Reimbursement of social contributions (CSG/CRDS)

Reimbursement of social contributions (CSG/CRDS)

Reimbursement of social contributions (CSG/CRDS)

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Are you concerned?

You can claim the refund of the social contributions if you are:

Case n°1: An active cross-border

You are residing in France but subjected to the social security legislation of the European country where you are working (European union or Switzerland): all incomes from your assets are concerned (lifetime annuity, rental revenues, capital gains from the sale of shares, capital gains on real estate, income from other investments etc.)

Case n°2: Non-resident

You are residing and working in another State of the EU (United Kingdom before Brexit, Benelux, Germany, Italy etc.) or in Switzerland - you are subjected to the social security legislation of this State and you have benefited from capital gains on real estate or have you earned rental revenues in France.

You are then entitled to claim the reimbursement of social security contributions that you paid.

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How much can you recover?

The amount you can get refunded corresponds to the total amount of the various social security contributions that you paid on your capital revenues:

  • 15,5% for social contributions paid in 2016 and 2017
  • 17,2% for social contributions paid after the 1st of January 2018

For example, capital gains on a real estate sold in 2016:

Exemple pour une plue-value immobilière réalisée en 2016

To this amount, should be added an interest for delay at the annual rate of 2,2%.

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Why claiming a refund?

Your right to obtain a reimbursement has been confirmed by the French justice by a decision of the Administrative Court of Appeal dated 31st May 2018 !

This favorable decision is the outcome of a very long legal battle lead against France and is fully based on European community law which has a higher authority than French law:

Year 2000: the beginning

The European court of justice considers for the first time that the levy of the CSG and the CRDS on the employment income of taxpayers who are subjected to the social security legislation of another Member State is:

“Inconsistent both with the prohibition against overlapping social security legislation laid down in Article 13(1) of Regulation No 1408/71 and with the Treaty guarantees of freedom of movement for workers and freedom of establishment”.

France has since complied with this decision.

However, the fate of social contributions on capital revenues remained unresolved.

Year 2015: a key year in 3 acts

1st act: France is sanctioned by the European courts:

The European court of justice ruled again in favour of taxpayers by its famous decision “De Ruyter” dated 26th of February 2015, stating that, in accordance with the principle that the legislation of a single Member State applies in matters of social security, it is forbidden to require a person to pay social contributions in a State other than the one he is affiliated to.

In its decision dated 17th of April 2015, the French supreme court for administrative matters (“Conseil d’Etat”) has aligned its position with the European court of justice by reminding the fundamental principles as follow:

  • The existence or the lack of counterparts in terms of benefits is not relevant,
  • The fact that a contribution is described as a tax by the legislation of a Member State does not exclude the application of Regulation No 1408/71
  • Persons who are not subjected to the French social legislation shall not pay contributions within the scope of Regulation No 1408/71.

2nd act: France bowing before the courts decisions:

Forced to abide by the decisions of the highest European and French courts, the French tax administration accepted to refund social contributions.

Our law firm was at the forefront in this first phase of the litigation and was able to obtain the refund of the amounts wrongly paid to the tax administration for a large number of our cross-border and foreign customers.

3rd act: France using sleight of hand to bypass the decision "De Ruyter" in order to maintain the social contributions!

The French government has passed within the Social Security Financing act for 2016 (law n°2015-1702 of the 21th December 2015) a provision (article 24) which aims to counter the European law decisions and to subject again to social contributions the capital revenues of persons who belong to another social security legislation.

As a nutshell, the French law has assigned the income resulting from social contributions to social organizations such as the Old age solidarity fund (“Fonds de solidarité vieillesse” - FSV), the Social debt redemption fund (“Caisse d’amortissement de la dette sociale” - Cades) and the National solidarity fund for autonomy (“Caisse nationale de solidarité pour l’autonomie” - Cnsas) which are serving non-contributory benefits that is to say benefits that are allocated regardless of the fact that the beneficiaries have paid contributions.

