Opportunities for non-residents to reclaim French taxes
1. Reclaim of taxes paid on Capital Gains (CGT)
On 20 October 2014, the French Supreme Court “Conseil d’Etat” rendered a very positive decision for taxpayers subject to the higher CGT rate.
French tax legislation treats taxpayers differently in respect of the CGT rate depending on their state of residence. According to the article 244 bis A of the French Tax Code, non EU/EEA residents were taxed at a rate of 33.33% as opposed to the 19 % rate that applies to French, EU and EEA residents.
In this case, the Conseil d’Etat confirmed that the difference of CGT rates between EU and EEA residents and other residents constitutes a restriction on the freedom of movement of capital, contrary to EU law.
Even if, in this decision, the French property was owned by a French SCI, even if it is not clearly expressed we believe that it should apply to any other situations such as when:
a property is owned directly; or
a property is owned through a Monegasque SCP
The 2014 Amended Finance Bill* changed article 244 bis A to harmonize tax rates estate capital gains of non-residents (this part of the Bill was adopted by the deputies), excluding taxpayers resident in NCSTs.
Please note that this new rule limiting the CGT rate to 19% for individuals selling property directly or through SCIs makes it even more advantageous structuring properties through partnerships like the Monaco SCP compared to holding structures subject to corporate taxes such as Luxembourg or UK ones.
Taxpayers should take action to claim back any overpaid tax in 2012 and 2013 - a claim to the French tax authorities should be made before the end of this year.
Contact us at consulting@rosemont.mc to assist with your reclaim.
*Article 27 ter nouveau.
2. Reclaim of social contributions paid on French income
There is a case currently pending before the European Court of Justice (C-623/13, Ministre de l’Économie et des Finances v Gérard de Ruyter). This decision might put an end to the application of the French social contributions on non-French tax residents.
The European Commission considered that the extension of social contributions to non-French tax residents against EU lax and the advocate general of the CJEU gave, in her opinion dated 21 October 2014, a positive answer to this question.
So, we also think that EU residents who have paid social contributions in France on a sale of a property (or on any French rental income) should be able to claim back from the French tax authorities the social contributions paid in the past.
Claims should be made even if the CJEU has not yet rendered its decisions.
The situation is different between the social contribution paid on the capital gain and the one paid on rental income:
For the 1st case: the rules regarding the deadlines to make a claim are complex and not clear: since a decision of the Administrative Tribunal of Paris, the rules seems to indicate that taxpayers can make a claim up to 31 December of the year following the tax year during which the contributions were paid.
So: for the sales which occurred in 2012, the deadline was the 31 December 2013. But, we believe that a claim should still be made anyway before the end of this year in order to keep a possibility of claiming back any tax that was overpaid in 2012. For the sales which occurred in 2013, the claim, must definitely be made before 31 December 2014 in order to avoid any doubt.
For the 2nd case: for the social contributions paid on French rental income : there is more time for action. Indeed, a claim could be made until 31 December of the second year following the tax year during which the tax bill was issued.
Contact us at consulting@rosemont.mc to assist with your reclaim.
Possible suppression of tax representative (ie: for selling French property)
There may also be a further advantage for non-residents selling French real estate coming soon.
Article 29 of the 2014 Amendment Finance Bill was recently adopted by the deputies. This cancels the obligation, for taxpayers residents in the European Union and in the European Economic Area (EEA) countries which have concluded a tax administrative assistance agreement with France, to appoint a tax representative in France.
The European Commission had sent to France a formal request to cancel its legislation concerning the obligation of having a tax representative in France. This obligation applies for income tax ; wealth tax ; corporate tax; 3% tax and capital gain tax.
Starting the 1 January 2015: the tax representative, for capital gains in France, is likely to be canceled for the taxpayers residents in the European Union or in the EEA.
The same suppression is being implemented aslo for: income tax, wealth tax, corporate tax and the 3% tax.
We are waiting for the final adoption of the law.
For further information on our tax advisory services in Monaco please visit www.rosemont.mc