Background to the complaint

1. The complainant is a French association that represents frontier workers who reside in France and are employed in another country.

2. In 2014, the complainant made an infringement complaint to the European Commission in which it argued that France violates EU law by deducting social security contributions[1] from pensions of Swiss origin received by pensioners who reside in France (‘the 2014 complaint’). In particular, the complainant argued that such deductions constitute double compulsory levies and, as such, undermine the freedom of movement for workers[2] and the right of establishment,[3] as well as EU legislation on the coordination of social security systems.^[4]

3. In July 2015, the Commission informed the complainant that it had decided to contact the French authorities in the context of an EU Pilot procedure[5] to obtain clarification on its application of levies to both income from assets and pensions of Swiss origin.

4. In 2019, the Commission informed the complainant of its intention to close the 2014 complaint, referring to “the social security contributions deducted from the income from assets”. The Commission clarified that the 2014 complaint was used to supplement an on-going infringement procedure against France, which led to the adoption of a national law on the financing of its social security system. The Commission had therefore closed the case.[6]

5. The complainant contested the Commission’s decision to close its infringement complaint. The complainant argued that the subsequent adoption of the French law, which prompted the Commission to close the case, addressed the issues concerning levies applied to income from assets. However, its complaint concerned the application of levies to pensions, which it contended are different in nature.  

6. In 2020, the complainant made another complaint to the Commission (‘the 2020 complaint’). The complaint was similar to the 2014 complaint and concerned the failure by the French Council of State to request a preliminary ruling from the Court of Justice of the European Union (CJEU) on the deduction of social security contributions by France on pensions paid to French residents by other countries, in particular Germany. In this complaint, the complainant referred to its 2014 complaint, which it claimed had remained unresolved. In its correspondence with the Commission about this subsequent complaint, the complainant explained that France  started deducting such levies on pensions originating from Germany only in 2016, and that no such levies are applied to pensions originating from Luxembourg.[7]

7. In 2021, the Commission rejected the 2020 complaint. In doing so, it referred to Regulation 883/2004 on the coordination of social security systems, according to which economically inactive persons, including pensioners, are subject to the legislation of the state of residence.[8] It stated that this means that the relevant authorities of the Member State of residence have the power to levy social security contributions on pension income received by pensioners who reside in that country, regardless of the origin of the pension, provided that the levy is implemented in a non-discriminatory manner and does not constitute a double imposition. This means that France cannot levy social security contributions on pensions of foreign origin that have already been paid by the individual in another context, for instance, during their professional activity, as this would constitute double imposition. The Commission explained that it was for the individual concerned, who receives a pension from another country, to prove that they had already paid social security contributions equivalent to those being levied by France.[9] The Commission found that this was not the case and that there was no double imposition. The Commission then compared the situation of a pensioner who receives a French pension only to that of a pensioner residing in France, who receives a pension from at least one other country, and found that there was no difference in treatment as France applied the same levies to both categories of pensioners in the same way. The Commission confirmed that the same reasoning also applied to the 2014 complaint.[10]  

8. In reply to further arguments raised by the complainant, the Commission clarified the nature of the social security contributions levied by France on pensions paid by other countries. The Commission explained that these contributions are not social security contributions in the strict sense but are ‘sui generis’, meaning that they would be unlikely to have an equivalent in other countries. The Commission thus confirmed that these levies did not constitute double imposition.

9. In its correspondence with the Commission about the 2020 complaint, the complainant again took issue with how the Commission had handled the 2014 complaint. In closing the 2020 complaint, the Commission repeated its previous explanations provided to the complainant in the context of the 2014 complaint, notably regarding the EU Pilot procedure[11], which led to the adoption of a national law in France to remedy the irregularities regarding levies applied to income from assets. 

10. In March 2022, dissatisfied with how the Commission handled its 2014 complaint, the complainant turned to the Ombudsman. The complainant raised concerns as to how the Commission interpreted the scope of the 2014 complaint and its failure to address the specific issues raised in its complaint.

The inquiry

11. The Ombudsman opened an inquiry into this complaint and asked the Commission to provide further explanations as to how it addressed the concerns of the complainant relating to allegedly unlawful deductions by France from pension income rather than from income arising from assets.

12. The Commission replied to the Ombudsman in July 2022.

13. The Ombudsman sought additional clarifications concerning the Commission’s assessment of the issues raised by the complainant in relation to the scope of the 2014 complaint and its claim that pensions originating from Luxembourg are exempted from the application of social security contributions.

14. The Commission replied to the Ombudsman in November 2022.

15. The complainant provided comments to the Ombudsman on the replies.

Arguments presented to the Ombudsman

By the Commission

16. In its first reply to the Ombudsman, the Commission referred to its replies to the 2020 complaint and restated some of the arguments raised in the context of that complaint. In particular, the Commission clarified that there was no breach of the principle of equal treatment of pensioners. The Commission explained that all pensioners residing in France are covered by the French social security scheme, regardless of whether the pensions received are from other countries, and that all pensioners are entitled to receive the same benefits, regardless of their contribution to the French social security scheme. This entails also the obligation for pensioners residing in France to pay social security contributions to the French scheme, deducted from the pensions they receive. In determining the contributions to be deducted, Member States have to take into consideration whether or not identical social security contributions have already been paid in the country paying the pension.

