We continue to receive a large number of enquiries from you concerning the social charges, so here is a recap of the rules as they apply for 2014, including reductions and exemptions.

The social charges in France are called the prélèvements sociaux, charges that are part of the general body of social security contributions (cotisations sociales) paid by business owners and employees.

However, unlike the cotisations sociales almost all sources of income are liable to the prélèvements sociaux, including pensions, social security benefits, investment income, rental income, salaries, business income and capital gains.

The social charges are not applied specifically to business income generated by auto-entrepreneurs, who instead pay a single percentage social security contribution.

As can be seen from the table below the social charges actually comprise 5 different taxes, not all of which apply to all income, and, in the case of CSG, apply at different rates on different income.

Exempted Pension Income

All pension income is ordinarily liable to social charges at the rate of 7.1% on net taxable income, although certain groups of persons are exempt.

The main exemptions are:

• Those who hold an 'E' form or S1 health certificate;
• Government service pensions (teaching profession, local government, civil service, armed forces);
• Those whose health insurance cover is provided entirely through a private policy, although the legal position is not self-evident;
• Those whose income is below a maximum threshold.
  

In relation to the low income exemption, it applies if your net taxable income is below the level that would make you liable for the taxe d'habitation. The income threshold for 2014 for a couple is €16,311, with differences up and down depending on household size.

The reference year for eligibility to this exemption in 2014 is your taxable income for 2012, as notified on your tax notice for 2013!

Those holding an S1 certificate or private health policy need to bring it to the specific attention of the tax office, with documentary proof, or you will find that your exemption will not be taken into account.

Indeed, either deliberately or inadvertently, such exemptions are frequently ignored, so you need to be vigilant in the examination of your tax notice. There continues to be substantial confusion on the issue amongst tax officials, as we have regularly reported in this Newsletter.

These exemptions do not apply to other income, such as rental income, or income from dividends or interest.

Reduced Rate

There is a reduced rate of social charges on pension income for those on a low income. The reduced rate is 4.3% if you pay less than €61 in income tax.

Income Tax Relief

For those who do pay income tax, as a general rule, CSG is deductible, at the rate of 4.2% on pensions and 5.1% on salaries and other income. The operational arrangements of this deduction depend on the nature of the income.

Non-Residents

Non-residents are liable for the social charges at the rate of 15.5% on capital gains and rental income. The issue continues to be a contentious one, and the European Court of Justice is due to sit and make a judgement on the issue.