Overseas Chambers of Peter Harris

Maison de la Boucterie
Rue de la Boucterie
Saint Saviour
Jersey, JE2 7ZW

French residents receive a crédit d'impôt as of right on British source property income: effectively no CRDS/CSG

March 16th 2020


Interesting analysis of the right to a General tax credit under the Franco-UK Treaty, and others where no taxation has been taken of the same kind in the United Kingdom.

Further evidence that as far as land and income from land is concerned, the tax credit method is designed to grant an effective exemption from French tax of any description on those revenues, whilst retaining their British description and nature.

Conseil d'Etat: avis 12-2-2020 n° 435907

The French tax credit equal to the CSG and the CRDS, which are included in the definition of "French taxes" in the Franco-British tax treaty of 2008, does not require that these revenues be included in the tax base of a similar tax or contribution in the United Kingdom: there are none. It was only the French that had been insistng that a social security contribution can be treated as a tax.

Under article 24, paragraph 3 of the Treaty, any double taxation of  revenues of United Kingdom source which is received by individuals resident in France is to be eliminated by imputing on any French tax arising a tax credit of an amount equal, in the case of income from land, to the French tax corresponding to the income (General tax credit method).

In an advice dated 12th February, 2020, the Conseil d'État laid down as a principle that the revenues giving rise to this tax credit are those included in the United Kingdom tax base irrespective of whether the French resident were exempted from them because of their status or activity.

On the other hand, there is no requirement that the revenues be subject to an effective taxation.

The Conseil d'Etat adjudicated that the prélèvements sociaux, which are defined as French tax under the Treaty open up a right to the General Tax Credit. No stipulation in article 24 of the Treaty subordinated the benefit of the French tax credit for a French resident to any condition that a similar contribution had been levied on these revenues in the United Kingdom.

Note that the treatment of land and income from and under the Treaty is carefully conceived so as to grant an effective exemption from tax in the state of residence of the receiver, whilst retaining the character of income at its source.

This is of great importance for any French residents with British source agricultural income and the exemption of British agricultural land from the French ISF and now the IFI.