Social Contributions in France - URSSAF
Originally posted on & updated on 10th February, 2024
If you’re planning a new life in France and you’re not lucky enough to be in the situation where you don’t need to work, the chances are you’ll be thinking about setting up a business. Setting up a business in France isn’t as complicated as people often lead you to believe, particularly since the introduction of the auto-entrepreneur. All of that said, it is well worth going into a business set-up situation in France with your eyes open, otherwise there can be some surprises, particularly regarding cotisations, or social security contributions.
Cotisations or social security contributions in France are a bit like National Insurance Contributions in the UK. However, generally speaking they are higher than the equivalent charges in the UK, which is where the nightmares can start if you’re not prepared. No matter whether you’re running a one-man or a one-woman band or you’re running a business that employs people, it’s essential that you know ahead of time what your liabilities might be from a social security contribution point of view.
When you “start a new business in France”, you’re required to register for social security, in most cases with the Union de Recouvrement des Cotisations de Sécurité Sociale et d’Allocations Familiales (URSSAF). Although there are other offices that deal with certain types of business, URSSAF is the main manager of social security contributions. Once you’re registered with them, you will start to pay contributions to the relevant funds. This is the start of you putting money aside in France for your retirement, health and family allowance, as well as making your contribution to the social security debt.
There are two options when it comes to social security contributions in France. First, you can elect to make only basic, compulsory contributions (which are already quite high) or you can fund for enhanced benefits if you have the budget and the desire. Evidence suggests that most expats don’t opt to pay for enhanced benefits in France, but whether you will or not will depend entirely on your personal circumstances.
Social security contributions are normally billed four times a year and when you start your business will be based on an assumed level of income. Depending on your business and how organised you are when you set it up, the assumed level of income may be too high or too low. There are advantages and disadvantages of each error. If your assumed income is too low, your estimated social security contributions will be too low too. This means that you could be lulled into a false sense of security, thinking that these contributions are not an issue.
However, in year two of your business, when your actual accounts have been filed, you’ll need to pay the difference. Many people get caught out by this and find themselves in trouble in the second year of their business because they haven’t set sufficient money aside to meet the contributions that are based on real results.
The only way of avoiding uncertainty is to opt for a micro-entreprise or “auto-entrepreneur”: status where your social security contributions are calculated as a fixed percentage of your turnover. While this might seem, on the face of it, a simpler way or running your business, in many cases, it is not the most efficient. Running many businesses on a regime réel, whereby you deduct your actual charges from your actual income before having your social security contributions calculated, proves more attractive.
While social security charges can be penal for new businesses in France, there are certain areas of the country where they are waived for a short period of time in order to incentivise the creation of new businesses. If you’re flexible about where you want to live, this might be an important part of your decision-making process.
Either way, like all things of this level of complexity, it’s essential to get good advice before entering into any business arrangement. If necessary pay for advice in English or pay to have French advice translated or interpreted by a professional so you are completely clear about where you stand. It’s also important to find a good accountant, who knows the French rules inside out to make sure you are taking advantage of all of the tax and social security contribution saving schemes that are available to you.
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