Social Security Charges etc.

[lalavande]

I am shortly to retire as a UK teacher, and I will also receive my Uk state pension. Both pensions will be paid into an offshore account.  I have had my home in Provence for about 4 years and I'll move there permanently asap. I don't feel ready to 'hang up my boots' and the chance has come up for me to buy a small business (a small language school) which I hope will generate extra funds to live on (UK pensions will be insufficient). The business stays below the 27,000euros a year allowance to avoid the VAT. There are the usual overheads of rent etc. but now I am told I will be obliged to pay 6,700euros pa for social charges. This is the french state pension and health contributions. As I'll be receiving a UK pension, and I'll have the carte mutual (done with the E106 from Newcastle) which comes under the reciprocal EU regulations (and I'll be paying additional top up health insurance) I have had a bilingual accountant go into the figures but because he deals with just french law he is unable to advise on any reciprocal arrangements, if indeed they exist.   Please can anyone advise me if there is anyway I can avoid paying the french social charges, because in effect I'll be paying twice. 6,700 euros is quite alot to come out of a small business. Or can they be declared and then set against whatever allowances I may qualify for. Or is it better I forget the who thing and stagnate??!!! Beginning to pay into the french state pension is crazy because of the few years I'll do it, I'll be lucky if it'll pay out centimes!! Also as far as the health contributions are concerned I'll already be covered. What now???Looking forward to some advice.

[Ron Avery]

If you are of retirement age 60 +and receiving a UK old age pension you do not get an E106 , you would get an E121. That exempts you from paying into the French CMU health care system, but does not cover full health care costs, you still need to think about a mutuelle top up.

If you continue to work as far as I know you will still be covered by the E 121 but you will have to pay French social charges, through your business, but only once, not twice as you seem to think.

Your teachers pension is not taxable in France but must be declared in France, your old age pension is taxable and must be declared in France, together with the income from the school.  It matters not if it is offshore or not, your bank will still have to declare where you pay your taxes.  There may be some exemptions fromn an E121 if you continue to work  perhaps Will can confirm that an E121 remains valid irrespective of whether you work or not.

[Laine]

Hi,

I'm sure, like Ron, that you will have to pay social charges, even if you personally won't benefit from them, but I'm not sure how much because it all seems to vary according to personal circumstances.  Are you thinking of being 'professional liberale' (no problems of VAT with this) because each 'company structure' is different and you may need advice on the best one for you   Where is your language school?  (We run one near Avignon).

Good luck whatever you decide to do.

Regards,

Laine

[lalavande]

Hi Laine, Thanks for reply. I'll not be far from you. It's in Marseille. Keep in touch. Lalavande

[lalavande]

Thanks Ron, certainly food for thought. Thanks for the correct E number, I wasn't sure. Lalavande

[Will]

I think you will find, as Ron said, that if you are entitled to E121, which basically confirms to the French authorities that you are in receipt of another European country's state pension, you would not have to pay the CMU contribution, but as you are working this benefit will probably not apply to you. .

Ron is also quite correct in that if you work, then social security payments are compulsory, covering things like health, retirement, unemployment, family allowance, training etc (as well as the French national debt to which virtually every French resident has to contribute whether working or not). The fact that you may not use the benefits, or even be entitled to them, doesn't matter - retirement fund payments, for example, pay for the present pensioners rather than build up a personal fund for you, as UK private pensions are supposed to. Depending on which caisse receives your retirement payments you may be eligible for a small reduction through being over retirement age, but it will be very small.

Actually your accountant's estimate sounds not too bad at all. Our accountant reckons on an average of 46% of your income going on social security charges, though it varies slightly according to what you do and how much you earn.

If you are entitled to E106 then you may be able to use this for healthcare etc rather than joining the French system immediately, which will be better for you financially, but you would have to be able to say that you are not yet a permanent resident in France in order to put off joining the French system, and in any case the E121 would probably supersede the E106 which is normally used by people retiring before state pension age. This would only be a temporary respite, though, as you will have to join the French system on expiry of E106.

As far as French taxation is concerned, your social charges can be (mostly) offset against tax.

[lalavande]

Thanks Will. All seems logical, even if I don't like it!!! I'm beginning to think that after I've paid all the various overheads that there will be very little money left esp. as I have to keep to the 27,000euro ceiling amount. Seems I could be working my socks off to fund the french!!Perhaps there will be a better, less hassle return on investment. Not alot of incentive to work!!!

[Ron Avery]

Why do you have to keep below the TVA ceiling?  This seems to be a  false ceiling you are unnecessarily imposing on yourself which will limit your earnings potential.  Is it so your fees are more competitive?  If you do have a turnover that requires you to register for and charge TVA , all you are doing is collecting  the TVA and paying it to the tax people, there is an extra administrative task in recording the TVA paid and received, but within the records that must be kept of any company hardly a major problem with decent financial accounting software.

[lalavande]

Hi Ron, The accountant advised this because if I were to go above this I would get caught up in alot of bureaucratic stuff. If I were going to go well above this, then it would be worth it. It is only a small school and the chances are that I could quite possibly tip over the limit but not enough to make all the extra paperwork worthwhile. He told me the 27,000 euros is the statutory figure for a small business to stay out of the VAT trap. Also the current owner has said this too. Naturally there are some funds that do not appear on the books, but that is not that fantastic. As much as I'd like to run this, it seems I could be doing alot of hardwork for a minimum return. Food for thought and thanks for continuing suggestions.

[Will]

My first year of trading was under the micro tax regime, as it covered only part of the tax year. In the following year, although my earnings rose in proportion and took me above the micro-bnc threshold, the acountamt managed to actually reduce my liability for tax and social charges so I paid less in following years under regime réel. Because I do business almost entirely with British clients then the French TVA benefits or otherwise were not great, though the accountant managed to get some credits. Accountants' fees are of course higher for réel than for micro, but these can be set against tax anyway, and the extra cost was well worth the saving. However, do not dismiss your own accountant's advice because it all depends on what you do and what allowances can be claimed.

[Laine]

Hi,

Check the status of the ' numero d'existance' because unless things have now changed in some way in the last ten years this entitles you to exoneration from TVA, even above the figure you mentioned  (talk to the Prefecture and tax office).

Regards,

Laine