French Social Levy on Foreign Earnings

A new social levy has been imposed on foreign earnings for those resident in France, writes Virginie Deflassieux of French tax advisors, PKF Guernsey.

The charge is specific to foreign earned income, either salaried or self-employed earnings.

The new cotisation is calculated as follows:

• Salaried income: 5.5%
• Professional earnings: 2.4% up to €34,308; 9.6% between €34,308 and €171,540.

Readers will recollect from my previous article (Newsletter 046, 18th November 2008), that the French social security collections agency URSSAF, invoking European regulations, attempted to levy CSG and CRDS charges on the UK earnings of two French lawyers fiscally resident in France who practise in France and in the UK.

The lawyers opposed this assessment on the grounds that, under the terms of the France UK Double Taxation Treaty, their UK earnings are not subject to French income tax, and thus should also be exempt from the CSG and CRDS charges.

The case went to the European Court of Justice whose ruling was not entirely clear-cut, leaving it to Member States to determine what income should be included for social security.

As a result, the French Government has now passed legislation to more clearly cover those in similar circumstances as the two claimants, who, whilst fiscally residing in France, carry out a professional activity in France and abroad.

The French Government argue that the reason for introducing the new charge is to ensure parity between those with purely French based income, and who pay the social levy on all their income. As those resident in France receive all the benefits of the French social security system, they consider it is only fair that they should pay social charges on all their income.

This cotisation will be treated as part of mainstream French social security charges, and so, unlike the CSG and CRDS, it is excluded from any double tax treaty exemption. We have asked the authorities to confirm whether the charge would be authorised as a deduction from the taxpayer’s total taxable income and we await their reply.

Those living in France on a pension taxed elsewhere in the EU do not suffer the payment of social charges on their pension as they obtain double taxation relief. For now, at least, this will continue to be the case.

Those seeking advice, French tax return completion, or simply a review of their present French tax affairs to verify that the correct tax treatment has been applied, can contact Virginie Defassieux at french.tax@pkfguernsey.com.

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