France Abolishes Levy Of Double Social Security Contributions From January 1st 2019
Last Friday, the French parliament accepted a proposal by the French government to abolish the levy of social security contributions from January 1st 2019 for persons (resident or non-resident of France) already subject to social contributions in another EU Member State (or Switzerland or the European Economic Area).
This change in law is of great importance for owners of secondary houses in France. From a capital gains tax standpoint, in the case of a sale such owners are currently subject to personal tax in France at a fixed 19% income tax rate plus 17.2% social contributions, i.e. in total 36.2%. An additional taxation applies for any capital gains derived from the sale of a property that exceed € 50,000. The tax rates vary from 2% to a top rate of 6%. Thus, in case the total capital gain exceeds € 260,000 the maximum capital gains tax rate applicable today can amount to 36.2 % plus 6%, i.e. 42.2%. From January 1st 2019 for persons already subject to social contributions in another EU Member State (or Switzerland or the European Economic Area) the tax rate will go down to maximum 25%!
The change in law will also have a positive effect for owners that receive furnished or unfurnished rental income from French property. From January 1st 2019 they will only pay personal income tax (with a minimum tax rate of 20%).
Last but not least, France could become quite interesting for wealthy private individuals, because the current flat tax rate of 30% on income from capital (interest, dividends and capital gains on sales of shares and bonds) will go down to 12.8% which corresponds to the levy of personal income tax.
Of course one has to be able to proof that he/she is subject to the social security system of another EU Member State (or Switzerland or the European Economic Area). Only then one can escape the levy of the French social security contributions. Unfortunately the new law does not apply for all other categories of foreign investors. For example an American, Russian, Indian or Canadian investor will still become subject to the French social contributions.
Me Albert MULDER (French lawyer / Avocat au Barreau d’Aix-en-Provence)
a.mulder@cm-tax.com