Refund of Social Charges incurred on French capital gain tax (CGT)
As a UK tax resident, whether you are an individual, or shareholder of a French SCI, the following tax update may draw your attention.
Indeed, as a person that may have sold a property in France, you may be eligible to claim a partial refund of social charges.
The claim filed shall have for purpose to obtain a social charges partial refund from the amount calculated by your Accredited Fiscal Representative and paid by your Notary at the time of the sale.
As a matter of fact, and direct consequence of Brexit, UK tax residents who have sold their property in France have supported a 17.2% social charges on the taxable capital gain, part of which may me refund through a claim.
What social contributions on real estate capital gain?
Before Brexit, UK residents used to pay Social Charges on capital gain tax at the favourable rate applicable to all United Union members (7,5% instead of 17,2%).
As a former consequence, UK taxpayers would only be liable for social charges up to 7.5%.
Since Brexit, not only UK tax residents selling a property in France have now the obligation to appoint an Fiscal Representative to assist calculate the capital gain tax through their sale, but they also support social charges the higher rate applicable to non-EU members (17,2%).
What Social Charges on property gains stand for?
You shall not ignore that since 1st January 2021, the full consequences of Brexit have been triggered.
Indeed, UK tax residents that are in the process of selling a property in France shall therefore comply with the following obligations.
The first one of them shall be to appoint a Fiscal Representative to help and assist the Notary Public to calculate the capital gain tax.
Such calculation provided by your Fiscal Representative would imply to determine a taxable basis, on which the UK resident would be liable for capital gain tax (19%), and social charges, now taxed under the full rate of 17,2 %.
Such rate increase corresponds to the fact that social charges for UK residents do not only correspond to the solidarity levy (7,5%) as it was the case before Brexit, but also to CSG (9,2%) and CRDS (0,5%).
As a consequence, the effective total rate on capital gain tax has increased from 26.5% to 36.2%. However, the 9,7% additional taxation effectively supported in addition since Brexit may now be refund through a tax claim.
What changes in the French Tax Administration’s position regarding UK tax residents?
French Tax Authorities have recently published on their online
website in the frequently asked questions (FAQ), that the refund of CSG and CRDS may be claimed by UK tax residents that have effectively supported social charges at the full rate through their real estate sale.
It is however not easy to understand the legal scope of the frequently asked questions (FAQ) from the French Tax Authorities’ online website
One shall keep in mind that French case law provides that the FAQ do not contain mandatory provisions of a general tax nature.
However, in the specific context where FAQ reveals in itself a position of the administration, it shall be viewed as containing mandatory provisions.
How to obtain a social charges refund?
As an Accredited Fiscal Representative, we were and are still in charge of multiple real estate sales that implies UK tax residents. We are also in direct contact with The French Tax Administration and exchange with its direction to discuss their expectations regarding Tax regulation.
As such we have the experience of supporting documents (legal, accounting, social) that the Fiscal Authorities expect in order to grant social charges refund to UK tax residents.
One shall keep in mind that once the claim filled, the administration does provide us with an automatic immediate answer, but they usually respond fairly quickly to our refund requests.
Please also note that the social charges partial refund is exclusively based on CSG and CRDS (9,7% out of the 17,2% full rate) supported by UK residents.
Contact our team to file your claim on your behalf: firstname.lastname@example.org