French Social Security Charges (C.S.G. and C.R.D.S.) May Be Creditable

Although the I.R.S. has recognized that foreign social security taxes imposed on net income may constitute creditable taxes for purposes of the Code §901 foreign tax credit provision, French social security charges have been denied such treatment in the past. More precisely, the French contribution sociale généralisée ("C.S.G.") and contribution au remboursement de la dette sociale ("C.R.D.S.") were not considered creditable by the U.S. Tax Court since they were considered to fall under the provisions of the French-U.S. Totalization Agreement.

In Eshel v. Comm’r , the U.S. Court of Appeals for the District of Columbia Circuit reversed this holding but remanded the case back to the Tax Court for further review and possible reconsideration. It now appears, based on a joint status report recently filed with the Tax Court, that the French and U.S. agree that neither the C.S.G. nor the C.R.D.S. falls under the provisions of the France-U.S. Totalization Agreement. This would be a favorable outcome for affected taxpayers.

More information to come by August 14 – stay tuned.

r More Information If you would like further information on this topic, please contact Nina Krauthamer or the attorney in the firm with whom you are regularly in contact.