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Exemption from CSG [General Social Contribution] and CRDS [social debt reimbursement contributions] on incomes from property and investment products for individuals subject to a health insurance scheme within the EEA (other than France)

Article 26 of the law 2018-1203 of 22 December 2018 on the financing of social security for 2019 has inserted a paragraph I ter into articles L136-6 (property income) and L136-7 investment products) of the Code de la sécurité sociale [French social security law], in order to achieve its compliance with the position of the CJEU following the “Ruyter” judgment .

It is thus now enshrined in law that individuals who are not subject to a compulsory French social security regime but are subject, in terms of health insurance, to a social legislation under the aegis of European regulation (EC) No. 883/2004, are exonerated from the contribution sociale généralisée (CSG) [General Social Contribution] and the contribution pour le remboursement de la dette sociale (CRDS) [social debt reimbursement contributions]. This concerns not only non-residents for French tax purposes, but also those who are resident for French tax purposes under a health insurance regime within the EEA, other than in France.

Exemption from CSG and CRDS concerns both incomes from property and from investment products. In consequence, only the solidarity levy at 7.5% remains applicable , with the exclusion of CSG and CRDS.

This partial exemption from social contributions is applicable :
- for incomes from property, as from tax on incomes from 2018 ;
- for investment products, for chargeable events occurring since 1 January 2019.

Being concerned solely with investment products, the decree No. 2019-633 dated 24 June 2019 which came into force on 26 June 2019, now specifies the arrangements for implementation of this exemption.

I. PROPERTY INCOME

A. Property income subject to social contributions

Article L136-6 of the CSS [Social Security Law] distinguishes between types of income from property subject to social contributions depending on whether or not the tax payer is an individual who is resident for French tax purposes.

• For those who are resident for French tax purposes, this involves :
- land property incomes,
- life annuities constituted for consideration, from property capital incomes other than those constituting investment products,
- the following gains and profits: earned long-term income, gains on transferable securities and shares, profits realised on futures, gains on digital asset transfers, gains on shares in listed companies in the case of a transfer giving entitlement to a reduction in wealth tax on personal property assets [IFI], gains and debts subject to exit tax, distribution of venture capital company grains, profits derived from industrial property and products derived from software protected by authors’ rights;
- stock-options gains allocated before 28/09/2012 and gains from the acquisition of restricted stock rights before 28/09/2012 or by virtue of an authorisation having taking place since 08/08/2015;
- incomes falling into the category of industrial and commercial profits [BIC], profits from agricultural incomes or non-commercial profits [BNC] when these have not been subject to CSG or CRDS in respect of earned income;
- incomes exempt from tax on the following types of income: long term earned income gains realised in the context of a retirement, incomes, gains, and products from overseas sources received by expatriates.

• For those who are non-resident for French tax purposes, this involves incomes from immovable properties located in France or fees relating to these properties (land property incomes of French origin) .

B. Applicable procedure

Article L136-6, I ter of the CSS does not refer to the specific arrangements set out by decree in order to benefit from the exemption mechanism, unlike that which is provided for investment products.

II. INVESTMENT PRODUCTS

A. Investment products subject to social contributions

Article L136-7 of the CSS distinguishes between investment products subject to social contributions depending on whether or not an individual is resident for French tax purposes.

• For those who are resident for French tax purposes, this involves most types of property income, including those exempt from tax on income. The concept of an investment product also encompasses immovable property gains and similar items .

• For those who are non-resident for tax purposes, this involves property gains and similar items of French origin, subject to the levy in Article 244 bis A of the CGI [General Tax Code] .

B. Applicable procedure

Concerning investment products, the benefit of CSG and CRDS exemption is subject to certain arrangements specified by decree No. 2019-633 of 24 June 2019. This decree makes a distinction between property gains and similar items and the levy referred to in Article 244 bis A of the CGI, on the one part (2.) and other investment products, on the other hand (1.).

1. Investment products other than property gains and similar items referred to at Article 244 bis A of the CGI (Article D136-1 of the CSS)

a/ Content of the declaration of honour

The beneficiary of the investment products must produce a declaration of honour to the paying establishment, indicating:
- that they are not subject to a compulsory French social security regime but that they are subject to a social legislation falling within the field of regulation (EC) No. 883/04 or pertaining to the common social security regime of the institutions of the Union;
- the social protection fund to which they are attached;
- their social security regime identifier for their State;
- the date of commencement of access to these rights in this regime;
- the undertaking to abide by the two obligations referred to in paragraph c/ below.

This declaration must be compliant with the model determined by the decree of the minister with budget responsibility dated 29 July 2019.

b/ Duration of validity of the declaration of honour

The declaration has a period of validity of three years. At the end of this period, the investment incomes become subject to the CSG and CRDS. It is therefore incumbent upon the interested party to produce a new declaration of honour before expiry of this period, in order to be able to continue to have the benefit of the exemption.

c/ Two obligations to be entered into by the beneficiary of investment products in the declaration of honour

The beneficiary of the investment products must given an undertaking in the declaration of honour to respect the following two obligations:

• first obligation – if the beneficiary of the investment products ceases to fulfil the condition giving them access to the exemption, they must inform the paying establishment of this within one month.

• second obligation – at the request of the administration, the beneficiary must be able to produce one of the following items of supporting documentation, issued by the competent institution:

1° Form S1 “Registering for health care cover”, issued by application of the European regulations (EC) No. 883/04 and (EC) No. 987/09 and referring to the affiliation of the individual with one of the Member States of the European Union, of the European Economic Area or in Switzerland;

2° Form A1 “Certificate concerning the social security legislation which applies to the holder”, issued by application of the European regulations (EC) No. 883/04 and (EC) No. 987/09;

3° An attestation of affiliation equivalent to the forms referred to at 1° and 2°, issued by the institution with which the individual is affiliated;

4° An attestation of affiliation to the common social security regime of the institutions of the Union.

2. Property gains and similar items referred to in Article 244 bis A of the CGI (Article D.136-2 of the CSS)

a/ Production of documentary proof at the time when the formality is fulfilled

For property gains and the levy referred to at Article 244 bis A of the CGI, the tax payer must substantiate that they fulfil the conditions for exemption referred to in the first paragraph of §I ter of Article L136-7 of the CSS. In other words, they must prove that they are not subject to a French compulsory social security regime, but that they are subject, for health insurance purposes, to a social legislation pertaining to the European regulation (EC) No. 883/04.

To do this, the tax payer must produce, in the context of the registration formalities, or the submission of the declaration of a gain, depending on their situation, one of the following documentary proofs, issued by the competent institution and relating to their actual situation in the date of the taxable event, namely:

1° Form S1 “Registering for health care cover”, issued by application of the European regulations (EC) No. 883/04 and (EC) No. 987/09 and referring to the affiliation of the individual with one of the Member States of the European Union, of the European Economic Area or in Switzerland;

2° Form A1 “Certificate concerning the social security legislation which applies to the holder”, issued by application of the European regulations (EC) No. 883/04 and (EC) No. 987/09;

3° An attestation of affiliation equivalent to the forms referred to at 1° and 2°, issued by the institution with which the individual is affiliated;

4° An attestation of affiliation to the common social security regime of the institutions of the Union.

b/ Further information concerning the situation where the property transferred is owned by several people

Where the property transferred is held by several people, the documentary proof referred to above is only produced on the basis of the gain received by each individual meeting the conditions of exemption. The fraction of the gain must itself be justified by any probative element, to be sent to the tax administration in the context of the registration formalities or submission of the declaration of a gain.

Exemption from CSG and CRDS on incomes from property and investment products for individuals subject to a health insurance scheme within the EEA