11. Business Social Security Contributions in France
11.2. Contribution Rates
The social security system for both employed and the self-employed is complex, and the contribution rate is high in comparison with most other countries.
The basis on which you will be assessed will depend on your type of business activity, your legal/tax structure and either your turnover or profit.
Such is the complexity of the system that we can only provide basic information on these pages. You will need to take advice from a good, commercially orientated accountant as to the legal/tax structure you should adopt as the choice will impact on the level of your social security contributions.
Broadly speaking there are two types of tax regimes for a business, either the regime réel or micro-entrepreneur.
11.2.1. Regime Réel
Under the tax status of regime réel you are liable for tax and social security contributions on your actual net profits.
The level of these contributions will vary depending on whether you have opted to be taxed on the basis of company taxation (impôt sur les sociétés) or through the system of personal taxation.
However, whichever system of taxation applies, the level of social security contributions for a self-employed person, a travailleur non salariés (TNS,) are around 45% of net profits.
This figure is deceptive because, provided you are taxed on the basis of regime réel, most social security contributions are considered as a deductible business cost.
Under the regime réel your social security contributions are calculated from your turnover less actual eligible costs, including deductible social security contributions.
There are contribution rates for different benefits - health, pensions, social charges, training, death/invalidity, and family benefits.
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 CIPAV professions libérales then the total is several percentage points lower.
In addition, some of the rates are progressive. That is to say, at a lower level of income you will pay a lower rate.
There is also a 'ceiling' figure used in the application of some of these percentages, although this is not the case with the health contribution.
The ceiling figure 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!
Accordingly, you cannot calculate precisely the level of your social security contributions simply as (say) 45% of your net profits, as the percentage figure will vary by level of profit, type of business and tax regime.
The level of the plafond de la sécurité sociale for 2019 is €40,524 (€3,377 per month).
As a result of this ceiling, in broad terms the total percentage level of social contributions you will pay reduces the higher your level of profits but there are also certain exemptions and reductions for those with low profits.
Conversely, on higher profits, the greater the amount of income tax/company tax you will pay!
One of the most pernicious effects of the system is the high level of social contributions paid by a small business earning only a small profit, despite the limited relief available. There is very little relief to those on low incomes, a situation that has been reflected in the minimum levels of social charges that apply during the first few years of the business. This is one reason why many new businesses choose micro-entrepreneur tax status, where social security contributions are 'pay as you go'.
Since 2019 those who set up a business using the tax system of régime réel obtain partial relief from social security contributions for one year, commencing from the date of business registration.
The relief is subject to an upper income limit.
The maximum profit to be eligible is approximately €40,000, but complete exemption is only possible if the net profit is no greater than approximately €30,000, above which it is granted on a sliding scale. With profit greater than €40,000 no relief is available.
In addition, certain charges are excluded from exemption such as the social charges CSG and CRDS, and the complementary pension and accident at work contributions.
Nevertheless, the overall effect is to reduce by over half the percentage level of cotisations that would otherwise be payable in the first year.
You can read more in Social Security Relief.
During this period for those contributions where there is no relief you will pay using a provisional profit figure determined by the authorities on a national basis for everyone, although the contribution level from these figures varies slightly by type of activity.
These provisional profit figures are around €7,500 for the first year and €10,500 for the second year, except for sickness benefit which has a provisional figure of circa €16,000.
These provisional figures are recalculated the following year, and are regularised the year after.
The use of provisional assessments has been a source of great difficulty for many businesses, as they 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 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.
The option to pay social security contributions on the basis of a best estimate 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.
In practice, this means that an established business in 2019 would pay cotisations on their declared 2017 income, which is regularised in the third quarter of 2018 when the 2017 figures have been declared and assessed!
You can read detailed information about the social security contributions payable in the first three years of a business at Starting a Business in France: Social Security Contributions
We have written a dedicated guide for those setting up as a micro-entrepreneur, which you can find at Micro-Entrepreneur Business in France, which sets out the social security contribution arrangements.
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