17. In its second reply to the Ombudsman, the Commission explained that, on several occasions, it had provided the necessary clarification to the complainant regarding the issue raised in its 2014 complaint, referring specifically to its letter of July 2015. The Commission clarified that the payment of the social security contributions in France would be discriminatory only if there is evidence that equivalent social contributions had been paid in another country. The Commission explained that the complainant had not provided such evidence, which led the Commission to conclude that there was no discrimination by the French authorities in this regard.

18. Regarding the alleged difference in treatment of pensions originating from Luxembourg and Germany, the Commission noted that the complainant had not raised this issue in the 2020 complaint, but had only mentioned it in its further correspondence with the Commission in 2021, without providing any supporting evidence. As a result, the Commission could not address this additional point.

19. The Commission further explained that, in the context of the Ombudsman’s inquiry, it had again analysed the relevant French legislation, but did not find any provision that would give rise to discrimination in terms of the deduction of the social security contributions based on the origin of the pension. The Commission thus found that the French law in question did not breach EU law, and that any possible inconsistency in the deduction of contributions may be the result of the misapplication of the French law by local authorities, which is an issue that would then fall outside its remit.

By the complainant

20. In its complaint and correspondence with the Ombudsman, the complainant took issue with how the Commission handled the complaint of 2014. The complainant claimed that the Commission failed to address the specific issues raised in the 2014 complaint and to deal with the matter in a timely manner. The complainant also argued that the treatment of the complaint in the context of the EU-Pilot procedure was confusing.

21. The complainant also disagreed with the position of the Commission on the matter. It argued that the Commission misinterpreted the applicable legal framework in a manner that is contrary to the objective of Regulation 883/2004, which is to encourage the free movement of workers. The complainant contended that, as the levies collected by France on pensions of Swiss origin do not benefit the pensioners in question, they should not be deducted. In addition, the complainant argued that the legislation was not intended to enable Member States to collect levies from foreign pensions that do not provide benefits to pensioners. The complainant further contented that the situation of French pensioners and of pensioners receiving a foreign pension and residing in France is very different, and cannot be compared.

22. The complainant claimed that, given the nature of the concerns raised in its 2014 complaint, the Commission should have referred the matter to the Court of Justice, which would be the appropriate body to settle the issue. 

23. In its comments on the Commission’s replies to the Ombudsman, the complainant reiterated its dissatisfaction with the Commission’s position on the substance of its infringement complaint and with how the Commission handled its 2014 complaint.

The Ombudsman's assessment

24. When it comes to dealing with infringement complaints, the Commission enjoys wide discretion in deciding whether and when to commence an infringement procedure.[12] Its policy on infringements of EU law is set out in its Communication EU law: Better results through better application.[13] The role of the Ombudsman in such cases is limited to verifying that the Commission gave clear and reasonable explanations for its decision, and that there was no manifest error of assessment.

25. The Ombudsman decided to open an inquiry into this complaint to clarify how the Commission had addressed the various issues raised by the complainant in the 2014 complaint. In particular, the complainant had raised concerns on the alleged double imposition of pension income of Swiss origin by France, which it contended would breach EU law on coordination of social security systems and free movement rights of pensioners. The Ombudsman also looked into how the Commission had communicated with the complainant in reply to its complaint of 2014 and the adequacy of the reasoning it provided.

26. The Ombudsman finds that how the Commission handled the 2014 complaint was not in line with principles of good administration. While the letter of July 2015 sets out the legal framework for pensioners receiving a foreign pension and residing in France, it specifically states that the Commission would seek explanations from the French authorities on how levies are deducted from pension income by France. As a result, the complainant reasonably expected to receive further clarification on the matter. However, the Commission instead closed the complaint, arguing that the subsequent adoption of a French law had addressed the issues raised in the complaint. This is despite the fact that the French law concerned levies applicable to income from assets but not to pensions, which are benefits of a different nature and are subject to different legal provisions. In addition, the fact that the Commission dealt with the 2014 complaint in the context of an EU Pilot procedure, which was linked to an ongoing infringement procedure against France, did not remove the obligation on the Commission to address the specific issues raised by the complainant and provide adequate reasoning. This is particularly the case given that the infringement procedure in question did not concern the same issue raised in the 2014 complaint and, as such, the solution found in the context of the EU Pilot procedure did not address the complainant’s specific concerns.  

27.  The Ombudsman regrets that the Commission has failed to acknowledge the confusion it created when replying to the complainant in response to its 2014 complaint and will make a suggestion in this regard.

