IRS agrees that French CSG is a Creditable Tax

The Internal Revenue Service (IRS) has recognized in a June 14th court filing that the French Generalized Social Contribution (CSG) and the Contribution for the repayment of social debt (CRDS), are, in fact creditable taxes for US tax purposes. This ends a 7-year legal battle about whether the CSG and the CRDS were “social taxes” covered under the Totalization Agreement or income taxes that would be creditable under Sec. 901 of the Internal Revenue Code.

The French tax was initially created in the 1990s to finance certain social security funds or general budget shortcomings. The payments were computed on the same tax base as the French income tax and unlike social charges, taxpayers receive no additional social security coverage as a result of the tax.

While the controversy over the CSG/CRDS was initially only affecting US citizens working in France, an amendment made in 2012 expanded the CSG/CRDS to gains realized on the sale of real property located in France by non-resident taxpayers.

As a result of the IRS’ position, US taxpayers will be able to claim a foreign tax credit against the CSG/CRDS paid to France. We would be pleased to assist in determining whether you are eligible to claim a foreign tax credit for prior periods via an amended return.