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Social Charges Increase from January 2012

The operative date for the recent increase in social charges is earlier than initially proposed, although it does vary by type of income.

We reported last month on the increase of 2 percentage points, from 13.5% to 15.5%, in the rate of social charges on certain income and gains.

The increase applies to almost all forms of capital and investment income, including rents, savings interest, capital gains, dividends and assurance vie.

The lower rates on pension and salaried income remain unchanged and many expat pensions are exempt from the social charges.

During the parliamentary progress of the legislation the government accepted a technical change, applying the increase to the prélèvement social (PS) component part of the social charges, not the main contribution sociale généralisée (CSG).

The result was to leave at 8,2% the CSG on investment and capital income, but to increase from 3,4% to 5,4% the prélèvement social.

The significance of this is that a proportion of the CSG is deductible against income tax, whereas this is not the case for the prélèvement social. So the change will bring in more cash to the government coffers.

The French parliament also approved the dates for introduction of the increase, which does vary depending on the type of income.

Whereas it was initially envisaged the increase would apply from Oct 2012, in fact for 'revenus du patrimoine' it applies from 1st January 2012, and for 'produits de placement' from 1st July 2012.

These rather strange and misleading terms mean:

Revenus du patrimoine - income declared by the individual on their tax return in the following year, such as rents and capital gains on share transactions.

Produits de placement - income where the social charges are deducted at source, such as capital gains on the sale of real estate deducted by the notaire, interest on savings accounts, dividend payments and bond coupons, which are also deducted at source.

In additon to the social charges, this income is also either subject to capital gains tax or income tax.

Certain bank saving schemes are exempt from the social charges, such as Livret A, Livret jeune, Livret d'épargne populaire (LEP) and the Livret développement durable (LDD).

You can read about these savings schemes and just what are the 'social charges' on the links below:

Related Reading:

This article was featured in our Newsletter dated 05/04/2012

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