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Les 3 rosettes

This page does not set out to give anything other than a glimpse of certain aspects of this area of French Law and professional advice should always be sought from a duly specialised French practitioner prior to undertaking any steps whatsoever.

Possibility for British & Irish residents to claw back French CGT payments

In the event that a UK or Irish resident were to sell a second home in France, the French tax authorities have been charging Capital Gains Tax on the fruit of the sale at 19% but then adding an extra 15.5% corresponding to "charges sociales" being special French social security contributions (doubtless to attempt to go some way to fill the black hole of the huge French social security deficit).

For example, the France-UK tax treaty does not provide for double taxation relief in respect of this supplementary percentage.

Although this "contribution" was challenged internally, it was subsequently validated by the French Constitutional Court.

However, it is subject to considerable criticism from the European Union institutions as under the "single applicable legislation" rule, EU regulations state that a person is subject to one social security system only.

It follows, according to the critics, that France cannot subject immovable property income of non-French but EU tax residents to French social contributions without breaching European law.

In this context, the European Commission has recently begun infringement proceedings against France and the Court of Justice of the European Union (CJEU) has been asked to give a preliminary ruling on this very point.

In the latter regard, the Advocate General of the CJEU has just released her preliminary opinion which is largely favourable to the non-French taxpayer.

This is good news prima facie, albeit that confirmation by the full Court is still required.

However, based on the above, UK and Irish taxpayers are we believe able to apply for a refund from the French tax authorities now and were the refund to be refused then proceedings would need to be commenced before the French Courts on the grounds of EU law.

Without though wishing to be perceived to be overly cynical, we observe that the French State has a something of a track record in at least delaying such procedural claims.

Indeed given the potential budgetary implications of a series of claims of this nature linked to the current far from brilliant health of France's finances, it is I am afraid to be expected that the French government will not give in easily and will not comply before it absolutely has to.

For example, it would be in its interest to draw matters out as much as possible such that as many claims as possible are time-barred.

In the present circumstance, and in the light of French statute of limitations rules, any challenge to the application of French social charges on real estate capital gains realised in 2013 will be time barred if not filed before 31 December 2014.

It is therefore strongly advisable to file a formal initial claim before 31 December 2014 for a refund of the French social charges which have been we believe were wrongfully applied.

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