UK nationals who sold property in France could miss out on refund after changes to ‘social charges’ rules

james · 17 December 2014 12:19

France has one of the highest global percentages of property owned by people not native to the country, with over three million French properties owned by non-French nationals. Although only 10% of non-French owned property is owned by non-EU citizens, the largest percentage of those properties is owned by British nationals, meaning any change to property laws or taxes in France is likely to affect thousands of Britons.

A French Law passed on 16^th August 2012, forces all residents of the European Union and EFTA to pay social contributions of 15.5% on a capital gain arising from the sale of property. These charges are levied in addition to the existing 19% Capital Gains Tax applied to all sales since 17^th August 2012. These contributions give no rights to social benefits in France however. Experts in the French property market were concerned the new charges could supress the French housing market in areas where non-French ownership of property was common. However, others stated French property law and tax rates change regularly, and many owners buy with the intention of not selling for a quick profit, and as such would not be overly bothered by the new social charges.

The opening of an infringement procedure against France by the European Commission, and the opinion issued by Advocate General Sharpston at the Court of Justice of the European Union (ECJ) means there is a high probability that the social security contributions on capital gains of French property is not compliant with the law of the European Union. This means that any sale completed on or after 17^th August 2012 could have incurred 15.5% on the capital gain which the ECJ will regard as unlawful, and taxpayers in the EU outside France could claim a refund. This includes the 7,000 British nationals estimated to have sold property in France in 2014.

Under these conditions, a claim should be filed as early as possible with the tax authorities to preserve the rights of taxpayers and, should the ECJ decision and/or a change in French legislation be favourable, to obtain restitution of levies wrongly paid. While it may still be possible in certain specific circumstances to also claim for sale that occurred in 2012, the rules are still unclear and it is strongly advisable to file the claim by 31^st December 2014 for sales completed in 2013.

Example 1

Date of purchase : 10.07.2004 Purchase price : €350 000

Date of sale : 15.12.2014 Sale price : €498 000

Gross capital gain	€20 250
Net taxable gain	€14 175
Capital Gains Tax	€2 693
Social contributions	€2 880

Example 2

Date of purchase : 10.07.2004 Purchase price : €980 000

Date of sale : 15.12.2014 Sale price : €1 350 000

Gross capital gain	€149 500
Net taxable gain	€104 650
Capital Gains Tax	€19 884
Additional Tax on high capital gain	€2 605
Social contributions	€21 261

In the examples above, an EU taxpayer not resident in France would be eligible to claim the sum highlighted.

Contact us

If you think you may be eligible for this tax refund, please contact us so as to determine if you could qualify.

Guillaume Barlet is a London-based French lawyer (independent juriste), consultant and head of the French Desk at Cubism Law specialising in resolving issues and anticipating cross-border matters for private individuals. Guillaume has in-depth experience in French real estate, estate planning and taxation including the acquisition and sale of French properties. Guillaume can be contacted by email (guillaume.barlet@cubismlaw.com) or by telephone (0044 (0) 207 831 01 01).

Guillaume_Barlet-Bat · 13 January 2015 13:03

@Francois A. 'Navman' Dumas: Since 1st January 2015, there is no longer any requirement for a resident of the European Economic Area to instruct a tax representative.

@Ian Woodward: There is no deadline to offset extensive works on a property (improvements, repairs and maintenance are usually not tax deductible). Alternatively, after holding the property for 5 years, an automatic deduction can be applied at 15% calculated on the purchase price. In your case, a more favourable tax regime would be applied after May 2017.

I hope this helps.

anon52461035 · 13 January 2015 12:38

What happens if you have to sell up at a loss, which is looking more and more likely, and especially where considerable sums of money have been spent improving the property? Moved here in May 2011 so is there any cut off, say 5 years residency, which will affect the tax liability if the property is miraculously sold before May 2016 whether at a profit or not?

Francois_A_Navman_Du · 30 December 2014 09:45

I have also been informed that in order to reclaim that money illegally cashed by the French Gov. you need to employ a specialized company when your property value was OVER 150K. You can NOT claim it yourself in that case.

My contacts tell me there is an 18 months limit to any claim made?

Brian_Milne · 18 December 2014 20:30

Debra, those are two unrelated cases albeit social charges are a common denominator. As your expert mentions it in the last sentence, the CGT case that Guillaume is referring to was the ongoing case at the time he wrote that, which might even have been very recently, preceding the court's decision.

Guillaume_Barlet-Bat · 18 December 2014 17:37

Dear Debra,

I am not aware of such procedure relating to the Social Security matter you mention and therefore I am quite unable to reply to your interesting question. Nevertheless, please note that the above article and the deadline mentioned only apply to claims for refunds of social contributions levied on capital gain.

Most claims for refunds of social contributions levied on income (certainly rental income) benefit from a more generous deadline (31^st December 2015 for income received in 2013).

I hope this helps.

Guillaume_Barlet-Bat · 18 December 2014 10:55

Dear Mike,

You are absolutely right. As mentioned in our article, EU taxpayers not resident in France can be eligible.

Like in the UK, selling a property in France which constitutes your main abode qualifies for a total exemption of CGT and social contributions.

Regards,

Guillaume

Mike_Longhurst · 18 December 2014 10:40

Can I assume that you mean British 2nd home owners because there is no Capital Gains Tax liability for the sale of a French property owned by a British citizen and the property sold is their primary residence. We sold our last property here (main residence) in Dec 2012 and we were not charged any CGT and as far as I am aware we were not charged Social Charges either.

Rgds, Mike L