7. Social Security Contributions in France
- 7.1. Basic Rules of French Social Security
7.2. Employers and Employees in France
7.3. Self-Employed
7.4. Retired Persons
7.5. Early Retirees
7.6. Social Welfare Levy (CSG/CRDS/PS)
7.6. Social Welfare Levy - Prélèvements Sociaux
The list of social security contributions considered in previous pages includes a distinct social welfare levy, called the
prélèvements sociaux.
The French translation is plural because the levy actually comprises three different charges, as follows:
- Contribution Social Generalisé (CSG)
- Contribution au Remboursement de la Dette (CRDS)
- Prélèvement Social (PS)
Strictly speaking, the levy is not a social security contribution, as it does not generate an entitlement to social security benefits.
It is applied on a wide variety of income sources, such as income from investments, rental income, and capital gains, so needs to be considered separately from social security contributions per se, which are mainly charged to wages and business profits.
Essentially the levy forms part of the general system of taxation, but it is not a progressive tax, and is not part of the income tax system. Nevertheless, most of the CSG is deductible for income tax purposes.
Certain popular savings schemes are exempt from the levy, which you can read more about in our pages on
Banking in France.
There is a debate going on in France about the future of the social welfare levy and one proposal that seems to be gathering currency is to integrate all three charges into the income tax system.
Between them, the tax revenue from these charges is far higher than that of income tax.
A summary of the income on which the charges are applied, together with the relevant rates, is shown below:
Table: Social Welfare Levy Rates
| CSG | 7.5% | 6.6% | 8.2% |
| CRDS | 0.5% | 0.5% | 0.5% |
| PS | 0% | 0% | 2.3% |
The liability of pension income to the charge will depend on your circumstances:
7.6.1. Retired Persons
As we stated earlier, if you are of retirement age from the EU, and in receipt of a E121, the levy is not applied on pension income received from outside of France. This is because your health costs are covered from your home country through the use of the E121 form.
This means that pension income other than the State retirement pension will also escape the levy.
7.6.2. Early Retirees
The liability of early retirement pensions from the EU to the social welfare levy is a question that is extremely vexing, not only for us, but for French officials, and for financial advisors with whom we have discussed the issue.
The basic rule that applies is that you are liable to pay the levy if you are (i) resident in France and (ii) affiliated to a system of compulsory health insurance in France.
Accordingly, those who are covered by an 'E' form (E101 or E121) are not liable for the levy.
Early retirees on 'E' forms gain exemption because, as their health costs are met by their home country, they do not fulfill the second criteria.
In effect, anyone living in France who is not part of the social security system (because they have an 'E' form), does not pay the levy on pension or foreign employment income.
Accordingly, if as a result of the rule changes introduced by the French Government in 2007, denying 'inactive' early retirees access to the State health system, you are obliged to take out private health insurance, you will not be required to pay the levy on your early retirement pension.
You will be liable for the levy on rental and investment income, as there is no prior condition on health affiliation on such income.
Nevertheless, even for those already in France, and who fulfill both conditions of residence and health affiliation, we have discovered that practice on early retirement pensions varies around the country. We believe one important reason is because tax offices are interpreting the law in different ways. Thus, some tax offices seem to exempt all pensions from the levy, including pre-retirement pensions, whilst others tax early retirement pensions.
We are also aware of many on a public service pension from the UK who escape the tax on the basis that it is not taxed in France. However, we are also aware of others who are taxed on their UK government pensions. The ability to exempt from the social welfare levy income taxed in another country has recently (2008) received some limited support from the European Court, so we await with interest how this situation develops.
In other cases the early retirement pension has only be charged the CRDS element (0.5%) of the social welfare levy, something that is more clearly identified on the tax return.
One other important factor in the lack of consistency is the way income tax returns are completed. If you complete or tick the wrong box, you may find you are taxed in the wrong way!
Other differences may be explained by the fact that there is an exemption for pensions below a income threshold. The threshold figure for exemption varies by family size. The threshold for a couple in 2009 (for net income earned in 2007) is €14,666. The threshold for one person is €9560. The income figure that is used is your revenu fiscal de référence in your income tax notice. These income thresholds are the same as those that would also grant you exoneration from payment of the taxe d’habitation, the local residence tax (or rates).
Even if you exceed the income threshold, but you pay less than €61 in income tax, then the rate of CSG is reduced to 3.8%.
Nevertheless, as a result of new legislation in 2008, these exemptions have been removed for new early retirement pensions received after Oct 2007. From this date, new recipients of an early retirement pension also pay the higher rate of 8% levy on their pensions, instead of 7.1%. Those already in receipt of an early retirement pension at this date are unaffected by the changes. The law has been introduced in order to dissuade people from taking early retirement.
Whilst it is clear these new rules apply to French early retirement pensions, it is unclear whether they also apply to expat early retirement pensions. We shall no more when the 2009 tax returns for income earned in 2008 have been processed.
We appreciate that there is a 'definite maybe' concerning much of the material in this section, but this is simply because the law is unclear, and applied differently across the country.
We would be most interested to hear of your experiences on this issue. You can e mail us at editor@french-property.com 
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