What You Need to Know About French Social Charges

 

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What You Need to Know About French Social Charges

France’s reputation for high tax rates is largely due to the high rates of social security contributions levied on taxable income, and this can be a source of confusion for foreigners. So, what are France’s “social charges”, what percentage of your earnings will you pay as an employee or self-employed worker in France, and do you need to pay social charges on your pension, investments, and other revenue? Here’s what you need to know about French social charges.

What are “Social Charges” in France?

France’s comprehensive social security system is funded by social security contributions or social charges (contributions sociales or prélèvements sociaux) paid as a percentage of your taxable income. Most employees in France will find that they are taxed at a rate of 22% on their gross income (salaire brut or revenue brut). For self-employed workers under the auto-entrepreneur regime, these rates are between 12,9% and 22.8%, depending on the type of activity carried out. For self-employed workers under another regime, these can be as high as 42%, and business owners and employers are also liable to pay a portion of social charges on behalf of their employers.

Social charges are taxed at a flat-rate percentage of your total gross earnings, so there are no lower or higher tax bands, and there is no ‘tax-free allowance’ as with income tax. However, these social charges are tax-deductible, meaning that your income tax is calculated after the deduction of social security contributions.

In France, ‘social charges’ is often used as the catch-all term to describe all the many different social security payments that are deducted from your salary (or paid by businesses and self-employed workers). You might hear these referred to as ‘contributions sociales’, ‘charges sociales’, ‘les cotisations’, ‘les prélèvements sociauxand many other terms, and it can get a bit confusing! These social charges can be broken down into various different contributions, including the general social charges (CSG/ CRDS), mandatory contributions to the general and complementary state pension schemes, and old-age insurance contributions, in addition to healthcare, unemployment, and other contributions that will be made on your behalf by your employer. All of these contributions are mandatory if you live and work in France.

Social charges are also payable on other forms of income in France, including pensions, investments, capital gains, rental income, and savings interest. However, when talking about ‘social charges’ in this context, it refers only to the general social charges (CSG/ CRDS).

We’ll look at all of the different social charges in more detail later.

Why are French Taxes and Social Charges so high?

Many foreigners moving to France ask the question: “why are French social charges so high?”. However, it is important to take into account the total of France’s income tax rates and fiscal household calculations, as well as your social security contributions. French income tax rates are comparatively low, especially for families, and so these social charges will account for the vast majority of your monthly tax deductions, not income tax. (This is opposite to many other countries, where income may form a larger percentage and social security contributions are often minimal).

Read our guides to French Income Tax and What is a Fiscal Household in France?.

While the burden of social security contributions can be high for businesses and some self-employed workers, many working families may not find their tax liabilities in France to be wildly different to what they were used to in their home country. As a very rough guideline, the OECD indicated an average total tax of 24.8% on workers’ salaries in France in 2020.

Another important thing to consider are the benefits reaped from being part of France’s social security system. France’s social security system is one of the most comprehensive in the world, providing universal state healthcare, some of the highest state pensions in Europe, generous maternity, paternity, childcare, and family benefits, and protections for long-term illness, disability, and unemployment. Many expats consider paying into this system to be more cost-effective than taking out private insurance policies, paying for private healthcare, or paying into private pension funds.

Read our guides to the French Social Security System, French Healthcare, and French Pensions.

When considering your tax liabilities in France, it’s essential to take all of these different aspects into account, as well as the many variables that can come into play depending on your personal situation. The calculation of French taxes and French social security contributions can be extremely complicated, which is why it is highly recommended to seek expert advice on your situation if you are moving to France.

Who Needs to Pay French Social Charges?

Social security contributions in France are compulsory and must be paid by all workers in France in the same way that you pay income tax. If you are employed in France, your social security contributions will be deducted from your wage at source along with your income tax, and if you are self-employed as an auto-entrepreneur, your social security contributions will be calculated when you submit your monthly or quarterly income declaration (déclaration de chiffre d’affaires).

In France, all employers also pay a portion of social security contributions on behalf of their workers – these are known as the ‘contributions employeurs’ ou ‘cotisations patronales’. Your French payslip will list all of these contributions made by both you and your employer.

As a business owner or employer in France, it is highly recommended to consult a tax advisor to fully understand your social security responsibilities.

Social charges for foreign workers living in France

Many expats living in France work for international companies or carry out business with international clients, and this can sometimes be confusing as to where you will pay your taxes and social security contributions. If you are resident in France, you must still apply for a social security number and submit an annual tax return – however, there may be situations in which you are not liable to pay French social security contributions.

If you live in France but receive a salary from an EU or UK company – for example, you work for the French branch of a UK firm, but your salary is paid from the UK – you will often be taxed at source in the country from which you receive your wages. Depending on your situation, this country may then issue an S1 form to enable you to access France’s state healthcare system.