Since 2016: capital revenues are again subjected to social contributions.

The scope and the implementing measures of the social contributions are maintained.

The application of social contributions on capital revenues is reactivated against:

  • Individuals residing in France, even if they are not subjected to the French social legislation
  • Non-residents as far as their rental revenues and capital gains on real estate of French origin are concerned.

Moreover, social contributions also apply:

  • With retroactive effect, to the capital revenues earned as of 2015 and which are mentioned on the tax declaration. This is the case for the rental revenues earned in France in 2015 by non-residents.
  • Starting from the 1st of January 2016, to capital gains on real estate that have been sold after the 1st of January 2016.

Finally, since the 1st of January 2018, the amount of social contributions has switched from 15.5% to 17.2%.

Year 2017: first cases and first decision sanctioning the new scheme

As claims were quickly filed to challenge the new legislation and obtain reimbursement of social contributions, a first favourable ruling was issued by the administrative court in July 2017.

According to this decision, the Social Security Financing act for 2016 has been declared inconsistent with the European law and, in particular, with the prohibition against overlapping social security legislation.

The court’s motivation is clear and straightforward:

At first, the judge outlines the intention of the French government concerning the adoption of this Social Security Finance act, which aims to find a legal solution to subject again to social contributions the capital revenues of persons who belong to another social security legislation:

There is no doubt about the fact that the article 24 of the Social Security Finance act for 2016 has transferred the income resulting from social contributions to non-contributory benefits in order to take into account the “De Ruyter” decision and to subject again to social contributions the capital revenues of persons who belong to another social security legislation.

By allocating the product of social contributions to different branches of the health system such as the Old age solidarity fund (“Fonds de solidarité vieillesse” - FSV), the Social debt redemption fund (“Caisse d’amortissement de la dette sociale” - Cades) and the National solidarity fund for autonomy (“Caisse nationale de solidarité pour l’autonomie” - Cnsas), the legislator wanted to bring the French law into conformity with the European law but also to maintain the income resulting from social contributions on capital revenues in the “social sphere” and to allocate it to non-contributory benefits that are outside the health system according to the European laws and are not subjected to the affiliation to the social security system.

In a second step, the judge considers that the new scheme implemented by the French government does not lead to a compliance of the French law with the Regulation No 1408/71.

Indeed, even if the allocation of the income resulting from social contributions has changed, it is still assimilated to “social security contributions” under Regulation No 1408/71.

This is the case for the Old age solidarity fund (“Fonds de solidarité vieillesse” - FSV) as far as it is destined to finance old-age benefits that are under the article 4 of the Regulation No 1408/71.

This also applies to the Social debt redemption fund (“Caisse d’amortissement de la dette sociale” - Cades) which aims to reduce the debt of the mandatory social security system caused by the funding of benefits served in the past.

Lastly, the National solidarity fund for autonomy (“Caisse nationale de solidarité pour l’autonomie” - Cnsas) is also concerned because it is destined to the help the elderly who are losing their autonomy as well as disabled persons and shall be assimilated to “health benefits” under article 4 paragraph 1 a) of the Regulation No 1408/71.

Moreover, the judge considers that non-compliance of the French law with the European law - because of the direct and relevant link between the social contributions and different branches of the French health system – is so obvious that it is not necessary to bring the case to the European Court of Justice!

Year 2018 : the recognition of the right to reimbursement by the Administrative Court of Appeal of Nancy

By judgment of 31st May 2018, the Administrative Court of Nancy decided that the major part (14.05% of the taxable income) of the overall products of the social security contributions (total of 15.5% of the taxable income) allocated to the financing of the “financement du Fonds de solidarité vieillesse” (FSV) Old Age Solidarity Fund (FSV) and “la Caisse d’amortissement de la dette sociale” the Social Security Debt Fund (CADES) was to be immediately reimbursed to the taxpayer.

For the Court, since they finance social security benefits, these social security contributions fall within the Regulation (EC) No 883/2004 and are therefore governed by the principle of unity of the legislation provided for by this text and that the taxpayer cannot be subject to social security contributions in another state than the one he depends on for his social security.

