2.6. Social Welfare Levy in France

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The list of social security contributions above 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. 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 in France

	Wages/Salaries/Early Retirement Pensions	Pensions/Benefits	Investments/Rental/Capital Gains
CSG	7.5%	6.6%	8.2%
CRDS	0.5%	0.5%	0.5%
PS	0%	0%	2.3%
Total	8%	7.1%	11%

The liability of pension income to the charge will depend on your circumstances:

i. Retired Persons

In the first place, as we stated above, if you are of retirement age from the EU, 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.

In practice, this means that workplace pension income other than the State retirement pension will also escape the levy.

ii. 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 expat financial consultants with whom we have discussed the issue.

Strictly speaking, unless you are covered by an 'E' form, 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.

Early retirees on 'E' forms gain exemption because, as their health costs are ostensibly met by their home country, they do not fulfill the second criteria.

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. This may well be because tax offices have interpreted the law in different ways. Some tax offices seem to exempt all pensions from the levy, including pre-retirement pensions, whilst others tax early retirement pensions.

Practice may also vary because of the way income tax returns are completed. If you tick the wrong box, you may find you are taxed in the wrong way!

There may also be different experiences because there is exoneration for pensions below an income threshold figure, although this concession is being removed for early retirement pensions received from 2008.

The threshold figure varies by family size.

For 2008 (for income earned in 2006 and appearing on your 2007 tax notice!), the thresholds is €9437 for one person. In the case of two persons the figure is €14,497.

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%.

We would be most interested to hear of your experiences on this issue. Please contact us at editor@french-property.com

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