Pension Rights of Micro-Entrepreneurs 2016
Friday 04 November 2016
Micro-entrepreneurs need to realise a minimum turnover each year to obtain entitlement to a French pension.
If you run a business as a micro-entrepreneur you pay a single fixed percentage of your turnover in social security contributions. These contributions grant an entitlement to a pension, amongst other benefits.
The actual percentage contribution varies by type of business, and the pension rights earned each year will depend on the turnover of the business. A minimum turnover is required to earn such rights, and the threshold figure differs by business activity.
For those in a sales based activity the minimum turnover in 2016 to earn one quarter/year rights is €4,982; for those in a service activity it is €2,890; for the professions libérales it is €3,466.
However, this figure is arrived at after deduction of the standard micro-entreprise cost allowance for each type of activity that is used for the calculation of net income for tax purposes - either 71%, 50%, or 34%.
So your pension rights are not based on your actual turnover, but your turnover after deduction of the cost allowance; that is to say, the figure used to determine your income tax liability.
Thus, taking the example of a commerçant (sales) based business with a turnover of €25,000 in the year. The abatement that applies in this type of business is 71%.
Accordingly, the calculation is:
- 71% of €25,000 = €17,750
- €25,000 - €17,750 = €7,250
- €7,250 = One quarter/year pension rights
The amount of pension you will receive is based on your income and the number of quarters' (trimestres) you earn, although you cannot earn more than four in a year.
The following table shows the turnover needed to obtain one to four quarters' pension rights in 2016 for each business category.
|Type of business||Cost Allowance||One Qtr||Two Qtrs||Three Qtrs||Four Qtrs|
|Sales (BIC)||71 %||€4,982||€7,870||€10,773||€19,995|
|Services (BIC)||50 %||€2,890||€4,565||€6,249||€11,598|
|Professional (BNC)||34 %||€3,466||€5,475||€7,557||€9,743|
The process of administration of the pension contributions, records and payments of micro-entrepreneurs is divided between three different agencies.
All micro-entrepreneurs pay their social security contributions to URSSAF, the social security collections agency, but URSSAF do not administer the pension fund.
This part of the process is handled by either the RSI (Régime Social des Indépendants) for BIC related businesses, whilst BNC businesses have their own pension fund run by CIPAV (Caisse Interprofessionnelle des Professions Libérales).
So it is the RSI and CIPAV who will determine how much pension you receive and they are responsible for pension payments. And as we have stated previously in these pages, both agencies have been widely criticised for substantial maladministration, with delays in the administration and payment of benefits.
Health Cover and French Pensions
Whilst the prospect of obtaining a French pension may be of interest to some, for many expats it could mean you lose your S1 health cover in retirement and pay more in taxes than you receive in pension income.
We discussed this issue in our article S1 Health Cover and French Pensions.