As usual at this time of year our mailbox contains a large number of e-mails from you concerning the social charges, with many of you considering you are being overcharged.

The social charges in France are called the prélèvements sociaux, which 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 for different income.

Exempted Pension Income

All pension income is ordinarily liable to social charges on net taxable income, although the pension income of certain groups of persons is 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;
• Those whose income is below a maximum threshold, around €16,500 for a couple.
  

These exemptions do not apply to rental income or income from dividends or interest.

Nevertheless, only domestic rents are liable for these charges, for rental income from the UK (and most other countries) is taxable in the UK, with elimination of the social charges applied through a 100% tax credit (crédit d’impôt). If social charges have been applied on your foreign rental income, you should contest the charge.

Income Tax Relief

For those who 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

It would appear that there are signs of some movement on the social charges imposed on the investment and rental income of non-residents.

Although most non-residents appear to have had social charges applied on such income (despite the fact such charges have been declared illiegal by the French Conseil d'Etat) some of you are reporting that this year the charges have not been imposed.

We can only assume that this has occurred as a result of some local tax offices going native, as the French government have yet to make a decision on the ruling.

Although in theory non-resident tax returns should all be handled by a central office in Paris, in practice some non-residents submit their return to their local office, who process and hold the return.

If you have been charged you will need to make a claim for a refund when the French government gets around to finally responding to the court ruling.