France has deducted social charges at 15.5% on the sale of French properties by non-residents as well as on rents received by non-residents. This was declared illegal by the European Court. Many people have requested repayment of these charges which have not been made until French law is changed to conform to the EU Court decision.
France also required non-resident sellers of French land to appoint a tax agent who typically charged 1% of the sale price. This has also been declared illegal and no longer applies. Most people who reclaimed the social contributions also claimed for repayment of the tax agent’s fee.
The French government says that the EU decision means that money collected from non-residents must no longer be aimed at financing French social security payments. They intend to continue levying this contribution but applying the money raised in a way which does not conflict with their interpretation of the EU ruling. New laws will be passed to cover this.
However people who have paid the contribution which has been declared illegal should soon be able to reclaim it provided they are EU residents. It is unclear whether interest will be paid or any loss for currency movements.
There is no word yet on refund of tax agents’ fees.
This brings the French government into disrepute. It will lead to more litigation and will put investors off. It also makes you wonder about the finances of the Republic given that it is going to these lengths to get non-residents to pay this tax which overall is not significant.
The sensible thing for the French government to do without further delay is to repay all the charges regardless of where people are resident and confirm they will not be levied again and that foreign investors are very welcome in France. This will be far more beneficial for the French economy than a short term fleecing of investors, most of whom are ordinary people without considerable wealth.
David Anderson, is a Solicitor Advocate, Chartered Tax Adviser, Barrister (Unregistered), Director and Co-founder of Sykes Anderson Perry Limited. He is qualified as a solicitor advocate and has higher rights of audience in all civil and criminal courts in England.
This article is for general information only. French tax and social security law are highly specialised areas and you should only act or refrain from acting after receiving full professional advice on the facts of your particular case.