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Exemption from “CSG-CRDS” on assets income and investment products for certain foreign persons

Exemption from CSG-CRDS on assets income and investment products for certain foreign persons

In a famous court affair (The DE RUYTER case), the European Court of Justice and the French State Council challenged the legality of the “CSG-CRDS” on assets incomes and investment products prior to the year 2016.

Assets incomes mainly include property incomes and capital gains on securities.

We will examine the consequences of this decision through a provision of the Social Security Finance Act for the year 2019.

I – The context of the affair

The application of “CSG-CRDS” was found to be illegal on income from property and investment products made by persons affiliated with a social security scheme in E.E.E. or in Switzerland.

Since then, however, the income from these contributions has been earmarked for solidarity expenditure (mainly the old-age solidarity fund), which does not fall under the European social legislation and its single cover principle.

However, a dispute is still outstanding on this subject.

II – The provisions of the social security finance act

In order to put an end to this dispute, the act provides for an exemption from “CSG-CRDS” on the following income:

  • Assets incomes and investment products,
  • Capital gains on real estate.

Only persons affiliated to a social security scheme in another Member State of the E.E.C. or Switzerland benefit from this exemption.

In return, a new solidarity levy at the rate of 7.5% has just been put in place on these same revenues. The persons mentioned above will be liable to this levy.

III – Modalities of application of the exoneration of “CSG-CRDS

To be exempt from “CSG-CRDS” on income from assets and investment products, the persons concerned must satisfy two (cumulative) conditions:

  • To be subject to the legislation of another European State or of Switzerland in the field of health insurance (in application of European Regulation 883/2004 of April 29th 2004,
  • Not to be in charge of a compulsory French social security scheme.

Regarding capital gains in state of tax deferral (Articles 150-0B Bis and 150-0B Ter of the French General Tax Code), the second condition to be exempted must be fulfilled at the time of realization of the capital gain.

IV – Entry into force of the act

This exemption from “CSG-CRDS” applies:

  • From the 2018 income tax on assets incomes (mainly real estate income and capital gains on securities),
  • Investment incomes whose generating event is from January 1st  2019,
  • From the 2019 income tax for withholding tax as down payment.

Regarding the taxation of other income, we will examine in a future article the provisions of the Finance Act for 2019.

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