British expats in France can claim a share of millions of pounds of compensation after the European Court ruled in their favour against unfair social security payments imposed by President Francois Hollande’s government.
Around 200,000 expats who have rented out or sold homes in France during the past three years will benefit from the victory following the legal challenge.
In 2012, the government ordered that expats with second homes should pay income tax on rental profits at 35.5% instead of 20%. At the same time, taxes on any capital gains on the sale of a property were hiked from 19% to 34.5%.
To rub salt into the wound, the government also declared second home owners should also pay a 15.5% social tax on rental profits and capital gains, which brought an extra £178 million in for the French tax man.
France breaks social security laws
Hollande claimed the new taxes were justified because second home owners had unfair tax advantages over other taxpayers.
However the rule flouted European Union laws which do not allow expats to pay social security contributions in two EU countries at the same time.
As the new law was drafted as a social security contribution rather than a direct tax, any amount paid by British expats was excluded from the UK’s double taxation treaty with France.
After CGT reliefs, a British expat making a £395,000 gain on a French house sold for £535,000 would pay almost £43,000 in social payments that could not be offset against tax in either country.
“It is illegal for a government in one member state to make a citizen making social contributions in another member state liable to do so again,” said the ruling from the European Court of Justice.
Spanish MPs back expats too
Lawyers for British expats are urging them to submit a claim for a refund of any social contributions plus any fees and other charges they have had to pay in relation to their properties.
British expats in Spain also won a legal victory after having their dream homes demolished because they were scammed by developers into buying properties that were built without permission.
MPs voted to amend laws that demand developers must pay compensation to expats who purchased a home from them in good faith only to find they had been conned later.