In France, public retirement pensions (paid by the State, local authorities, public institutions, etc.) are, in principle, subject to social charges (prélèvements sociaux).
The standard rate is 9.1%, though reduced rates apply to those with modest incomes.
However, the situation is more nuanced for foreign nationals residing in France as their liability for these charges depends on their individual status and the provisions of international conventions and European law.
We have recently received several reports from readers who have received a bill for social charges on their pension income, when they have previously received an exemption. Those affected appear to be mainly retirees on government service pensions from the UK.
In practice there are four major exemptions from the social charges on pension income.
First, European nationals, as well as UK nationals, who hold an S1 health certificate of exemption. S1 holders are exempt as their health costs are met by their home country. S1 holders also pay lower social charges on investment and rental income.
Second, recipients of government service pensions for whom, under the terms of a tax treaty between their home country and France, such pension income is taxed solely in the country of origin. The clause concerning pension income is typically found in Articles 17 to 19 of the relevant tax treaty.
Third, any other pension income that is exempt under the terms of a tax treaty. This is the case notably for US and Canadian pensions. Again, the relevant articles of the treaty usually govern this exemption.
Finally, those who hold a private health insurance policy, and who do not have a French social security number, are exempt. The health policy cannot be merely a ‘top-up’ policy.
There is no distinction in the regulations made between an early retirement pension and those receivable at the age of retirement.
While state retirement pensions are normally taxable in France, exemptions may apply under the terms of a double taxation treaty, such as those with the United States.
Those who have been incorrectly charged need to, in the first instance, contest the charge with the local tax office.
Should this not yield a satisfactory resolution an appeal can be made to the Conciliator Fiscal, who is normally based in the same tax office. We occasionally encounter some CFs who resist such appeals, but most seem to see sense.
You can find more details about the regulations in our Guide to the Social Charges.
If you seek advice concerning anything in this article contact our Property/Tax Clinic and one of our advisors will get back to you.
Related Reading:
