11. Social Security Contributions in France

1. 11.1. Structure of System
   11.2. Contribution Rates
   - 11.2.1. Regime Réel
   - 11.2.2. Micro-Entreprise
   11.3. Relief from Contributions
   11.4. Social Security Benefits

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11.2.2. Micro-Entreprise Social Security Contributions

If you have already acquainted yourself with our pages on the Taxation of Business Profits, you will be aware that the tax liability of a micro-entreprise is calculated after deduction of a fixed rate allowance against annual turnover.

This means that liability to social security contributions also arises on a percentage of gross sales income, depending on the type of business activity.

For example, someone running a business registered chambre d'hote would receive an allowance of 71% against revenues, meaning they would be charged social security contributions on 29% of their gross income.

Whilst, ostensibly, the social security contribution rates for a micro-entreprise are the same as those for a business operating under the regime reel, since 2008 the total amount payable has been capped at a maximum percentage of turnover. The new arrangements are called micro-social simplifié.

Those in one of the professions libérales have a cap of 21.3% or 18.3%, depending on the type of business activity that carried out.

The payments can be made each month or quarterly, based on their turnover for the previous month or quarter, but you need to elect to opt to pay in this way.

It is also possible for a micro-entreprise who has opted for the micro social simplifié to also opt for a fixed percentage charge for income tax, which they pay with their social security contributions. Those in a service based business pay 1.7%; those in a commercial activity 1% those in one of the professions libérales pay 2.2%.

The payments can be made each month or quarterly, based on their turnover for the previous month or quarter, but you need to opt to pay income tax in this way.

Those who opt for the micro social simplifié are granted exemption from the payment of the business rates, the Contribution Economique Territoriale (CET) for the first three years following the creation of their business, including the year of start-up.

If you do not opt to pay your charges in this way, you will be charged social security contributions on the basis of provisional estimates, and regularise your income tax at the end of each year.

Whichever method of payment you are considering, you need to discuss with your accountant, or your Caisse, the mechanics of paying in either manner.

Moreover, whilst the cap on social security contributions 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. You might be better off on the regime réel.

Neither can the rule 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.

Auto-entrepreneur

Since 2009 there has been yet another new business status called auto-entrepreneur, in which the owner of a business pays a fixed percentage of their gross turnover in social charges and, by option, French income tax.

This occurs in the same manner as is now possible with a micro-entreprise with the system of fixed social charges also called micro-social.

In effect, an auto-entrepreneur pays the same tax and social security payments given above as a micro-entreprise who has opted for the regime of micro-social/fiscal.

Those who opt for this status are also exempt from the payment of business rates for the first three years following the creation of their business.

Does it Make Sense?

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.

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 is comparatively high, the level of income tax payable is lower.

You can read about social security contributions as they affect a small business, in our more comprehensive guide to Micro-Entrepreneur Business in France.

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Next: Relief from Contributions

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