French tax rules change constantly and it is important to consider the tax implications when investing in France. 2018 saw the French reform on wealth tax, reducing its scope to real estates only and imposing new restrictions on deductible debt.
2019 will see the suppression of the taxation of some components of the social charges.
Non-residents currently have to pay a rate of 17.2% of social charges on their rental income or property capital gains. France was before condemned by the European Court of Justice in the case Ruyter  . This case led to a large number of tax claims against the French Tax office until the budget 2016 when the French government decided to maintain the taxation of social charges on non-residents despite its controversy by reallocating the proceeds of the social charges into a new category.
This law-making mechanic to make the taxation of social charges EU-compliant is currently being challenged in another case. Indeed, in a recent judgment of 31st May 2018, the Court of Appeal of Nancy in 2018 ruled out that some social charges were not compliant with EU Law. The French government has appealed against that judgment before the French Supreme Court. It is likely that the latter will uphold the judgment.
As the perspective of seeing new tax claims, the French government took the lead by deciding in its new budget that from the 1st January 2019, non-French residents will no longer have to pay the Contribution Sociale Généralisée (CSG) and Contribution au remboursement de la dette sociale (CRDS), which are two of the social charge taxes and whose rate are respectively 9.9% and 0.5%. Non-French residents will still be subject to the tax of prélèvement de solidarité affecté au budget général de l'Etat, whose rate will be 7.5% and to the tax of prélèvement social (currently at 4.5%) and to the tax of contribution additionnelle (currently at 0,3%).
However, the suppression of the CSG and CRDS will only be limited to non-residents who are not registered with the French health care system and are subject to the health care system of a country of the European Union, the European Economic Area or Switzerland.
Furthermore, the suppression of the above taxes is compensated by an increase of the minimum rate of income tax on rental and investment income earned by all non-residents, from 20% to 30%. It will apply on income earned in 2018.
It is not the end of this “social charges tax saga”. As indicated above, if the Supreme Court upholds the Nancy Court of Appeal’s decision, non-French residents may be able to claim a refund of the social charges they have paid between 2016 and 2018.
If you require advice on French legal & Tax matters, please contact Loic Raboteau via email at firstname.lastname@example.org or tel on +44 (0) 20 7356 0833.