On July 27, 2015, the French Council of State (CE, Nos. 334551 and 342944) upheld the decision of the Court of Justice of the European Union of February 26, 2015 (CJEU, Case C-623/13)

which challenged the taxation of investment income by non-residents under social security contributions.

In this regard, individuals subject to a foreign social security scheme within the European Economic Area (EEA) can, based on the aforementioned decisions, claim a refund of social security contributions unduly paid.

Refund Procedures Specified by the Tax Authorities

The tax authorities clarified the practical procedures for the refund in a press release dated October 20, 2015.

For non-residents, the refund concerns social security contributions calculated on real estate income, namely rental income and capital gains on real estate.

Income covered by the refund request

In practice, a refund request must be submitted to the tax authorities before December 31, 2015, for:

  • Rental income received between 2012 and 2014 (social security contributions collected from 2013 to 2015).
  • Capital gains on real estate realized during 2013.

Note that the same refund request can be made by a French tax resident if they are affiliated with a foreign social security scheme within the EEA.

A Legislative Reform for 2016

Finally, as part of the drafting of the 2016 Social Security Financing Law, the French government plans to allocate levies on investment income "to the financing of non-contributory benefits" (e.g., minimum old-age pension, RSA) rather than to the financing of social security schemes.

Social security contributions will thus be maintained on real estate income received by non-residents in 2016, while avoiding the argument of non-compliance with EU law.

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