Social charges apply to most income in France but recent rule changes may benefit expatriate retirees in France and non-residents with French assets.
Social charges apply to most income in France but recent rule changes may benefit expatriate retirees living in France and non-residents with French assets.
Newcomers to France soon learn that income is subject to two forms of tax here – income tax and social charges. Non-residents may also have to pay this tax, for example if they rent out French property or make capital gains on the sale of local real estate.
What are social charges?
Social charges are levied on most forms of income in France, in addition to income tax. They are called ‘social charges’ (prélèvement social) because the money is used to finance the French social security. However, they do not provide health benefits and should not be confused with social security contributions (which are also payable on employment income).
Social charges are actually made up of six elements, with the rates varying according to the type of income.
The rates for 2019 and 2020 are:
SALARIES AND UNEMPLOYMENT BENEFITS (on 97% of gross)
|RETIREMENT OR DISABILITY PENSIONS (on 95% of gross)
||INVESTMENTS, ANNUITIES, RENTAL INCOME AND CAPITAL GAINS
|CSG (Contribution sociale généralisée)
|CRDS (Contribution au remboursement de la dette sociale)
|PS (Prélèvement Social)
|CA (Contribution additionnelle)
|PdS (Prélèvement de Solidarité)
|CASA (Contribution additionnelle de solidarité pour l’autonomie)
How are social charges paid?
Social charges are paid in arrears and usually calculated on the income declared in your income tax return. Each autumn you receive a notification of the amount you owe for the previous year’s income.
For certain types of income/gain (assurance-vie under special rates, real estate capital gains, dividend/interest advance payment etc.), the charges are paid by the 15th of the following month.
Are UK pensions liable to social charges?
Social charges on pension income are only payable if you are subject to the French health care system (you are either paying cotisations sociales or PUMA contributions). If you are not, and/or you have Form S1, you escape social charges on pension income.
One of the 2019 reforms was to reduce social charges payable pensions, from 9.1% to 7.4%, for individuals in receipt of pension income of less than €2,000 per month (€3,000 for a couple).
Social charges on investment income – what changed in 2019?
Individuals covered under the health care system of another EU or EEA country are no longer subject to CSG or CRDS on their investment income or capital gains. Instead they now pay a new Prélèvement de Solidarité at a flat rate of 7.5% – a tax saving of 9.7%.
You can benefit from this 7.5% social charges rate on investment income if:
- You hold From S1
- You are a non-resident of France earning French source income and are covered by the health system of another EU/EEA country.
For investment and passive income, such as bank interest, dividends, withdrawals from assurance-vie etc, this new 7.5% rate applies from 1 January 2019. For capital gains on the sale of securities like shares; capital gains on the sale of real estate, and rental income deriving from unfurnished properties, it applies from January 2018.
Note that the 30% flat tax charged on investment income since January 2018 – the Prélèvement Forfaitaire Unique (PFU) – already includes social charges.
Tax planning for France
With the French tax regime being so complex, it is always a good idea to take personalised advice to ensure you are following the rules correctly. A tax and wealth management adviser can also explain what tax planning opportunities are available in France, particularly for your investment capital and pensions.
Contact your local Blevins Franks adviser
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals are advised to seek personalised advice.