SO­CIAL CHARGES

There have been nu­mer­ous changes to the rules re­gard­ing the pay­ment of so­cial charges in France. Rob Kay ex­plains the lat­est de­vel­op­ment and how it might af­fect you

Living France - - CONTENTS -

Our tax ex­pert ex­plains so­cial charges in France and the lat­est changes to the reg­u­la­tions

If you are think­ing of mov­ing to France or buy­ing a prop­erty there, you need to know about so­cial charges. If you al­ready live in France or own a French prop­erty, you may be con­fused by all the re­cent changes. The French government has re­vised the rules yet again, so here is a re­cap of so­cial charges be­fore an ex­pla­na­tion of the lat­est reg­u­la­tion to help guide you through these changes.

WHAT ARE SO­CIAL CHARGES?

To all in­tents and pur­poses, so­cial charges are an­other tax levied on most types of in­come in France, on top of in­come tax.

They are called so­cial charges be­cause the money is used to fi­nance the French so­cial se­cu­rity. How­ever, these pay­ments pro­vide no health ben­e­fits and should not be con­fused with the charges so­ciales (the French ver­sion of Na­tional In­sur­ance con­tri­bu­tions) payable on earned in­come.

They are ac­tu­ally made up of six el­e­ments: the con­tri­bu­tion so­ciale général­isée (CSG), con­tri­bu­tion au rem­bourse­ment de la dette so­ciale (CRDS), prélève­ment so­cial (PS), con­tri­bu­tion ad­di­tion­nelle (CA), préléve­ment de sol­i­dar­ité (PdS) and the lat­est one, con­tri­bu­tion ad­di­tion­nelle de sol­i­dar­ité pour l’au­tonomie (CASA).

HOW ARE THEY PAID?

Gen­er­ally, so­cial charges are paid in ar­rears, and they are cal­cu­lated based on the in­come you de­clare in your tax re­turn.

The French au­thor­i­ties cal­cu­late the amount due and send no­ti­fi­ca­tion ( avis d’im­po­si­tion) of the amount payable in the au­tumn fol­low­ing the sub­mis­sion of your tax re­turn. So your tax re­turn for 2015 in­come, for ex­am­ple, will be sub­mit­ted in 2016 and you will re­ceive your so­cial charges bill some­time in the au­tumn.

How­ever, dif­fer­ent rules ap­ply for cer­tain types of in­come such as real es­tate cap­i­tal gains, or in some cases as­sur­ance vie in­come where so­cial charges are paid the month af­ter the gains are re­alised.

WHO PAYS THEM?

Prior to 2012, only French res­i­dents had to pay so­cial charges. Then in 2012 a very con­tro­ver­sial de­ci­sion was made: to start charg­ing non-res­i­dents on cap­i­tal gains made on the sale of a French prop­erty and the rental in­come gen­er­ated from it. For the past couple of years, UK res­i­dents have had to pay so­cial charges of 15.5%. This in­cludes own­ers of hol­i­day rental homes in France – who were al­ready pay­ing so­cial se­cu­rity charges in the UK.

In terms of UK prop­erty, any rental in­come gen­er­ated is li­able for tax in the UK, whether you are res­i­dent there or not. How­ever, you have an in­di­vid­ual per­sonal al­lowance of £11,000 (for the 2016/17 tax year). If you and your spouse have no other UK source in­come, and your rental in­come is be­low your com­bined al­lowance, then you will have no tax to pay in the UK.

The UK/France dou­ble tax treaty was de­signed to avoid dou­ble tax­a­tion. You re­ceive credit in France for the equiv­a­lent amount of French tax and so­cial charges.

WHAT CHANGED IN 2015?

In Fe­bru­ary 2015 the Euro­pean Court of Jus­tice (ECJ) ruled that France could not ap­ply so­cial charges on peo­ple who were sub­ject to so­cial se­cu­rity in an­other EU/EEA mem­ber state. This meant that non-res­i­dents should not be li­able on French prop­erty in­come, and res­i­dents who are af­fil­i­ated to the so­cial se­cu­rity of an­other EU mem­ber state (gen­er­ally in­di­vid­u­als hold­ing EU form S1) were ex­empt on un­earned and in­vest­ment in­come. The French government con­firmed this in Oc­to­ber.

