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Recovering French Prelevement Sociaux payments

Recovering French Prelevement Sociaux payments 

The latest news is that the deadline for claims on Prélèvements Sociaux assessed in 2016 is 31/12/2018.

Historically long term visitors to our website and subscribers to our Bulletins will be aware that, up to the end of 2015, Prélèvements Sociaux paid on capital gains or rental income by certain non French residents and on other investment income for some French residents became reclaimable on the back of the “De Ruyter” (1)  affair.
 
The “De Ruyter” case resulted in CJEU1 decision C-623/13 of 26th February 2015, which concluded that Prélèvements Sociaux, whether attached to earnings, pensions or investment income or gains were, by their nature, social security contributions within the meaning of EU social security regulations. Therefore their scope as a levy on income and gains was dependent on the taxpayer not being subject to the social security legislation of another EU state (e.g. the UK) under the terms of EU regulation 883/2004 and its related instruments.

The decision led to nearly 60,000 claims being made. Charles Hamer participated in the exercise, maintaining a 100% success rate on claims submitted.
 


Legislative Changes from 01/01/2016

 
Determined to nonetheless levy the charge on non-residents, the government of the day introduced complex and in depth modifications to French legislation via the French Financing of Social Security Act 2016. (Loi No. 2015-1702).  (1)

This, apparently, firmly closed the door on any further successful claims on the levy assessed from 01/01/2016. Seemingly, at the time, that was that.

But there are some terrier-like taxpayers out there who will just not let go!


Jurisprudence finding against the post 01/01/2016 changes. CAA NANCY 31/05/2018 NO. 17NC02124

 
The effectiveness of the current legislation has now been successfully challenged to Court of Appeal level (2), broadly on the same principles as the De Ruyter case, namely that all but 1.45% of the Prélèvements Sociaux levy of 15.5% and 17.2% are still defined as National Insurance contributions.
 
As regards the 1.45%, the CAA has referred the question to the CJEU as to whether or not this too should be rebated on the grounds of it falling within Regulation 883/2004.
 

Proposed legislative Changesincluded in the Finance of Social Security Bill 2019 (PLFSS19)

 
Prélèvements Sociaux for assessment in 2019 onwards.
 
Whilst the French tax administration is now appealing the above judgement to the Conseil d’Etat (3), an acknowledgement of the weakness in the State position lies both in the findings of a commissioned report on the taxation of non-residents (4), resulting in the introduction by the Government of an amendment to PLFSS19, in which they propose that EU citizens who are not subject to French NI legislation but are instead subject to the NI legislation of another EU member state should not be liable to CSG or CRDS assessable on investment income from 2019.
 
Investment income in this context would include capital gains from the sale of French property and profits from non professional French property lettings.
 
If adopted then, this is good news going forward (5) however, because new legislation cannot be applied retrospectively it would not result in an automatic rebate of Prélèvements Sociaux already paid in 2016, 2017 and 2018.
 
Nonetheless, the reasoning behind the amendment, if adopted, will support the claim for recovery based on the CAA Nancy judgement.
 

What to do now about Payments made in 2016-2018.

 
Since, as with the 2012-2015 payment period, there is no mechanism for automatic repayment of Prélèvements Sociaux, a formal claim for recovery needs to be made by or on behalf of the payer.
 
Entitlement to a rebate still needs to be validated to ensure that it meets the necessary conditions for the CAA Nancy judgement to apply.
 
The status of the payer needs to meet the conditions that they were not subject to French NI law and were instead subject to the NI law of another EU state at the date of assessment.
 
It must also not be forgotten that the CAA Nancy judgement is currently being challenged by the Administration and, if not otherwise dropped, the process must technically be concluded via the Conseil d’Etat and, potentially at least, the CJEU, before any rebate can be guaranteed.
 
This process will not be concluded for some time yet, certainly not before the end of this year.
 
In the meantime, the right for the payer to make a claim remains time limited by reference to the date of assessment of the levy rather than the date of final judgement.
 
The deadline for claims on Prélèvements Sociaux assessed in 2016 is 31/12/2018.
 
Consequently, we strongly recommend that – in order to preserve their right to claim a rebate on Prélèvements Sociaux paid – clients and readers who have been charged Prélèvements Sociaux during 2016 submit a claim before their opportunity to do so expires on 31/12/2018.
 
I.E. Use the right to claim it or lose it!
 
It therefore makes sense to ensure that theformal appeal has been submitted before the cut off date of 31st December 2018 for any Prélèvements Sociaux paid in 2016.
 
For claims involving Prélèvements Sociaux charged on income, (e.g. rental profits) it makes sense for us to claim for payments made in each of the 3 years 2016 to 2018.

For claims involving Prélèvements Sociaux charged on capital gains, (e.g. on the sale of a French property), the claim needs to be made urgently for sales made in 2016. For later sales, the deadline will not be until 31st December 2019 for sales in 2017 and December 2020 for sales made in 2018. Nonetheless, it can still make sense to claim for 2017 and 2018 payments now with the aim of getting to the front of the queue, (claims for the 2012-15 period have only just been fully resolved). Meanwhile, making a claim now on 2017 and 2018 payments doesn’t prevent us from re-launching the same claim later directly to the tax office, if they don’t play ball: the legislation allows repeat claims on the same grounds for as long as the deadline has not expired.
 

What will happen following submission of the claim?

 
The fact that the CAA judgement is currently being appealed means that the tax office will not normally accept any claim outright.
 
