Are you paying more French social charges than you should?

“I pay 18.6% French social charges on my investment income, but my neighbour says he only pays 7.5%. Surely one of us must be wrong?”

Or perhaps you are wondering why it is not 17.2%. When did that change?

If either of those questions sounds familiar, you are certainly not alone.

Many expatriates are confused about the subject, particularly following the recent increase in French social charges.

The difference often has nothing to do with your nationality, how long you have lived in France or even where your investments are held. Instead, it can depend on something many people never consider: which country is responsible for funding your healthcare.

For most French tax residents, investment income such as bank interest, dividends, capital gains and rental income is subject to French social charges. 

Following the 2026 budget, the standard rate applicable to many forms of investment income increased from 17.2% to 18.6%.

One notable exception is the assurance vie, where withdrawals continue to attract social charges of no more than 17.2%. 

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Reduced rate

So why do some people pay just 7.5%?

The answer lies in the European rules governing social security.

The reduced rate may apply where healthcare is funded by the UK, another EU country, Norway, Iceland, Liechtenstein or Switzerland. Although healthcare is provided in France, the costs are reimbursed by the country responsible for the individual's social security.

Where another country remains exclusively responsible for funding their healthcare, that individual is generally liable only to the prélèvement de solidarité of 7.5%, rather than the full French social charges.

This explains why two neighbours with similar investment portfolios can pay very different amounts.

Take the example of John and David.

Both retired from the UK and now live permanently in France. Both have similar investment portfolios, and both regularly draw income from their investments to supplement their retirement income.

John does not work in France and never has. The only state pension he receives is from the UK. 

The UK remains solely responsible for funding his healthcare under his S1 form, provided that the S1 has been correctly registered with the CPAM. As a result, he is generally liable only to the 7.5% prélèvement de solidarité on his investment income.

David's circumstances are different. After moving to France, he spent several years running a small business. Those contributions entitle him to a French pension. And so, France becomes responsible for funding his healthcare, meaning he is subject to the full French social charges, now up to 18.6%.

Despite living in the same village and having similar investments, their tax bills differ significantly.

It is a good reminder that assumptions can be expensive.

Many people believe that because they receive a UK state pension, their UK S1 will take priority over the French system.

However, periods of employment or self-employment in France can sometimes affect which country is responsible for providing healthcare in retirement, particularly where there is an entitlement to a French pension.

Other considerations

The rate is only part of the calculation. The type of investment, how returns are produced and how withdrawals are taken can all affect the amount ultimately assessed for social charges. For example, an assurance vie is treated differently from many other investments, illustrating why the structure of an investment can be just as important as its performance.

The increase to 18.6% has led many people to ask whether they are paying the correct rate. For anyone with significant investment income or a large capital gain, the answer could make a considerable financial difference.

If you have lived or worked in more than one European country, or your circumstances have changed since moving to France, it may be worth checking that the correct rate is being applied.

You might be wondering whether there are ways to reduce French social charges. In most cases, the applicable rate cannot simply be changed. However, careful financial planning can often reduce the amount of income or gain that is actually assessable.

In other words, while the rate may remain the same, the amount entering the tax calculation may not.

Most people have no objection to paying tax. It is one of the ways we all contribute towards the country we have chosen to call home. What nobody wants, however, is to pay more than the law requires simply because they were unaware of the rules or failed to plan. This is where good financial planning can make a real difference.

Robert Kent is a financial adviser with Kentingtons.com