Social charges on pensions in France

Why am I liable to social charges on my pension?

France operates a generous healthcare system, whose cost has more often than not exceeded revenues that the French government collects from its social security system. Due to these recurring deficits, provisions are in place to increase revenue streams, including subjecting pensions to social charges under the income tax system.

Therefore, pensions received by taxable persons in France are subject to social charges if the person (or household) is considered to be dependent on the French health system. This applies to both local French pensions as well as foreign private ones.

However, certain exemptions apply, should these conditions be met:

  • Foreign pensions are exempt from tax in France, by virtue of double taxation treaty provisions, being only taxable in the source country. This generally applies to government pensions or US social security pensions.
  • The pensioner benefits from a UK State Pension, which includes health coverage by the UK government while the person is tax resident in France (and therefore the person’s health costs are not considered to be borne by the French health system).
  • The taxable person or household pays into the French health system via PUMA (Protection Universelle Maladie which replaced CMA – Couverture Universelle Maladie).
  • The taxable person or household is considered to have a low income and therefore benefits from a full or part exoneration (social charges at 3.8%). This is calculated on a sliding scale against the Revenue Fiscal de Référence (RFR) of the household.
  • This rule has been part of French tax and social charges law for the last few years, but has often been overlooked by tax offices due to the volume of work they have. However, more and more tax offices are looking into this matter and will subject social levies and penalties for non-declaration and late payment of the sums due.

    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.

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