Social security contributions are mandatory levies on income in France. They fund the country’s robust social protection system, which covers health insurance, pensions, family benefits, and more. Whether you are a resident or a non-resident, understanding these contributions is essential to navigating the French tax system.
Key Social Security Contributions
The main social security contributions are as follows :
1. General Social Contribution (CSG)
The CSG, introduced in 1991, applies to various incomes, such as salaries, pensions, and capital income. It primarily finances health insurance and family benefits.
2. Contribution for the Repayment of Social Debt (CRDS)
Implemented in 1996, the CRDS is aimed at repaying social debt. Like the CSG, it applies to a wide range of incomes but at a lower rate.
3. Solidarity Levy
For property and investment income, an additional solidarity levy is applied to support social protection funding.
Contribution Rates
The rates vary based on the type of income :
Earned Income (salaries) : CSG is 9.2%, CRDS is 0.5%.
Capital Income (interest, dividends, real estate gains) : Total social security contributions are 17.2%.
A Brief History of Social Contributions
Social security contributions have evolved to meet the system’s growing needs. In 2012, a reform extended contributions to non-residents, leading to legal challenges.
2015 : The European Court of Justice (ECJ) ruled that applying these contributions to EU/EEA non-residents was against European law.
2016 : France updated its legislation, replacing contributions with a solidarity levy for certain non-residents.
Who Pays Social Security Contributions ?
French Residents
Residents pay contributions on:
- Earned income: Salaries and professional income.
- Replacement income: Pensions and unemployment benefits.
- Property income: Rental income and real estate capital gains.
- Investment income: Dividends and interest.
Non-Residents
Non-residents should also pay contributions, but the rules differ depending on the taxpayer’s location:
EU/EEA/Switzerland/UK Residents
Social security contributions on property income and real estate capital gains are replaced by a solidarity levy of 7.5%.
Non-Residents from Other Countries
These taxpayers remain subject to standard contributions at a global rate of 17.2% on property income and real estate capital gains.
Social Security Contributions and Real Estate Capital Gains
For non-residents selling property in France, tax residency determines the applicable rate:
EU/EEA/Switzerland/UK Residents: 7.5% solidarity levy.
Other Non-Residents: 17.2% social security contributions.
How to Secure the Reduced Rate?
To qualify for the reduced rate, non-residents must provide proof of tax residency and affiliation to their home country’s social security system. This documentation should be presented to the notary or tax representative during the sale.
If these documents are unavailable at the time of sale, the notary can hold the difference between the reduced and standard rates in escrow until the paperwork is provided.
Conclusion
Social security contributions apply to everyone earning income in France. However, non-residents from the EU, EEA, Switzerland, and the UK can benefit from a reduced rate. Understanding these rules can help you manage your tax obligations effectively. For more personalized advice, feel free to contact us at French Tax Online.