Law firms update – 2018 French social security bill : CSG increase, social security taxes decrease, a windfall for foreign source non-commercial profit beneficiaries

The French Government has announced early September 2017 the increase of “Contribution Sociale Généralisée” (CSG surtax) applicable to workers (employees, independent contractors) and retired persons. This increase has been confirmed with the presentation of the Social security finance bill for 2018 and will apply notably to self-employed individuals. This is a 1.7 points increase bringing the rate from 7.5% (currently) to 9.2%.

The French Government has however announced at the same time some measures in favor of self-employed individuals, notably under the form of social security tax decreases :

  • Family allowance social taxes rate would be reduced by 2.15 points : from the current rate of 5.25% to 3.1% ;
  • Gradual reduction of illness-maternity contributions would be reinforced for professionals with taxable income below Euro 43,000.

If all these measures announced by the French Government become effective, the self-employed individuals’ social taxes (irrespective to the retirement and Bar contributions) would be computed as follows:

  • CSG / CRDS : CSG surtax at 9.2 % and CRDS surtax at 0.5 %, giving a global rate of 9.7%
  • Family allowances : 3.1%
  • Illness-maternity (for self-employed individuals receiving a net professional income exceeding Euro 43,000) : 6.5% (unchanged rate)

These changes should benefit to self-employed individuals receiving foreign source professional income. Indeed, it is currently confirmed that the CGS-CRDS surtaxes are not assessed on foreign source professional income (non-commercial professional profit for instance), received by French tax residents, as long as such foreign source income give right in France to an income tax exemption, or a tax credit, in accordance to a double tax treaty signed by France.

Thus, the beneficiaries (self-employed individuals) of foreign source income would not be impacted on these foreign source income by the CSG-CRDS increase, whereas they would benefit from the family allowance social tax decrease (as long as they would be due, this issue being currently discussed in the frame of lot of cases before the courts).

In order to anticipate this social tax decrease, the persons concerned should adjust their 2018 French provisional social taxes and could then avoid being in a refund situation towards the URSSAF for all social taxes listed above (RSI scheme, being “merged” with the URSSAF, should no longer exist as of 2018).

Your RHExpat Avocats contacts for self-employees’ individual income tax and social security :

Teddy Pal
Email : teddy.pal@rhexpat-avocats.com

Florence Deck
Email : florence.deck@rhexpat-avocats.com

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