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French social charges on rental income

Deductible as expense rather than tax credit?

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Good afternoon,

UK resident individual rents out a property in France, the French tax return has been submitted showing income tax and social charges due (CSG, CRDS...).

Could someone please confirm the correct treatment of the French social charges ? My research shows that they are specifically excluded from the French-UK double taxation treaty so we can only offset the French income tax paid. However can we still deduct the social charges as an expense in computing the rental profit?

Many thanks

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By foxtrot
24th Aug 2017 18:52

I'm probably out of date, but does not the 2008 DTA at article 2 include CSG and CRDS as being within the definition of "French tax"

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By Matrix
24th Aug 2017 19:36

Yes but per Article 24 these taxes are not considered French tax for the purposes of eliminating double taxation.

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By foxtrot
25th Aug 2017 10:24

Thanks for the correction -mea culpa

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By Chipette
24th Aug 2017 21:18

Thanks for your response. I understand the charges to non resident have been controversial but referring to a "bulletin officiel des finances publiques" this specifically excludes them from DT relief. (I can only find a French version). Whether this regulation has force of law is unclear, but if so would the charges be allowable as a deduction from profits?

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Caroline
By accountantccole
25th Aug 2017 09:13

My understanding is that it is tough luck with social charges and NI. Although similar you can end up with paying on both sides of the channel with no reliefs :-(

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By Matrix
25th Aug 2017 10:08

To obtain a deduction instead of a credit then I believe the tax would still have to be on the list of creditable taxes. If it is excluded from credit under the treaty then I assume it is not an income tax but sorry I could not readily find the HMRC definitive list.

It looks as if this issue has been raised before https://www.accountingweb.co.uk/any-answers/csg-and-crds-by-hmrc

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By Chipette
25th Aug 2017 11:40

Thank you for the link. I will do some more research on this.
Seems the consensus is no relief...

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By Helenrs
10th Jan 2019 12:03

Hello, would you be able to update me on where you got to with this research. I looking at a similar point, and agree it looks like no relief for the social charges.

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By Chipette
10th Jan 2019 13:34

Hi Helen
There has been a ECJ ruling that theses charges shouldn't be applied in the first instance. However the individual needs to send a letter to the French authorities to have the charges refunded. I have a model letter (in French) but I haven't yet the practical experience of getting a refund. Pm me for more info.

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