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Business Start-Up Social Security Charges

The level of social security charges for a new business have been revised for 2017, excepting those who have micro-entrepreneur tax status.

If you establish a new business in France, and you elect for micro-entrepreneur tax status your social security contributions are a fixed percentage of your turnover for each accounting period.

The percentage level of the charges depends on the type of business in which you are engaged, ranging from around 13.5% to 25%.

However, if you decide not to operate on this basis, but choose instead to adopt the tax status of régime réel, a new business is obliged to pay social security charges based on an estimated profit as determined by the social security agency. This operates for the first two years of the business.

As might be expected, the calculation of these charges is fearsomely complex, but it comes back to a reference figure, to which a discounted percentage is applied, and then the standard contribution rate for the benefit applied to this figure.

The reference figure is called the 'plafond annuel de la sécurité sociale'. In its abbreviated form it is know as 'PASS'.

The PASS serves as the basis for the calculation of social security contributions of business owners and certain other benefits.

It is revised each year in line with inflation, and for 2017 the level of PASS is €39,228.

In the recent years successive governments have reduced the level of contributions payable, which, broadly speaking, have fallen from 40% of PASS in the first year down to 19%, although that reduction has been offset by the removal of certain previous exemptions, eg social charges.

The base figure that is used in 2017 for a new business is a notional profit of €7,453 (19% of €39,228), in the first year, to which the rate applicable for each social security charge is applied. The charges that apply in the second year are based on a notional profit of €10,592, using percentage rate of 27% of PASS.

So, taking as an example health cover (maladie-maternite), the calculation for the first year is €7,453 X 3.95% = €294.

The following tables summaries the contributions payable by trade and commercial based businesses in the first and second years of the business. The rates that apply for professions libérales is broadly similar, although they do not pay sickness contributions, and the level of the pension contributions depends on the business profession

In total, the level of contributions in the first year amounts to around €3,000 pa, but adjusted pro-rata to the commencement date of the business.

Benefit
Base
Rate
Amount
Health/Maternity
19% PASS = €7,4533.96%€294
Sickness Benefits
40% PASS = €15,691
0.70%€110
Family Benefits
19% PASS = €7,4532.15%
€160
Main Pension
19% PASS = €7,45317.75%€1,323
Complementary Pension
19% PASS = €7,4537.0%€522
Death/Invalidity
19% PASS = €7,4531.30%€97
Social Charges
19% PASS = €7,4538.0%€596


Total€3,102

In total, the level of contributions in the second year amounts to around €4,000 pa.

Benefit
Base
Rate
Amount
Health/Maternity
27% PASS = €10,5923.96%€461
Sickness Benefits
40% PASS = €15,691
0.70%€110
Family Benefits
27% PASS = €10,5922.15%
€228
Main Pension
27% PASS = €10,59217.75%€1,880
Complementary Pension
27% PASS = €10,5927.0%€741
Death/Invalidity
27% PASS = €10,5921.30%€138
Social Charges
27% PASS = €10,5928.0%€596


Total€4,154


If actual profits turn out to be higher or lower that these estimates the figures are recalculated the following year and are regularised the year after. It is possible to request that additional charges that may be required are phased over the year, rather than paid in a single payment.

As an alternative, it is also possible for a new business owner to offer their own estimate of anticipated profit and for social security charges to be then based on these estimates. However, if the profits turn out to be higher a surcharge on the additional charges may be applied.

In the event that the business does not achieve these profits levels, or incurs a loss, a minumum level of social security contributions remains payable, amounting to around €1,500 pa.

Related Reading:

This article was featured in our Newsletter dated 13/06/2017





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