Non-residents and cross-border workers: Haro on social contributions

The European and French Court judged, a few weeks apart, interesting decisions on social contributions regarding income (up to 15.5%) allowing non-residents and cross-border workers that are French residents to file a claim for a refund of these social contributions.

1. Social contributions in France and European rules:

Liability to social contributions on income (CSG-CRDS), that are not necessary linked to right to benefit with social services in return, has raised questions in terms not only on equity but also in strict implementation of law for long time.

In this context the Court of Justice, in its decision of 26 February 2015 ruled an important contribution for anyone liable in France to social contributions.

In that judgment, the Court held that liability to French social contributions (CSG + CRDS + additional social contributions )on wealth income for French residents working abroad and exclusively affiliated to a non-French social security scheme is contrary to European regulation n°1408/71.

This judgment has just been confirmed by the Administrative French Supreme Court in a similar case involving a French resident and social contributions on property capital gain while not affiliated to the French compulsory social security scheme.

Both Courts analyze the cases as followed:

  • Regulation n°1408/71 stated the rule of a strict single affiliation to a social security scheme and single social contributions.
  • The link between contributions and branches of social security is direct and sufficiently relevant regarding CSD and CRDS. The fact that this contribution is not linked to professional activity in France is not relevant in itself, to state an exception.
  • The existence or lack of conterpart regarding social scheme is not relevant regarding this regulation,
    Consequently according to regulation n° 1408/71 French resident that are not liable to French social security scheme shall not contribute to it.
2. The practical consequences of these precedents:

We consider that the consequences of these judgments go wider than the strict situation of the social security contributions on property income.

a. Social Security Contributions of individual non-residents:

Since 2012, non-residents individual are subject to French Social Security Contributions on income arising in respect of French real estate and on capital gains arising in respect of disposals of French real estate.

However, due to these precedents, individual non-residents are able to prevail themselves of the provision of the European Regulation n°1408/71 and are entitled to claim reimbursement of the social security contributions.

This opportunity applies to:

  • Individual non-residents established in one of the 27 other EU Member States or individual non-residents established in Switzerland, Norway, Liechtenstein and Iceland,
  • That receive income arising in respect of French real estate and income arising in respect of shares of property companies holding real estate located in France, or
  • That receive capital gains arising in respect of French real estate or shares of property companies holding real estate located in France
b. Social Security Contributions of Individual Cross-Border Residents:

Case Law here above described also apply to French residents non-affiliated to the French social security.

In such situation, French Individual Residents are also able to prevail themselves of the provision of the European Regulation n°1408/71 and are also entitled to claim reimbursement of the Social Security contributions.

The income in question are:

  • Capital gain and income arising in respect of French real estate,
  • Dividend, interest and investment earnings,
  • Capital gain on securities,
  • Received by French tax residents exclusively affiliated to Social Security scheme from one of the 27 other EU Member States, or affiliated to an equivalent scheme in Switzerland, Norway, Liechtenstein or Iceland.

Pursuant to the bilateral Agreement on the Free Movement of Persons between Switzerland, the EU and EFTA countries, in force since June 1st, 2002, the French cross-border residents working in Switzerland are subject to the European Regulation and especially subject to European Regulation n°1408/71 and n°883/2004.

These individuals, employees or self-employed workers in Switzerland, are subject to only one set of Social Security rules that necessarily corresponds to the State in which they exercise their professionnal activity.

However, cross-border residents can opt for a membership to the Swiss Social Security scheme (LAMal), to the French Social Security scheme (CMU) or for a private medical insurance. (ended as from May 31st, 2015).

Therefore, French cross-border residents affiliated to the Swiss Scheme (LAMal) or those who were holders of an private insurance before May 31st, 2015 are able to prevail themselves to claim reimbursement of the social security contributions.

3. Filing a claim:

Social payers concerned by the above shall file a claim for a refund of French social contributions paid according to the sentenced cases.
This claim may concern social contribution to the French social scheme from 2012 to date. Regarding 2012 exceptions make the claim to be filed before July 30th, 2015.
Jeannick Moisy
Lintax Société d’Avocats

Michel Brocard
Brocard Avocats

Valérie Truchet
Truchet Avocat

 

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