As a self-employed worker or business owner who lives in France, but works for international clients or conducts business internationally, you will still be liable to pay French social charges. However, the nature of your business and the location of your employees or associates will come into play – again, in this situation, it’s highly recommended to seek professional advice.

It’s also important to note that you may also continue to make voluntary contributions to your home country’s social security system if you wish, providing this option is available. For example, a British citizen working in France may elect to continue making voluntary National Insurance contributions in the UK during their period posted abroad.

Social charges on pensions and other income

It is not only workers in France that are liable to pay social charges – a portion of these social security contributions are also levied on other income sources, including pensions, investments, capital gains, rental income, and savings interest. This kind of income is subject to the general social charges (CSG/ CRDS) only, and rates vary depending on the kind of income (more on this below).

French Social Charges Rates: How Much Will You Pay on Your Earnings?

Now we’ve looked at whether you will be liable to make French social security contributions, let’s take a look at what you can expect to pay. The first thing to point out is that the calculation of French social security contributions and social charges is incredibly complicated, and the below information is intended as a very rough guide only. Your personal situation, salary, industry, and the size of the company you work for may all affect these figures.

French social charge rates in 2022 for the average salaried employer will add up to around 22% of your gross income, and they include:

Contributions sociales/Charges sociales (Social charges)

  • CSG – Contribution sociale généralisée or Generalized social contribution – 9.2 % (2.4% taxable, 6.8% non-taxable) on 98.25% of your total monthly salary.
  • CRDS – Contribution pour le remboursement de la dette sociale or Contribution to the repayment of social debt – 0.5% calculated on the same basis as CSG.

Cotisations de Sécurité Sociale (Social Security Contributions)

  • Cotisation pour l’assurance vieillesse plafonnée (capped old-age insurance) at 6,90%
  • Cotisation pour l’assurance vieillesse déplafonnée at (uncapped old-age insurance) at 0,40%.

Cotisations de Retraite Complémentaire (complementary pension contributions)

  • CEG – cotisation d’équilibre généralisé (general balance contribution) – 0.86% to 1.08% depending on your salary plus an additional 0.14% CET contribution for higher earners.
  • Cotisation Agirc-Arrco – complementary pension contributions – 3.15% to 8.64%, depending on your salary

See a table of employee and employer contributions here or use URSSAF’s simulator to estimate your Gross/Net salary in France here.

French Social Charges Rates: How Much Will You Pay on Your Pension?

Pensions in France are subject to CSG (Contribution sociale généralisée) at a rate of 3.8%, 6.6% or 8.3% in 2022. If you receive a French pension, your pension income will be subject to one of these rates, depending on the amount of your pension. Exemptions are made for individuals whose revenu fiscal de référence or RFR(reference tax income) is less than €11,431, or couples whose RFR is less than €17,535.

Pensioners may also pay the CRDS (Contribution pour le remboursement de la dette sociale) at a rate of 0.5% and CASA (solidarité pour l’autonomie) at 0.3%, although exemptions are available depending on your RFR.

This can add up to a total of 9.1% social charges paid on your pension income, depending on your situation.

If you are an EU citizen retired in France and receive a pension from another EU country, you may be able to apply for an S1 form. This entitles you to access France’s state health system and grants an exemption from paying French social charges.

This also applies to UK pensioners who moved to France prior to Brexit and are covered by the Withdrawal Agreement. Recipients of British state pensions post-Brexit who wish to move to France, may also be able to obtain an S1 form. Read more in our guide Can I get an S1 Form After Brexit?

If you are a retiree in France who receives a non-EU pension, you may be required to pay social charges on your foreign pension in France. As always, if you are unsure of your liabilities, we highly recommend seeking professional advice.

French Social Charges Rates: How Much Will You Pay on Savings, Investments, and Other Income?

General social charges (CSG/ CRDS) are also applied to other income sources, including investments, capital gains, rental income, and savings interest, in addition to a further ‘Prélèvement de Solidarité’ charge. These are taxed at different rates depending on the income source. The 2022 rates are:

CSG – 9.2%/0%

CRDS – 0.5%/0%

Prélèvement de Solidarité – 7.5%

Depending on your situation, including whether or not you are resident in France, you may be liable to pay the full rate of 17.2% or the minimum rate of 7.5%

See our article Social Charges on Investments and Capital Gains Post-Brexit: 17.2% or 7.5%?

Paying Your Taxes in France

Whether you are moving to France, own French property, or have business interests, assets, or investments in France—FrenchEntrée is here to help with all your tax questions. Our Essential Reading articles will talk you through all the basics, from income tax and social charges to wealth tax and property taxes. However, international tax liabilities can be complicated, so if in doubt, we always advise discussing your personal situation with one of our recommended financial or tax advisors.

Disclaimer: This guide is provided for general information purposes only and is not intended to be a substitute for professional advice regarding any aspect of your tax planning or tax liabilities in France. FrenchEntrée cannot be held responsible for the consequences of decisions or actions you may choose to take in connection with French tax declarations or tax liabilities.

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