For the lesser part of social security contributions, being 1.45% of the taxable income, serving to finance the Caisse nationale de solidarité pour l’autonomie (CNSA), the court decided to stay proceedings and to ask the European Court of Justice to statue on whether the services rendered by the CNSA, being the “independence social allowance” (APA) and the disability compensation allowance (PCH) (…) are illness benefits covering additional expenses of everyday life, in which case they would also be fall within the Regulation EC No. 883/2004 or whether they are welfare benefits since the beneficiary’s income is taken into account for granting them.

As a result, today the taxpayers who were not affiliated to the French social security system and who were wrongly subjected to social contributions which intended to finance the Old age solidarity fund (“Fonds de solidarité vieillesse” - FSV) and the Social debt redemption fund (“Caisse d’amortissement de la dette sociale” - Cades) are entitled to claim the refund of those social contributions (CSG, CRDS).

The reimbursement of the share (1.45%) serving to finance the National Solidarity Fund for autonomy (CNSA) will be claimed as part of the same reimbursement proceeding. It is indeed not necessary to wait for the decision of the European Court of Justice to form a complaint now.

Finally to be complete, the Minister of action and public accounts appealed in cassation on July 31, 2018 against the judgment n ° 17NC02124 of May 31, 2018 by the Administrative Court of Appeal of Nancy. The cassation appeal was registered at the Conseil d’Etat (8th Chamber) under number 422780.

However, there is no need to wait for the outcome of such appeal before seeking in reimbursement.

The Conseil d’état will not take a decision for several months or even years, in most cases well after the deadline to act.

All lights are green to take an action before it's too late!

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Why act now? / How soon should you act?

Ever since the Decree No. 2013-643 of the 18th July 2013, a jurisdictional decision revealing the non-compliance of a French provision with a higher rule (European law) is no longer an event that opens a new deadline to file a claim.

In other words, it is advised not to wait - for the Conseil d’Etat or the European court of justice to settle the new scheme implemented by the Social Security Financing act for 2016 - to launch the procedure.

Claim deadlines are therefore those set by ordinary rules under Article R 196-1 of the tax procedure guide.

If you miss the deadline to start an action, it will be too late even if the final decision of the Conseil d’Etat will occur after the expiry of the deadline.

The claim deadlines are as follow:

Delais plus-value immobiliere Delais revenus locatifs

As per the expiry of the deadline of 31 December 2018 for capital gains on real estate sold in 2016 and other capital revenues earned in 2015 (mentioned in the 2016 tax declaration), it is in the interest of taxpayers to take precaution and act quickly without waiting for the outcome of the proceedings.

In any case for the British citizens, it is highly recommended to file the claim up before the official date of the Brexit planned on the 29th march 2019.

Indeed, there is currently a risk for the British citizens to act on the basis of the European law after the Brexit because they won’t be part of the European Union any longer.

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Why appoint us?

Trust us

The GOFFIN VAN AKEN law firm is composed of three multilingual lawyers and has in the past undertaken several actions in defence of non-resident or cross-border taxpayers in their relations with the tax or social administrations by obtaining positive results in courts.

The press talks about us:

What we will undertake on your behalf

As part of the mandate we will take care of:

  • Opening and building up the file
  • Submitting a preliminary claim to the competent tax administrations (mandatory preliminary procedure)
  • Then initiating the procedure before the Administrative court to contest the refusal by the tax administration because until the Conseil d’Etat will not settle the question of compliance of the Social Security Financing act for 2015 with the European law, all preliminary claims will be rejected by the tax administration.
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The cost of the refund action (preliminary claim):

PACKAGE: 500 € excl. VAT (600 € incl. VAT) + 15% excl VAT from the amount recovered.

This amount applies regardless of the number of tax years involved or the type of income concerned by the social contributions.

Any further actions before any French Court will be charged 500 excl. VAT per procedure.

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