28. Nevertheless, in its replies to the Ombudsman, the Commission demonstrated that it had addressed the complainant’s concerns regarding the deduction of social security contributions from pensions originating from other Member States, including Switzerland, as part of its replies to the complainant’s 2020 complaint.

29. The Ombudsman finds that, while the Commission should have addressed the complainant’s concerns in the context of the 2014 complaint, in its replies to the 2020 complaint, the Commission did address the concerns raised by the complainant in its 2014 complaint.

30. The Commission provided adequate reasoning for its view that France, as the Member State of residence, is entitled to deduct levies from foreign origin pensions received by pensioners residing in France and thus deriving benefits in France. In addition, the Commission gave reasonable explanations as to why the deduction of levies by France from foreign origin pensions does not amount to double imposition of levies if such levies are not comparable to contributions paid in other countries. Given the unique nature of the levies at issue, this did not appear to be the case in other Member States, including Switzerland. In addition, the Commission set out its view that there is no discriminatory treatment of pensioners living in France and that, even though these levies do not grant a direct advantage to French-based pensioners receiving a foreign pension, this is not contrary to EU law under the principle of solidarity. The Commission stated that the explanation provided in relation to the 2020 complaint was applicable to the 2014 complaint.

31. The Ombudsman is of the view that the explanations provided in this context are sufficiently clear to allow the complainant to understand the Commission’s position that France does not breach EU law. The fact that the complainant disagrees with the Commission’s explanation and interpretation of the law is not sufficient to indicate a manifest error of assessment in this regard. The Ombudsman may not substitute the Commission in its role as ‘guardian of the treaties’ and cannot ask the Commission to refer the matter to the Court of Justice. The Commission has the discretion to do so if it finds that a Member State breaches EU law, which it did not find in this case.

32. Concerning the alleged difference in treatment of pensions originating from Luxembourg and Germany, the complainant had not raised the issue in its complaints of 2014 and 2020. The complainant briefly mentioned the issue in its correspondence with the Commission, without substantiating these points. The Ombudsman is of the view that the Commission should have replied to the complainant that it could not address these questions without further evidence. However, it remains open to the complainant to turn again to the Commission on this point, providing detailed information and supporting evidence that would enable the Commission to conduct a full assessment of the complaint. 

33. In light of the above, the Ombudsman finds that no further inquiries are justified in this case. 

Conclusion

Based on the inquiry, the Ombudsman closes this case with the following conclusion[14]:

No further inquiries are justified.

The complainant and the European Commission will be informed of this decision.

Suggestion for improvement

Where the Commission decides to add a complaint to an ongoing infringement procedure, in particular in the context of an EU Pilot procedure, it should ensure that it adequately addresses the specific issues raised in that complaint.

 

Emily O'Reilly
European Ombudsman

Strasbourg, 01/09/2023

 

[1] The general social contribution (CSG), the social debt repayment contribution (CRDS) and the additional solidarity and autonomy contribution (CASA)

[2] Article 45 of the Treaty on the functioning of the European Union (TFEU)

[3] Article 49 TFEU

[4] Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32004R0883&from=FR . It is applicable to Switzerland on the basis of a Decision No 1/2012 of 31 March 2012, of the Joint Committee: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:22012D0195&from=EN .

[5] The EU Pilot procedure is a mechanism for informal dialogue between the Commission and the Member State concerned on issues relating to potential non-compliance with EU law. It is used before launching a formal infringement procedure: https://single-market-scoreboard.ec.europa.eu/enforcement-tools/eu-pilot_en#:~:text=EU%20Pilot%20is%20a%20mechanism,launching%20a%20formal%20infringement%20procedure.

[6] Loi n° 2018-1203 du 22 décembre 2018 de financement de la sécurité sociale pour 2019.

[7] concerning the CSG and CRDS.

[8] Article 11(3)(e) Regulation (EC) No 883/2004 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A02004R0883-20140101

[9] Judgment of the Court of 18 July 2006, case C-50/05, Maija T. I. Nikula. Reference for a preliminary ruling: Korkein hallinto-oikeus - Finland, points 35 and 36: https://curia.europa.eu/juris/showPdf.jsf?text=&docid=57021&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=10401273

[10] In 2020, the complainant submitted another infringement complaint to the Commission, which was similar in substance to its complaint of 2014. It concerned the deduction of social security contributions by France on the pensions paid by Switzerland to the widow of a deceased Swiss pensioner residing in France. The Commission closed the case relying on the same reasoning as the above-mentioned complaint of 2020 and concluded that France did not breach EU law.

[11] Based on the Judgment of the Court (First Chamber) of 26 February 2015, case C-623/13, Ministre de l'Économie et des Finances v Gérard de Ruyter: https://curia.europa.eu/juris/liste.jsf?language=fr&num=C-623/13

[12] Judgment of the Court of 14 February 1989, Starfruit v Commission, case 247/87, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:61987CJ0247.

[13] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52017XC0119(01)&from=EN

[14] This complaint has been dealt with under delegated case handling, in accordance with the Decision of the European Ombudsman adopting Implementing Provisions