So if you were res­i­dent in France and af­fil­i­ated to the so­cial se­cu­rity of an­other EU mem­ber state, you could claim re­pay­ment of so­cial charges on cap­i­tal gains on prop­erty and shares, div­i­dends, in­ter­est, as­sur­ance vie, let­ting in­come etc, for in­come re­ceived in the years 2012 to 2015.

WHAT HAS CHANGED NOW?

The French government has fought back and has changed the rules once again in the so­cial se­cu­rity bud­get for 2016. In essence, Ar­ti­cle 24 says that so­cial charges will now be paid to a non-con­tribut­ing fund ( fond vieil­lesse).

This is out­side the scope of the ECJ’s rul­ing and so for in­come re­ceived from this year on­wards, so­cial charges are again due on un­earned and in­vest­ment in­come (or on French real es­tate in­come for non-res­i­dents) – even if you have form S1.

There are ru­mours that there will be ap­peals, in which case could the law have to change yet again?

CAN I STILL CLAIM FOR PRE­VI­OUS YEARS?

Yes. If you un­duly paid so­cial charges on un­earned in­come in 2013, 2014 and 2015, you are en­ti­tled to a make a claim to re­cover the tax. The dead­lines for the dif­fer­ent in­comes can vary, and it also de­pends on whether you are

res­i­dent or non-res­i­dent, so seek ad­vice from a tax ex­pert. You need to write to your lo­cal tax of­fice, or ask your ac­coun­tant to do so on your be­half, de­tail­ing ex­actly which pay­ments you are re­claim­ing. You can also go on­line to the tax web­site im­pots.gouv.fr and look at the ‘ Par­ti­c­ulier’ sec­tion.

Your claim must be ac­com­pa­nied by ev­i­dence of your af­fil­i­a­tion to an­other coun­try’s health sys­tem (such as your S1 form) and de­tails of the so­cial charges paid.

WHAT SO­CIAL CHARGES DO I HAVE TO PAY FROM 2016?

These are listed in the ta­ble ( right). You can deduct a pro­por­tion of the so­cial charges payable on in­come taxed at the scale rates against earned or pen­sion in­come.

ARE THERE ANY GREY AR­EAS?

If you are a French res­i­dent, any UK pen­sion in­come you re­ceive is gen­er­ally tax­able in France and not the UK, with the ex­cep­tion of government ser­vice pen­sions. In this in­stance, only UK tax is payable re­gard­less of the coun­try of res­i­dence.

How­ever, your government ser­vice pen­sion is taken into ac­count when de­ter­min­ing the rate of tax payable on your other in­come, so you still need to de­clare it in France. Lo­cal tax of­fices also tend to in­clude government ser­vice pen­sion in­come when cal­cu­lat­ing your so­cial charges. And al­though, ac­cord­ing to the dou­ble tax treaty, so­cial charges should strictly not be payable, some peo­ple are charged, oth­ers are not, some re­quest and re­ceive re­funds, oth­ers are turned down.

In any case though, if you are not af­fil­i­ated to the French health­care sys­tem (which may be the case if you hold form S1) you are not li­able for so­cial charges on any of your UK pen­sion in­come, in­clud­ing government pen­sions.

With so­cial charges on top of in­come taxes, your tax bill in France can be high. How­ever, there are com­pli­ant ar­range­ments in France that can lower your tax li­a­bil­i­ties on your sav­ings and in­vest­ments. You should al­ways seek pro­fes­sional ad­vice on tax in France, both to make sure you are aware of all the lat­est tax rules and that you hold your sav­ings and as­sets in the most tax-ef­fi­cient way.

Rob Kay is se­nior part­ner at Blevins Franks blevins­franks.com 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; an in­di­vid­ual should take per­son­alised ad­vice.

So­cial charges are paid in ar­rears and are cal­cu­lated based on the in­come you de­clare in your tax re­turn

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