Capital Gains tax for non-residents: social charges still apply but will now benefit the elderly
After removing social charges ruled unlawful from the capital gains taxes paid by non-residents selling property in France, the government has reintroduced the extra charges as “funds for the elderly.”
Non-resident property sellers are back to paying 34.5 % tax on sold property in France. On top of the usual 19% capital gains tax, they will once again be made to pay 15.5% extra. These extra “social charges” previously subsidized the French health insurance system. Now, this extra amount will be paid into a government solidarity fund for the elderly.
“Social charges” ruled unlawful:
Since 2012, non-resident property sellers have been made to pay 15.5% in “social charges” on top of the 19% rate already included in capital gains taxes. These funded the sécurité sociale, the French insurance system. But in 2015, France was condemned for overcharging non-residents.
On 26 February 2015, the European Court of Justice (ECJ) judged it unlawful to make non-residents contribute to the health systems of two European Union (EU) countries.
This followed the Ruyter case, where it was ruled that a Dutch national who resided in France and paid social charges in the Netherlands should not be made to contribute to the French social security system as well.
On 27 July 2015, the French Supreme Court confirmed the ECJ’s ruling and went further, ruling that all non-residents — whether from the EU or European Economic Area (EEA) — should be exempt from paying social charges on capital gains. France is now obligated to retroactively reimburse overcharged non-residents who make claims for property sold from 2012 onwards.
Charges reintroduced as contributions to a different system:
From January, the French Finance Ministry has reintroduced this extra tax on property sold by non-residents in a measure included in the new Finance law for 2016. This sees the extra charges transformed into contributions to the Fonds de Solidarité Vieillesse, the national pension fund.
This move has been widely condemned, with several national newspapers pointing to a “ploy” on the part of the Finance Ministry’s. Le Figaro has dubbed the measure an “illusionist’s trick” while Les Echos refers to it as a “parade.” According to many, the Ministry’s motives are clear: social charges charged to non-residents have been estimated to yield between 300 and 320 million euros annually.
Nonetheless, experts expect the measure to be challenged by the ECJ in coming months and ultimately deemed unacceptable, with the country potentially forced to refund millions of euros to non-resident property sellers who make claims against these charges.
Photo credit: Pixabay / Succo