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Starting a Business in France: Social Security Contributions

Business start-ups in France which choose the 'régime réel' form of taxation are subject to a particular set of rules for social security contributions.

We regularly consider in these pages the tax and social security rules that apply to those starting a business in France as a micro-entreprise.

However, an alternative, more conventional business tax status is possible, called the régime réel, under which the owner is liable for social security contributions on the basis of their profit, not their turnover, as is the case with a micro-entreprise.

We considered the issue of which tax status to use in Should You always Elect for Micro-Entreprise Status?

The régime réel applies automatically to those who set up a company, but it can also apply to a sole trader who chooses to opt for it.

For those who choose the régime réel there are particular rules that apply concerning liability to social security contributions (cotisations), with relief granted in the first year and contributions payable in the second year based on a notional profit figure.

This is how it works. The figures given apply for 2019 and they are adjusted upwards each year.

First Year

In the first year of the business you automatically obtain exemption or a reduction in certain social security contributions, under a scheme of business start-up relief called ACRE (Aide aux Créateurs et Repreneurs d’Entreprise).

The relief applies to social security contributions for health, invalidity and death, basic pension, and family benefits, on a sliding scale based on your net profit.

Where you declare your anticipated profit to be less than €30,393 you obtain 100% exemption; with profit between €30,393 and €40,524 the assistance is on a sliding scale; above €40,524 no assistance is available.

However, the contributions for the complementary pension scheme (retraite complémentaire), social charges (CSG and CRDS) and professional training (formation professionnelle) remain payable, based on a notional profit figure as follows:


Contribution
Notional Profit
Amount Payable
Complementary Pension
€7,700€539
Social Charges (CSG-CRDS)
€7,700€747
Professional Training
€40,524€101 to €118 x 2*

* Depending on activity.

The amount payable is pro-rata to duration of activity in the year.

As your later actual profit will inevitably be different to the estimated figure, you will be required to reconcile the balance (up or down) in the second year.

Second Year

In the second year you will be liable for social security contributions based on pre-determined provisional estimates of your profit, as follows:

Contribution
Notional Profit
Amount Payable
Health-Maternity
€16,210€512
Sickness Benefit
€16,210€138
Death-Invalidity
€7,700€100
Family Benefits
€7,700€0
Basic Pension
€7,700€1,367
Complementary Pension
€7,700€539
Social Charges (CSG + CRDS)€7,700€747
Professional Training
€40,524€101 to €118 x 2


If your actual profit differs, a recalculation is made in the third year, although it is possible to adjust the pre-set estimate on-line during the second year.

Third Year

In subsequent years, the following table shows the rates of social security contributions and the income thresholds that apply. In some cases it is based on your total business profits, and in others up to a maximum profit figure.

In practice, the charges amount to around 45% of net profit, although it varies by level of income. All social security contributions are a deductible business expense, save for the social charges.


Contribution
Income
Rate
Health-Maternity
Total Income
0% to 6.50%
Sickness Benefit
Up to €202K
0.85%
Death-Invalidity
Up to €40,524
1.30%
Family Benefits
Total Income
0% to 3.10%
Basic Pension
Up to €40,524
+€40,524
17.75%
0.60%
Complementary Pension*
Up to €37,960

Income between €37,960
and €162,096
7%


8%
Social Charges (CSG + CRDS)Total Income**
9.7%
Professional Training
€40,5240.29%/0.34%***

* Different rules apply for the regulated professions libérales

**All social security contributions are added back (and therefore not deductible from profit) for the purposes of calculating the social charges.

*** The lower rate applies to trade based activities only.

Where in the third and subsequent years your business is in deficit or your profit below €4,660 you are only liable for a minimum level of social security contributions, amounting to between €1,000 to €1,500 a year, depending on your income.

The charges are payable on-line, either monthly or quarterly, via URSSAF, the social security collections agency.

Related Reading:

This article was featured in our Newsletter dated 08/11/2019





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