Currently, while French tax residents and EEA tax residents (tax residents of EU Member States, Iceland, Liechtenstein and Norway) are subject to tax at the minimum rate of 34.5% on their capital gains arising from the disposal of French real estate assets, non-EEA tax residents are subject to tax at the minimum rate of 48.5%.

This difference in taxation between non-EEA tax residents (such as Swiss tax residents) and EEA tax residents has been challenged by taxpayers under a specific provision of the EU Treaty which can be used by any taxpayers: the free movement of capital (article 64 of the EU Treaty).

Recent decisions of the French Supreme Court on other articles of the French tax code with the same difference in treatment have indicated that this difference in treatment is not compatible with the EU Treaty, which means that non-EEA tax residents should be subject to the same tax rate on capital gains as EEA tax residents.

These recent decisions could lead to some claims from non-EEA taxpayers who were unduly subject to a capital gains tax rate higher than for EEA tax residents. Such claims must be filed within the relevant time limit.

Our recommendation

Non-EEA tax residents who have recently sold French real estate assets should immediately file a claim in order to recover the capital gains tax unduly paid.  This claim must be filed within the year following the one during which the sale occurred (e.g. by 31 December 2014 for a sale in 2013), although it could be argued that a taxpayer has until the second year following the one during which the sale occurred to file this claim (e.g. 31 December 2015 for a sale in 2013).