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When must you pay social charges?

A definitive guide to which pensions attract charges, the exemptions and the links with healthcare.

The Connexion, and Annett Consultancy, have compiled the following article to help demystify the subject of social charges and pensions.

We begin by establishing the definition of the terms to ensure there are no misunderstandings:

Social charges: These are the combined Contribution Sociale Generalisée (CSG), the Contribution à la reduction de la dette sociale (CRDS), and the Prélèvement Social (PS).

Healthcare: This is the French state health system, the Couverture de Maladie Universelle (CMU), which enables access to French doctors, medication and so on at reduced cost. Once accepted into the system you receive an Attestation. The green Carte Vitale is issued usually after some six weeks. Its purpose is to enable the relevant share of the payment from the state to be made directly to the provider of the medical treatment or medications etc, leaving only the non-refundable part to be paid by the patient.

Complémentaire: This is the insurance top-up which covers the unrefundable element of all medical acts and medications, provided either by insurance companies or mutuelles.

Pensions: We all know what these are but a distinction needs to be made between 'government' pensions which are paid from the UK and assessed and taxed in the UK; private pensions which are paid from the UK but assessed and taxed in France; and state pensions, such as the Old Age Pension, which are also assessed and taxed in France.

All pensions that are assessed and taxed outside of France are not liable to social charges in France.

However, by contrast, all pensions that are assessable and taxable in France are liable to the social charges in France - unless they are exempted.

What causes French assessable pensions to be exempt is if the taxpayer is in receipt of a state pension, such as the UK Old Age Pension.

The French cannot levy social charges on income that is paid, as a result of other social charges having previously been paid, and as the UK Old Age State pension is a pension paid as a result of national insurance contributions having been paid during the taxpayer's working life, the French cannot assess this particular pension income to social charges.

However, while the granting of the exemption is restricted to having only the UK Old Age pension, the application of the exemption has been extended to all pension income, so simply receiving the UK State Old Age Pension means that no other EU pension income can be assessed to the social charges.

But - enter section VIII on the pink 2047 tax return, referring to income being nonetheless assessable to the CRDS.

If you look at the notes booklet to the 2047 form, page 8 and point 17, you will see the following second sentence:

Entrent dans la catégorie des revenus de source étrangère soumis en France à l'impôt sur le revenu et imposables à la CRDS les seuls revenus d'activité et de remplacement de source étrangère perçus par une personne physique considérée comme domiciliée en France pour l'établissement de l'impôt sur le revenu et à la charge, à quelque titre que ce soit, d'un régime obligatoire de sécurité sociale français.

What this means is that all foreign 'replacement' income (therefore including pension income), earned by a French fiscal resident, is liable to be assessed to the CRDS, if the taxpayer is liable, under whatever form, to an obligatory French social security system - such as the healthcare system.

The healthcare system here is contributory on your world income, so is irrespective of where the income has been assessed and taxed - unless you are exempt from contributing.

You can be exempt from contributing by:
■ Holding an E106 exemption certificate (or an E108 and some others), but this is limited to a period of two and half years, maximum.
■ Holding an E121 exemption certification, obtainable if you are in receipt of the UK Old Age State pension.
■ Have 100% private medical insurance (such as BUPA International).

So, if you are exempt from contributing to the French healthcare system under one of the three ways mentioned above, your pension income in total is not liable to assessment to the CRDS, so granting you complete exoneration from the social charges on all of your pension income.

On a different point to do with healthcare, under new regulations new non-working residents in France can no longer belong to the French healthcare system for the first five years of their residency. In order to be allowed to become residents, therefore, they need:
■ To have an E121, or
■ To initially have an E106 after which time, if they are not entitled to the E121, they will have to have 100% private medical insurance, or
■ Have 100% private medical insurance until they are entitled to an E121 due to having their Old Age State pension.

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