Small reminder on the liability for social security contributions

The CSG (Generalized Social Contribution) was created to diversify the financing sources of the Social Security system, this contribution partially substitutes for employee contributions.

The CRDS (Contribution for the Reimbursement of the Social Debt) is for liquidating the Social security deficit. 

The social security contribution is, for its part, assigned to the National Pension Fund for Employees (Cnavts), to the National Health Insurance Fund for Employees (Cnamts) and to reimburse the social debt. The additional contribution to the social security levy is assigned to the National Solidarity Fund for Autonomy, and the solidarity levy is assigned to the Cnamts.

These contributions, of a social nature, are in fact collected as taxes and are based on property income (revenues from investment income, real estate revenues, capital and real estate gains, etc.).

When the contributions are based on property income, the contribution payers are individual taxpayers whose tax residence is in France. The non-residents are also subject to pay these contributions at the rate of their French property income.

Ultimately, a taxpayer could be subject to social security contributions, even if he/she will not be able to benefit from the compulsory social security schemes he/she finances.

The flexible measures brought by the Court of Justice of the European Union

In a decision of 26 February 2015 (C-623-13), the European Court of Justice  considered that a French tax resident subject to the social security scheme of another Member State of the European Union could not be subject to social security contributions in France on his/her property income on the grounds that he/she fell, in this case,  under the Dutch Social security system and not the French one.

In a prior decision in 2000, the Court of Justice of the European Union had already concluded that the French social security contributions could not be levied on the work and replacement income of workers who, even though they were residing in France, were subject to the Social security legislation of another Member State.

In other words, an individual who is not subject to the French Social security, even a French tax resident, cannot be subject to social contributions on property income.

The implications of this judgment in France

Two major consequences emerge from this decision:

• On the  one hand, it could allow frontier residents living in France, but dependent on the social protection system of the country where they work, to not be subject to social contributions on their property income in France;

• On the other hand, it could also allow owners of property located in France, residing in another Member State or Switzerland and subject to the social legislation of their country, to not be subject to social contributions on their real estate income and real estate gains generated in France. 

Nevertheless, from a practical point of view, we have to be careful. Indeed, this decision is not immediately applicable in France. To date, it does not exempt the taxpayers involved from not paying any social contributions on their real estate income and real estate gains in France.

This exemption will only be effective if the Tax legislation is amended following this decision from the Court.

In its communiqué of 26 February 2015, the Government stated that : « The Government takes note of this judgment which is a procedure that is initiated by an individual who resided in France and where he/she paid his/her taxes on his/her Dutch property income, in conformity with the liability rules of the CSG in force since its creation. The rest of the procedure entails that the Council of State shall take the final decision on the litigation that was submitted, taking into account the judgment of the Court of Justice of the European Union. It is after this ruling that the Government will, when appropriate, take the necessary actions. »

Nevertheless, we can only advise you to initiate a procedure now in order to obtain the repayment of the money.

Indeed, since actions aiming at recovering amounts unduly levied are restricted to two years, France may be forced to reimburse complainants within the time limit, for the capital income taxes received in 2012 and subsequent years.