11. Social Security Contributions in France
There are various grounds on which relief or a reduction is available
i. New Start-Up
Since 2019 all new business start-ups are granted unconditional relief on social security contributions, the nature of which depends on your business tax status.
You can read more in the next section on New Start-Up Relief.
ii. Company Savings Schemes
If you employ at least one member of staff (even on a part time basis) you can establish a company savings scheme, in which you, as the owner of the business, can also participate.
These schemes are called Plan d'Epargne Entreprise (PEE).
You can pay in up to 25% of your annual income into a scheme.
Savings in a PEE are invested on the stock market and, provided they are retained for at least 5 years, the sums paid in, and the capital gain, are exempt from social security contributions, other than CSG/CRDS.
The sums and gains are also exempt from income tax and capital gains tax.
There are exceptional circumstances when it is possible to gain access to the funds before the end of the 5 year period, without loss of tax or social security benefits.
Those concerned about funding their retirement can also pay into a retirement savings scheme called a Plan d’Epargne pour la Retraite Collectif (PERCO) which offers similar fiscal advantages.
The sums placed in a PERCO are not available until retirement, although as with a PEE there are exceptional circumstances when you can gain access to the funds.
You can only open a PERCO if you have in place a PEE.
Needless to say, get the advice of your accountant before you start either of these savings schemes.
iii. Development Area
If you establish the business in a development area (and there are many different types in both rural and urban areas) you may be entitled to some relief from social security contributions.
You can read more in our pages on Financial Assistance.
If you are unable temporarily for reasons of illness, or other justifiable reason, to operate the business, the social contributions continue to be payable, excepting those for retirement pension, where relief from payment is available.
In such circumstances, you may of course be entitled to benefits yourself!
It is possible to reduce your liability to social security contribution by the adoption of a limited company structure and the use of dividends as a method of personal remuneration.
If you decide to establish a limited company, you can choose to pay yourself via a mix of salary and an annual dividend.
However, the use of dividends as a method of remuneration has become of less interest in recent years due to a tightening of the fiscal rules.
If the dividend payment is greater than 10% of the capital of the company, then you pay the full gamut of social security contributions on that fraction over 10%. This is to stop company owners paying themselves in dividends to escape the payment of social security contributions.
You will also need to declare the dividend payment with your annual earnings, which are then liable to personal income tax.
You will pay both the employer and employee social security contributions on that part of your income paid by way of salary.
Clearly, you will need to do the maths, and to take the advice of your accountant to establish whether or not it is worthwhile to do so in your circumstances.
Since January 2018 a single rate ‘flat tax’ of 30% applies for dividends.
vii. Elderly Persons
If you are aged at least 65 years of age, then you are eligible for relief from the payment of sickness benefit, when contributions will be based on your actual income, not on a minimum. If you have low income, neither will you pay CSG/CRDS or complementary pension contributions.
vi. Free Health Cover
If your total income (including income from earnings other than your business) is below certain thresholds, then you can receive free health cover through the Complémentaire Santé Solidaire (CSS).
vii. Financial Difficulties
A business that encounters financial difficulty is able to make application for temporary assistance with the payment of social security contributions. Priority is given to those encountering difficulty for the first time, those where an unforeseen external event causes difficulty (bad debt), business women with young children, or difficulties caused by illness or other 'accident of life'. You can read more about the application process at Demande d'intervention du Fonds d'action Sociale.
Next: Social Security Benefits
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