Is your pension over charged?

PENSIONERS can wrongly be ordered to pay social charges on certain pensions because of three key reasons, Connexion expert Hugh MacDonald writes:

The reasons are firstly the E106 and the E121 health right certificates, secondly social charge exemption rights, and thirdly French tax forms.

Both the E106 and the E121 exempt the holder from paying the French healthcare charges under EU legislation pursuant to the free movement right of people within the EU.

The period of validity of the E106 is from the time someone stops working in their original country, and usually for a maximum period of 2 1/2 years, so some one stopping work and moving immediately to France would have the use of the full 2 1/2 years' exemption of paying French healthcare rights, while someone stopping work and waiting for a year before moving to France would only have 1 1/2 years left of their E106 healthcare exemption rights to use.

The E121 is provided if the taxpayer is in receipt of government old age state pension.

While the situation is clear with the E106 as it only applies to healthcare costs (and nothing to do with social charges), the situation with regards to the E121 is different - why?

Because the qualifying factor in order to be able to have an E121 is to be in receipt of a government old age pension. But, having a government old age pension entitles the person to also be exempt from all social charges on all of their pension income.

Why? Because in 1992 the French were caught by the EU for assessing to social charges income which, by virtue of its nature - state pension income - was being paid to the taxpayer as a result of their payment of social contributions during their earlier working life (ie. national insurance contributions). It was wrong to assess to social charges on income, which income was paid due to having earlier paid other social charges.

The French argued that social charges were an integral part of the tax system, faffed around so much and failed to provide the EU courts with information, so that when the courts published their findings, they not only prevented the French from applying social charges to state old age pension income but, as a penalty, to all pension income if the taxpayer was also in receipt of a state old age pension.

Hence we have the confusing situation of an E106 only exempting someone from paying the healthcare charge; while the E121 not only exempts someone from paying the healthcare charge but, effectively, also exempts them from social charges on all of their pension income.

So, to the French tax form. There is nowhere on the tax forms, anywhere, to indicate income which is exempt from the social charges in total. The nearest we get is the box on the 2047 form, section VIII, the figure from this box is then transferred to box TL in section 8 of the 2042 form.

However, this section VIII of the 2047 does state in the heading that the CRDS will still be applied to income inserted in this section ... hence why the tax offices are applying the CRDS.

The answer is to write to your tax office, enclosing a copy of your E121 certificate, and point out to them the content of their own note 17 on the Notes to the 2047 form, and specifically what is in italics below. This state that the E121 is what removes someone from being a liability to the French health system since the costs are paid by the UK, while the last sentence states clearly that foreign pensions are exempt.

Les revenus portés dans les tableaux I et V de la déclaration n° 2047 ne doivent pas être obligatoirement reportés dans ce tableau. 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.

Pour les personnes percevant des revenus d’activité ou de remplacement provenant d’un autre État membre de l’Union européenne ou de L’Espace économique européen ou de Suisse, la définition de personnes à la charge, à quelque titre que ce soit, d’un régime obligatoire d’assurance maladie est précisée par les règlements communautaires n° 1408/71 et n° 574/72.

Il s’agit notamment des pensions de source étrangère, lorsque le bénéficiaire des revenus remplit les conditions pour être à la charge d’un régime obligatoire de sécurité sociale français.