Rather they will adopt one of three stances:
 
Stance A). Formally reject the claim – for which they will need to provide reasons, reference to the legislation, for rejecting the argument put forward in the claim. This is likely to be an adoption of the argument which is to be put forward by the administration to the Conseil d’Etat
OR
Stance B). Ignore the claim so that it automatically expires (6) – representing an implicit rejection without having given reasons
OR
Stance C). Acknowledge the claim but give notice of their intent to reserve judgement, instead holding it in abeyance pending the Conseil d’Etat, (and ultimately, CJEU), decision.
 
The apparent anticipation amongst commentators of the inevitability of a positive conclusion in favour of the taxpayer suggests that Stance C is the more likely initial outcome.
 
If the PLFSS19 amendment is adopted, in our view it is likely that most tax offices will not fight to the death on claims and will simply notify the claimant of an intent to wait for the Conseil d’Etat, although such a reaction cannot of course be guaranteed.
 

In turn, the awaited Conseil d’Etat judgment may be fast tracked.
 
Progressing the case to the Tribunal Administratif (TA)

 
Nonetheless, if the tax office reaction is either a) or b) then, in order to keep the file alive, the claimant will need to arrange to present the case to the relevant Tribunal Administratif within the time limit allowed (7).
 
Charles Hamer would be able to continue present the claim on your behalf during this stage.
 
If the case reaches this point, the tax office would have to respond anyway, giving their argument as to why the rebate should not be made.
 

Progressing the case to the Cour d’Appel Administratif (CAA)

 
Bearing in mind that there has already been a CAA judgement issued in favour of the claimant, it would be highly unusual for a TA to conclude in favour of the tax office on the same argument unless the Conseil d’Etat has subsequently reached a judgement in favour of the tax office.
 
Nonetheless, at this stage, if it was to arise, the claimant would need to instruct an avocat to take the case forward to the relevant CAA,
 
Charles Hamer would then liaise with the avocat by forwarding the file to them and providing any support they require from us in the preparation of the case.
 

Preparing and Making your Appeal: How Charles Hamer can help   

 
Charles Hamer with both French and English mother tongue speakers in the team has over 25 years practical experience in French tax office liaison and tax appeals. In the case of the 2012-2015 Prélèvements Sociaux appeals we were 100% successful (8). We are therefore well placed to prepare the basis of your appeal and oversee it to its conclusion.
 
With this in mind we have designed a questionnaire alongside a document checklist to complete and supply in order to make a well presented appeal in time.
 

OUR FEES:

 
-To assess whether or not we believe you are entitled to a rebate and to estimate the amount of this rebate we do not levy any charge
-To prepare and submit the appeal we have a non recoverable fixed administration fee of £300 (inc. TVA). -This is payable at the same time as you provide instructions to us.
-If the case needs to be taken to the Tribunal Administratif, (stance A or B above) then we will levy a supplementary fee of £300 (inc. TVA) to cover the additional costs of preparing and representing the case. However this supplementary fee will then be credited against our eventual success fee (see next bullet point)
-Once the appeal is successful, if this is achieved without the case having to be taken to the relevant Cour Appel Administratif (CAA), we will levy a success fee of 10% of the amount recovered subject to a minimum of £600 (inc. TVA) and a maximum of £3,000 (inc. TVA). Otherwise, if the case does go to the CAA, then we would not levy a success fee. Instead the case would continue, at your discretion, on terms agreed with the avocat representing your case.
 

SO, FOR EXAMPLE:


In the event that the appeal successfully recovers Prélèvements Sociaux and interest, without any need to take the case to the Tribunal Administratif

If the appeal successfully recovers £2,800, our fee would be:
£300 + £600 (£2800 x 10% being less than £300) = £900
 
If the appeal successfully recovers is £15,000, our fee would be:
£300 + £1500 = £1,800
 
If the appeal successfully recovers £35,000, our fee would be:
£300 + £3,000 = £3,300
 
In the event that the case needs to be taken to the Tribunal Administratif in order to keep the claim alive, then the payment structure would be as follows, in the above scenarios:
 
If the appeal successfully recovers £2,800 , our fee would be:
£300 + £300 +£300 =  £900 (minimum total fee)
 
If the appeal successfully recovers £15,000, our fee would be:
£300 + £300 + £1200 = £1,800
 
If the appeal successfully recovers £35,000, our fee would be:
£300 + £300 + £2,700 = £3,300
 
Consequently, as long as the claim is ultimately successful, there is no additional overall outlay on your part in the event that the case needs to be carried through to the Tribunal Administratif.
 
In the event that the claim ultimately has to be carried through to a Cour d’Appel Administratif:
 
Then our fees to that point would be:
£300 + £300 = £600 in all cases.
 
To find out whether or not you qualify for a rebate under CAA Nancy, and, to receive our questionnaire, documents checklist and fee agreement,then please contact Emilie Mengin at our French office:
-   info@charleshamer.co.uk
 -  Tel: 00 33 231 97 80 72).


NOTES

 
1 Court of Justice of the European Union 
2  Initially, (successfully), to the Tribunal Administratif (TA) in July 2017, whose decision was appealed to the Cour d’Appel Administratif (CAA) by the tax office but was upheld by the CAA.
3 8’eme chambre No. 422780
4 La Mobilité Internationale des Français – Anne Genetet - June 2018
5 Albeit short lived for UK nationals in the event of a no deal Brexit next March who would not then benefit from the new provisions – no longer being EU citizens.
6  Normally 6 months after the receipt of the claim
7 Between 2 and 4 months from the date of the Tax Office rejection, (implicit or otherwise) depending on the status of the claimant, (2 months if French resident, 4 months if not). 
8 Completing over 90 claims 
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