Loi Madelin policies for the self-employed in France?

Self-employed people can benefit from a range of protection insurances and pensions, which fall under a tax relief system known as the Loi Madelin (Madelin law).

It is named after the minister who introduced the scheme in the 1990s.

Apart from sole traders, this is also available to unsalaried people running companies (SARL, EURL, etc), whether set up to pay impôt sur les sociétés or income tax.

Loi Madelin insurance contracts come in four kinds, with the aim that (within certain ceilings) the premiums are deductible from your taxable income.

The aim is to help these categories of workers to fill in gaps in their social security cover.

This is because they are, depending on sector, more poorly protected. The categories are:

1: A private retirement pension;

2: A top-up health policy for the individual and their dependants;

3: A policy to replace work income in case of having to stop due to illness or accident (indemnité journalière), or to insure against death (assurance décès) or incapacity (contrat de prévoyance);

4: An involuntary unemployment policy.

In each case the amount deductible is limited.

The limits are based on the Plafond Annuel de la Sécurité Sociale (PASS), a figure that for 2019 was €40,524.

You can deduct contribution amounts up to whichever is higher between 10% of the PASS (€4,052) or 10% of the taxable profit (up to a maximum amount of 8xPASS or €324,192) plus 15% of the part of the profit between 1xPASS and 8xPASS.

This deduction is for the purposes of income tax and not social charges. Since the benefit is a tax deduction, you need to be paying tax to benefit fully.

However, it could also mean you stay in a lower tax band. Before taking out such policies, it is advisable to check what they provide and when benefits are available.

This question was answered by Olaf Muscat Baron who is a Fellow of the Chartered Association of Accountants UK, a French expert comptable and an International tax advisor.

He is the principal accountant of Fiscaly, an accountancy firm based in the Dordogne.

See www.fiscaly.fr or call 09 81 09 00 15

Email your tax questions to news@connexionfrance.com