Real estate capital gains and rental income from French source : UK residents can also benefit from the CSG and CRDS exemption
Published on 28th Mar 2022
In an update dated 14 January 2022 to its frequently asked questions (FAQ) relating to the tax consequences of Brexit for individuals, the French tax authorities have clarified that the exemption from the "contribution sociale généralisée" (CSG) and the "contribution pour le remboursement de la dette sociale' (CRDS) also applies to property income ("revenus du patrimoine") received as from 1st January 2021 by UK residents.
As a reminder, Article 26 of the Social Security Financing Act for 2019 introduced an exemption from CSG (9.9%) and CRDS (0.5%) on property income and passive income received by taxpayers, whether they are domiciled in France for tax purposes or not, who are covered by a social security scheme within the EEA or Switzerland (provided thus that they are not covered by a compulsory French social security scheme). For these taxpayers, only the 7.5% solidarity levy ("prélèvement de solidarité") provided for in Article 235 ter of the French Tax Code is due.
Persons affiliated to a social security scheme of a non-EEA member state or Switzerland remain thus subject to the traditional treatment with regard to social security contributions (overall rate applicable of 17.2%). As a result, from 1st January 2021, UK residents should theoretically no longer benefit from CSG and CRDS exemptions on their property income.
However, having regard to the agreements on the exit of the UK from the European Union signed on 12 November 2019 and 30 December 2020, this exemption also applies to property income received as from 1st January 2021 by taxpayers who meet the following conditions:
- They are affiliated to the UK social security scheme;
- They are nationals or legal residents of France, the UK or another Member State of the EU;
- They are not dependent on a compulsory French social security scheme.
Consequently, this property income (namely real estate capital gains & rental income) won't be subject to the CSG and CRDS but will remain liable to the solidarity levy at the rate of 7.5% provided for in Article 235 ter of the French Tax Code.
As regards property income received in 2021 (which will have to be declared in May/June 2022) and real estate capital gains realised since these recent comments by the French tax authorities, the CSG and CRDS should therefore not be claimed.
With regard to CSG/CRDS that may have been wrongly withheld by the French tax authorities on real estate capital gain realised since 1st January 2021, it is possible to claim for a refund. This claim must be lodged with the French tax authorities by 31 December of the second year following the year of payment of such social contributions. For example, the CRDS and CSG wrongly withheld in 2021 may be claimed until 31 December 2023.