11. Social Security Contributions in France
- 11.1. Structure of System
11.2. Contribution Rates
11.3. Relief from Contributions
11.4. Social Security Benefits
11.2. Social Security Contribution Rates in France
The social security system for independent workers and companies is complex and the contribution level is high by comparison with most other countries. The basis on which you will be assessed will depend on your turnover, type of business activity, and your type of legal/tax structure.
You will need to take advice from your accountant as to the legal/tax structure you should adopt, whether micro-entreprise, regime réel or limited company, as the choice will impact on the level of your social security contributions.
The following table summaries the applicable
average rates for a non-agricultural
travailleur non salariés (TNS). That is to say, someone who is either self-employed (
EI), or a majority shareholder of a limited company (
EURL or
SARL).
Depending on your business activity/profession, some of the specific rates do vary slightly, notably in relation to pension contributions.
In particular, if you are in one of the
professions libérales then the total is several percentage points lower.
Table: Social Security Rates (TNS)
| Family Benefits | 5.40% |
| Health/Sickness | 6.5% |
| Sickness Benefit | 0.7% |
| CSG/CRDS | 8% |
| Invalidity/Death | 1.5% |
| Pensions | 23% |
| Training Levy | 0.15% |
Many new business owners assume from viewing these rates that they hand over nearly half of their net profits in social charges. This is not true. The average for most business's is about one third of net profits, although the rate may well be higher if you elect to be taxed as a micro.
The reason why a straight line calculation cannot be made is that most social contributions are considered as a deductible business expense, provided you are taxed on the basis of regime réel. There is also a 'ceiling' figure used in the application of these percentages,
If you are a micro, the social charges are payable on your turnover, after deduction of the fixed allowance granted to you; if you are regime réel, they are calculated from your turnover less actual eligible costs, including deductible social security contributions.
The ceiling figure against which social security rates are applied is is called the plafond de la sécurité sociale. Certain social contributions are based on this ceiling, others on a fraction or multiple of it, and yet others on the totality of your business income!
The level of the plafond de la sécurité sociale for 2008 is €33,276 (€2773 per month).
As a result of this ceiling, the total percentage level of social contributions you will pay reduces the higher your level of profits. Conversely, on higher profits, the greater the amount of income/company tax you will pay.
In the past, one of the most penicious effects of the system has been the high level of social contributions paid by a small business earning only meagre profits. There has been very little relief to those on low incomes, a situation that has been reflected in the minumum levels of social charges that apply during the first few years of the business.
As a new business has no previous income record on which to base contributions, then for the first two years the contributions were based on a provisional profit figure determined by the authorities on a national basis for everyone.
The use of provisional assessments has been a source of great difficulty for many businesses, as these assessments may bear no relation to reality - they either do not pay enough, and so later have to repay, or they pay too much, which causes problems of cash flow until reimbursement is received.
Accordingly, all businesses are now permitted to pay social contributions on the basis of actual or best estimate profit levels. There is still a minimum amount (circa €1500) that you will still need to pay (even if you make a loss), but less than you might otherwise pay through the system of provisional assessments.
This option is available at the request of the business, and without supporting information. Needless to say, there may still be the need at the end of the year to regularise the contributions based on final year actual profit figures.
You also need to be prudent with your estimating, for if your profit is higher than the estimated figures provided to the authorities, then you will be liable for a 10% surcharge on the additional charges payable.
The Government has recently (Jan 2008) introduced further measures to reduce the burden of social security contributions on a small business. The new provision caps the level of social contributions payable by a new micro-entreprise, and abolishes the use of provisional profit figures for all, except those in one of the professions libérales.
Accordingly, a 'service' based micro business would pay no more than 24.6% of their turnover in social contributions, whilst the figure is 14% for a 'sales' based business. This new status is called micro-social.
Once again, those in one of the professions libérales do not benefit from this concesssion, although there are reports this may change in the future.
Whilst this rule is potentially very attractive for a business with a very small turnover, you need to do the sums to make sure it works for you on higher levels of turnover.
In short, the key benefit of the new rule is that it abolishes the previous minimum level of contributions.
The basic premise is that the social security authorities will apply the rule automatically, if the calculation is to your benefit.
However, if you are a new micro-entreprise you would be advised to discuss the application of this new rule with your accountant, or the RSI. This is because for start-ups the rule will be applied against provisional figures determined by the authorities, whereas you can elect to be assessed on the basis of your own estimates.
It cannot apply where you are obtaining relief from social security contributions as someone formerly registered as unemployed, or relief gained as a start-up in a development area.
More generally, you need to ensure it is in your best interests to be taxed as a micro-entreprise. If you are making no or little money in your first year or so as a business, then you may be better off being taxed on the basis of regime réel, although a minimum level of contributions is payable, even under this tax regime. You can read more in our review of the tax regime of micro-entreprise.
As we mentioned in the section on
Business Structures, if your spouse participates in the running of the business, they are also required to pay social security contributions. They are not eligible for the regime of
micro-social.
Although social security charges may seem high, it is important to understand the relationship in France between the tax system and the social security system.
Unlike the UK and many other European countries, liability to income tax occurs after deduction of social security contributions. The income tax system is also very progressive.
Whilst, therefore, the level of social contributions may seem high, the level of income tax payable is generally lower.
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Work & Business in France