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).
For further information or to discuss any of the issues raised, please contact Stéphanie Le Men-Tenailleau.
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