European residents, social charges and property income

March 3rd 2015

In a decision dated February 26, 2015 (matter 623/13), the Court of Justice of the European Union (hereafter CJEU) has recently ruled that a French resident, who receives property income from foreign sources, may not be subject to social security contributions (CSG, CRDS and other contributions) in France as a result of this income, when he is registered with a social security scheme in another member State (either compulsory or voluntary).

To decide in this manner, the CJEU cites the uniformity of legislation provided by the European regulation (1408/71) and, accordingly, the prohibition of the accumulation of the contributions.

It also emphasizes that this prohibition of accumulation is not subordinated to the exercise of a professional activity and accordingly, this prohibition shall apply regardless of the origin of the income received by the person in question.

Two categories of persons may cite this decision and formulate claims :

- On the one hand, the French tax residents, who carry out a professional activity (employee or independent) in another member State of the EU, a State within the European Economic Area (Norway, Iceland and Liechtenstein), or in Switzerland.

The non-subjugation to social contributions should concern all the income, professional or not (real estate income, investment income, real-estate capital gains…), of affiliates to a foreign social security scheme, subject to the absence of registration in France.

- On the other hand, by extension, the non-residents, who are registered in their State where they carry out their activity, and who receive real estate income and make
real-estate capital gain from French sources.

In this regard, it must be noted that the European Commission opened two infringement proceedings against France relating to the CSG and the CRDS deducted from the property income and the investment income of persons domiciled outside of France for tax purposes and dependent either on the social security scheme of another member State, or the French Fund Scheme abroad (CFE).

It is worth noting that these claims must be filed at the latest on December 31 of the 2nd year following :

- its payment for the social contributions relating to the real-estate capital gains. More specifically, this concerns the social contributions paid as from 2013 and relating to the real-estate capital gains ;

- or the tax notice for the real estate income. More specifically, this concerns the real estate income received from 2012 to 2014, which were assessed between 2013 and 2015.

Céline Thimonier