Since January 2021, UK non-residents who earn investment income and capital gains in France have no longer been eligible to the exemption from the social charges CSG and CRDS that applied when the UK was a member of the EU.
This exemption was hard earned by a series of court cases in France and the European Court of Justice, which finally obliged the French government in 2019 introduce a change in the law.
Instead of the 17.2% social charges, non-residents who were affiliated to another social security system in the EEA, would now only pay a 7.5% solidarity tax.
However, following Brexit, UK non-residents lost this concession, although in February 2021 we published a piece questioning the legally of this position, as under Trade and Cooperation Agreement (TAC) signed on the 24th December 2020 between the EU and the United Kingdom, the position of UK non-residents appeared to have been protected.
That is precisely what has now happened, for in a recent revision of their guidance notes on Brexit the French tax authority state that UK based non-residents can continue to benefit from lower social charges on investment income/gains, and capital gains on the sale of property, stating:
'Toutefois, eu égard aux accords de sortie du Royaume-Uni de l’Union européenne signés les 12 novembre 2019 et 30 décembre 2020, cette exonération est maintenue pour les revenus du patrimoine perçus à compter du 1er janvier 2021 pour les contribuables qui remplissent les conditions suivantes :
- Ils sont affiliés à la sécurité sociale britannique ;
- Ils sont ressortissants ou résidents légaux de France, du Royaume-Uni ou d’un autre Etat membre de l’Union européenne ;
- Ils ne sont pas à la charge d'un régime obligatoire de sécurité sociale français.
En conséquence, ces revenus du patrimoine ne seront pas soumis à la CSG et à la CRDS mais demeureront passibles du prélèvement de solidarité au taux de 7,5 % prévu à l’article 235 ter du CGI.'
That does also confirm that that those who live in France under an S1 certificate of entitlement will obtain the exemption.
For non-residents, the French tax authority do often seek official confirmation of affiliation to the UK (or other) health system. The NHS (UK) provide no such certificate so the simplest route is to obtain a letter from your doctor on officially headed paper. Alternatively, try HMRC (UK) DWP service, who have shown a willingness to provide a suitable letter. The following link might also be of use Apply for a certificate of continuing liability for National Insurance.
In the note the tax authority state that those who have paid the full panoply of social charges should make a claim for a refund in the normal manner, in the first instance by a letter to the tax office for non-residents. The claim must be made within the two-year window that is permitted in law. Thus social charges wrongly withheld in 2021 may be claimed until 31 December 2023.
Géraud Nayral, of French tax partners Cabinet Budiz, comments that: "As occurred previously with EEA nationals and social charges refunds, it is likely there will be further developments on the procedure, perhaps requiring the submission of a sworn statement." We will advise in due course, although you would be best advised to not hold off making a claim so that it is at least registered.
Despite the change in policy for UK non-residents, other non-residents outside of the EEA remain liable for the social charges, with the tax authority stating:
'En revanche, les personnes affiliées à un régime de sécurité sociale d’un Etat non membre de l’EEE restent soumis à un traitement classique au niveau des prélèvements sociaux.'
As we have previously reported, many banks and notaires are failing to apply the correct rate of social charges on investment income and capital gains. Social Charges on Investment Income and Capital Gains
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