7. Social Charges/Contributions in France
- Basic Rules
- Employers and Employees
- Retired Persons
- Early Retirees
- Social Charges (CSG/CRDS)
7.6. Social Charges
7.6.1. What are the Social Charges?
The list of social security contributions considered in previous pages includes a rather particular type of social charge, called the prélèvements sociaux, also known as the contributions sociales.
Strictly speaking, the charges are not a social security contribution, as they do not generate an entitlement to social security benefits, although the CSG goes towards funding health care in France.
The social charges are applied on a wide variety of income sources, such as income from investments, rental income and capital gains, so need to be considered separately from social security contributions per se, which are mainly charged to wages and business profits.
Between them the tax revenues from these charges are far higher than that from French income tax.
The charges form part of the general system of taxation, but they are not progressive, and they are not part of the income tax system.
There is frequently discussion about integrating at least some of these charges into the income tax system, but it is unlikely this is a reform will be carried out quickly or comprehensively.
Until 2018 the prélèvements sociaux comprised five different taxes, as follows:
- Contribution Sociale Généralisée (CSG);
- Contribution au Remboursement de la Dette Sociale (CRDS);
- Prélèvement Social (PS);
- Cotisation de solidarité pour l’autonomie (Casa)/Contribution additionnelle;
- Prélèvement de Solidarité.
However, in 2018, as a result of legal controversy over the application of these charges on EEA residents, the government changed the law, abolishing the prélèvement social and the contribution additionnelle on capital, but increasing the rate of the prélèvement de solidarité.
In addition, in order to comply with European law, the proceeds of the prélèvement de solidarité were no longer allocated to the social security budget, but to the general fund. To that extent, strictly speaking, therefore, it is no longer a social charge, ie not one of the official prélèvements sociaux.
7.6.2. Social Charges Rates
A summary of the income on which the charges applicable are applied, together with the current rates, for residents of France, is shown below.
As can be seen the rate of social charges differs, depending on the nature of the income, but it also depends on your legal status.
Table: Social Charges - Rates 2019
|Prélèvement de Solidarité||0%||0%||7.5.%|
We consider in more detail the application of social charges in pension income and capital gains/rents/investments below.
Certain popular savings schemes are exempt from the charges, which you can read more about in our pages on Banking in France.
7.6.3. Pension Income
There are four rates of social charges on pension income, based on income. These rates apply on both State and early retirement pensions.
For a single person the rates and income limits for 2019 (2017 income) are as follows:
- 0% <€11,128
- 3.8% <€14,548
- 6.6% <€22,580
- 8.3% >€22,580
For a couple (married or civil partnership), the rate and limits are as follows.
- 0% <€17,070
- 3.8% <€22,316
- 6.6% <€34,636
- 8.3% >€34,636
These income thresholds are increased for additional dependants in the household.
For those on the reduced rate of 3.8%, the liability to an increase in the CSG rate to 6.6% only applies if the threshold is exceeded for two consecutive years. Thus, the benefit of the reduced rate of 3.8% is retained if the reference tax income limit is exceeded for only one year.
In addition, expatriates who hold an 'E' form or S1 health certificate, or who are in receipt of a government service pension (teaching profession, local government, civil service, armed forces) are also exempt. Similarly, if you are covered for health via a private policy you should obtain exemption on your pension income.
S1 Exempt Households
The basic rule that applies on pension income is that you are only liable to pay the charges if you are affiliated to the system of compulsory health insurance in France.
If you are of retirement age or an early retiree from within the EEA, and in receipt of a S1 health certificate of exemption, the social charges are not applied on any pension income received from outside of France. The same rule applies to cross-border workers who hold an S1.
This is because your health costs are covered from your home country through the use of the S1 form.
This means that workplace pension income other than the state retirement pension also escapes the charges.
The law covering the issue is frequently misunderstood by local French tax officials, as a result of which those on an S1 form sometimes erroneously pay social charges on their pension income.
The legal position is determined by European Regulations 1408/71 and 574/72\, which were subsequently set out in France under Circulaire n° 2002/4 25 January 2002.
These were later substantially amended by Regulations (EC) 883/2004, which became the basic regulation, and (EC) 987/2009, which set out the procedures for implementing the basic regulation. These rules govern social security rights and payments within the EEA.
