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IRS Clarifies FTC Rules For French Social Taxes

Thursday, July 25, 2019

On July 19, 2019, the United States Internal Revenue Service updated its webpage on foreign tax credits to clarify that it will not challenge foreign tax credit claims involving certain French taxes.

The webpage explains that earlier this year the US and France memorialized through diplomatic communications an understanding that the French Contribution Sociale Generalisee (CSG) and Contribution au Remboursement de la Dette Sociate (CRDS) taxes are not social taxes covered by the Agreement on Social Security between the two countries.

"Accordingly, the IRS will not challenge foreign tax credits for CSG and CRDS payments on the basis that the Agreement on Social Security applies to those taxes," the text states.

Previously, the IRS had disallowed foreign tax credit claims for the CSG and the CRDS on the grounds that they were covered by the US-France social security totalization agreement, and were therefore not creditable under US law. However, the agency has changed its position following a decision by the US Court of Appeals for the District of Columbia Circuit, which reversed a 2014 Tax Court ruling in favor of the IRS in Eshel v. Commissioner.

The IRS's change, announced previously on June 13, 2019, means individual taxpayers who paid or accrued these taxes but did not claim them can file amended returns to claim a foreign tax credit.

According to the IRS, generally, individual taxpayers have ten years to file a claim for refund of US income taxes paid if they find they paid or accrued more creditable foreign taxes than what they previously claimed. The 10-year period begins the day after the regular due date for filing the return (without extensions) for the year in which the foreign taxes were paid or accrued. This means that amended returns may be filed going back to tax year 2009.