Following an earlier decision by the European Court of Justice (ECJ), the French Supreme Court has ruled that French employees, who are expatriated to a foreign country within the EU where they pay social security contributions, shall no longer pay CSG and CRDS contributions on their French investment income.
The French courts have been struggling for some time with the CSG and CRDS contributions and whether they should be treated as taxes or social security contributions. Confusion has arisen over how to treat such contributions for French tax residents who are temporarily living abroad in another EU member state and are subject to the host country social security regime. According to the EU regulation on social security coordination (n°883/2004), persons to whom the regulation applies shall be subject to the social security laws of a single member state only.
On 26 February 2015 the ECJ decided that applying CSG and CRDS to French tax residents who are temporarily living outside France and subject to a non-French social security system is contrary to the above mentioned principle of the EU regulation n°883/2004. Following this decision, the French Supreme Court (the Conseil d’Etat) has recently confirmed that such contributions must be treated as social contributions and therefore should not apply to any person already subject to a foreign social security system.
However, as CSG and CRDS contributions are reported through individual tax returns (which do not include any reference to the applicable social security system), it is likely that expatriate taxpayers will have to claim for their CSG and CRDS exemption after their income tax notice has been sent. It is therefore essential that, until the French tax authorities change their reporting system, expatriate employees are made aware of their right to claim these exemptions. Claims may be made until 31 December of the second year following the year in which tax was due (ie. for income received in 2012, tax may be reclaimed until 31 December 2015).
Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information see our legal page.
Circular 230 disclosure
To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this article (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
If you would like to copy or otherwise reproduce this article then you may do so provided that: (1) any such copy or reproduction is for your own personal use or if it is made available to any third party it is done so on a free of charge basis; and (2) the article is reproduced in full together with the contact details, disclaimer and any logos as they appear on each article.