If you have an S1 you should ensure you keep a copy to produce to your tax office, but your local CPAM health office will also supply you with an Attestation de droits à l'assurance maladie, on which the coding should indicate to the tax office that your health cover is provided through an international agreement. You can also request this document on-line at www.ameli.fr.
Private Health Policy
Similarly, if as an early retiree, if you are obliged or choose to take out private health insurance, you should should be able to obtain exemption from the charge through the French social security code.
Article L136-1 of the code states that in order to be liable for the social charges on pension income the individual must be both resident in France and in the French social security system:
'1° Les personnes physiques qui sont à la fois considérées comme domiciliées en France pour l'établissement de l'impôt sur le revenu et à la charge, à quelque titre que ce soit, d'un régime obligatoire français d'assurance maladie '
The private policy must be more than just a 'top-up' policy; it must be for all your health cover.
If you are in receipt of a 'government service pension' taxed in the UK you also escape the social charges by virtue of the 2008 Double Taxation Convention between the UK and France, as under the DTC the social charges are considered to be a 'tax'.
The exemption only applies to the government service pension, not other early retirement pensions, unless exempt on other grounds, eg low-income, S1.
Purchased annuities outside of the workplace pension are not recognised in France and could be construed as investment income. As this can be a complicated area, you would be wise to take professional tax advice. However, that said, declaring them as pension income is actually a correct way of reporting this income. It is then for the tax authority to decide whether they wish to raise any queries or objections to the declaration being made in this way!
If you are liable, the rate that will be used will depend on your total taxable income, not merely your pension income. That is to say it will apply on your ‘Revenu Fiscal de Référence' as shown on your tax notice. This means that for a couple who are taxed on a joint base a common rate applies, irrespective if one of the spouses could have claimed a reduced rate or exemption.
The relevant tax year for assessing your liability in 2019 (for 2018 income) is your 2017 income, as stated on your tax notice for 2018!
Those paying at the full rate who might be expecting to benefit from this announcement will need to wait until the summer of 2019 to obtain the reduced rate, following submission and assessment of your 2018 income tax return. A tax rebate will then be granted for any over-payment in social charges made since January, and the rate adjusted for the remainder of the year.
7.6.4. Capital Gains/Rents/Investment Income
The basic rate of social charges is 17.2% on net gains or profit.
However, where the individual holds an S1 health certificate, or they are non-resident in the EEA, they are only liable to the 7.5% solidarity tax.
7.6.5. Deduction for Income Tax
The pain of the social charges is relieved to some extent by virtue of the fact that CSG is partially deductible for income tax purposes. That is to say, the deductible sum paid in CSG reduces the figure that is used to determine your liability to income tax.
In 2019 the deduction is:
- 6.8% on salaries;
- 5.9% on pensions charged at full rate;
- 6.8% on unfurnished rental income, investment and business income;
- 3.8% for other income.
On pension income, for whose who pay at the rate of at 8.3% it is 5.9% deductible; at 6.6% it is 4.2%, and at 3.8% it is entirely deductible. The deduction occurs in the year following imposition.
The effect of this rule is that the non-deductible fraction of pension income is included in your income tax assessment.
The CRDS and the solidarity tax (prélèvement de solidarité) are not deductible.
In addition, the deduction on investment income (savings, dividends) only operates where the taxpayer has opted to be taxed for income tax purposes using the scale rates, rather than the 'flat tax' (Prélèvement Forfaitaire Unique - PFU) of 30%.
7.6.6. Local Interpretation
Whatever your circumstances, we have found that local tax offices interpret the law differently.
Thus, some tax offices seem to exempt all pensions from all or some of the charges, including pre-retirement pensions, whilst others tax all early retirement pensions.
Similarly, the manner in which the Double Tax Convention is applied in France is not consistent, and you may well need to take advice on your circumstances or challenge the assessment that has been made.
If the tax office will not accept your argument, then appeal to the Conciliateur Fiscal, the local tax ombudsman. In the event that your appeal to the CF is turned down then you need to appeal to Médiateur du Ministère de l’Économie, des Finances et de l’Industrie.
You should also make sure that you correctly complete your tax return. We have found that a large number of expatriates do not do so, as a result of which they find the social charges are imposed, when they might ordinarily be exempt.
This is particularly the case for those exempt on an 'S' health certificate, as you need to include this form with your tax return or the tax office will not be aware of your circumstances.
We would be most interested to hear of your experiences on this issue. You can e mail us at firstname.lastname@example.org
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