Social contributions and capital gains on real estate for non-residents: a turning point in French case law.

For several years, the rules applicable to social contributions on real estate income from French sources earned by non-residents have raised numerous questions and disputes. A recent decision by the Council of State (CE, 9th-10th chambers combined, May 19, 2025, no. 491958) provides decisive insight into the issue of the residency condition for taxpayers affiliated with a social security system of a member state of the European Union, the European Economic Area, or Switzerland.

For company executives, investors, and international entrepreneurs, this decision is significant: it redefines the contours of taxation and potentially opens the door to refund requests or clarification of tax choices within the framework of a cross-border investment project.

At PRAX Avocats, our mission is to help you navigate these legal developments strategically and securely. This article aims to clearly and structurally present the tax and legal implications of this decision, with concrete examples, while reminding you of the precautions to take if you are affected.

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Legal and tax context of taxation for non-residents in France

Since 2012, income from French sources received by non-residents — particularly capital gains realized from a real estate sale — may be subject to social levies (CSG, CRDS, solidarity levy). At that time, this generalized taxation quickly sparked controversy: taxpayers residing in other EU member states, while being affiliated with social security in those states, deemed it illegal to also be liable for French contributions.

This debate falls within the framework of European regulations concerning the coordination of social security systems, particularly Regulation No. 883/2004 of April 29, 2004, which generally prohibits double taxation intended to finance multiple social systems simultaneously.

Case law had already evolved in the past (notably with the "de Ruyter" case, CE 2015), leading the French legislator to distinguish within social contributions those allocated to financing contributory or non-contributory benefits. However, certain situations remained uncertain, particularly regarding individuals affiliated elsewhere but residing outside the EU, or vice versa.

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A key decision: CE, May 19, 2025, no. 491958

The facts behind the dispute

In the case decided on May 19, 2025, by the Council of State, a German taxpayer, affiliated with the mandatory social security system in Switzerland, had realized a taxable capital gain in France. The French tax administration had subjected him to social levies on this capital gain. The administrative court of appeal confirmed this position on the grounds that the taxpayer did not reside in an EU country.

Seized in cassation, the Council of State annulled the appeal decision on a fundamental point: it recalled that the European regulation on the coordination of social security systems applies regardless of the taxpayer's residence, as long as the taxpayer is affiliated with a system of a member state of the EU, EEA, or Switzerland.

In other words, as soon as there is valid affiliation with a social system in one of these states, French social levies do not apply.

A clarification on the residency condition

The Council of State specifies that the residency condition is only required, according to the regulation, for specific situations, particularly concerning stateless persons and refugees. In contrast, for any citizen of a member state, mere affiliation with a social security system in this area is sufficient to exclude French social taxes.

This is a crucial point of clarification that directly impacts taxpayers established in a third state (like Switzerland) but affiliated with a social security system of the European Economic Area or equivalent.

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Concrete implications for start-ups, executives, and investors

For expatriate French executives or non-resident partners

Consider the common case of a French start-up executive who moves to Zurich for strategic development while remaining affiliated with the local social security. If this executive retains a property in France and decides to sell it, any capital gain realized will no longer be subject to French social contributions, provided he proves his affiliation with the Swiss system.

This not only reduces the total tax burden but also avoids unjustified overlap of social contributions. However, care must be taken regarding documentation and the date of affiliation to secure this position.

For European investors active in the French real estate market

Many European investors — German, Belgian, Dutch, Swiss — are active in the French real estate market, attracted by its capital gains taxation and yield prospects. For these profiles, this decision potentially opens the way to two strategies:

An ex ante securing: ensuring that their affiliation with the social security system in their country of residence is recognized by the French administration to avoid undue social levies.
An ex post action: it is possible, in certain cases, to request a refund of unduly paid social levies, subject to compliance with the claim deadlines (generally two years from the date of collection).

Again, it is essential to seek advice to verify the admissibility of a recourse or a refund request.

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Points of vigilance not to be overlooked

Proof of affiliation: a key operational issue

The Council of State's decision highlights the importance of affiliation, but it is the taxpayer's responsibility to provide proof. In practice, this involves producing a certificate from their local social security system, possibly translated, and in compliance with French administrative requirements.

In the context of acquiring and then selling shares in a real estate-dominant company, this question may also arise — particularly if the company's main asset is a property located in France.

PRAX Avocats regularly supports start-ups and companies in their cross-border legal and tax structuring, particularly during fundraising involving non-resident investors.

It should also be noted that only affiliations with legal or mandatory social security systems recognized in the EU/EEA/Switzerland are covered here. A simple subscription to private health insurance is in no way sufficient to invoke the application of the European regulation.

A legal verification of local affiliation conditions is often necessary to secure the tax position.

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What strategy to adopt if you are affected?

In light of this jurisprudential evolution, business leaders, start-up partners, or investors may, depending on their situation, consider the following actions:

Reassess their potential tax liability on future capital gains
Challenge unjustified past social taxes
Structure their real estate holdings or assets through optimized vehicles
Revise the clauses of partnership agreements or remuneration modalities, particularly for executives residing abroad

Each of these options raises issues of compliance, tax transparency, and legal security. Tailored support, adapted to the taxpayer's profile and geographical location, helps avoid misjudgments and future conflicts.

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Conclusion: opportunities but also essential precautions

The Council of State's decision of May 19, 2025, represents a step forward towards better articulation between national law and European law. It clarifies the scope of social contributions for non-residents affiliated in a member state but does not exempt from legal vigilance in its concrete implementation.

If you are affected, whether as a non-resident partner of a start-up established in France, a real estate investor, or an international executive, a personalized analysis of your situation is essential.

The teams at PRAX Avocats are at your disposal to advise you, analyze your rights, and assist you in your tax and legal procedures.

For personalized legal support for your business project, contact PRAX Avocats.