General Social Security Contribution (CSG)General Social Security contribution (GST), General Social Security contribution (GST) Monday, March 7th, 2011
Since its inception in 1945, the social security system has been financed mostly from contributions levied on earned income.
This arrangement has long distinguished France from some of its European partners, who finance most social spending from tax.
However, in order to tackle social security funding problems and ensure that all income helps to finance social protection, the range of resources was extended by the introduction of supplementary levies of a tax nature. They are the general social security contribution (contribution sociale généralisée, CSG), the social security debt repayment contribution (contribution pour le remboursement de la dette sociale, CRDS), the 2% social levy and the 0.3% additional contribution.
Most recently an additional 0.1% contribution to the 2% social levy, earmarked to fund the earned-income supplement (revenu de solidarité active, RSA), has been introduced as of 2008 or 2009 according to the nature of the investment income concerned.
The biggest payers of corporation tax are liable to a 3.3% social contribution.
General Social Security Contribution (CSG)
The general social security contribution, which came into force on 1 February 1991, is a levy with a social purpose. Unlike social security contributions, which entitle those who pay them to benefits, the CSG is levied like any other tax without any direct benefit in return.
The CSG is allocated to the social security budget, and specifically to the national family allowance fund, the old-age solidarity fund and compulsory health insurance schemes.
The contribution is levied on individuals who are domiciled for tax purposes in France and, where earned or substitution income is concerned, members of a French compulsory health insurance scheme.
The CSG tax base is very wide, since it is levied in principle on earned income, substitution income, income from personal assets and income from investments in fixed-income securities subject to withholding tax or exempt from income tax.
CSG on earned and substitution income
For income from salaried employment and similar income, the tax base comprises the gross amount of salaries and benefits in cash or in kind. A 3% deduction is allowed for professional expenses. CSG is deducted by the employer at source at a 7.5% rate and paid to URSSAF, the body that collects social security contributions.
CSG is also levied at the 7.5% rate on non-wage earned income and paid in advance in quarterly instalments.
For substitution income, early retirement benefits received by employees who have taken early retirement since 11 October 2007 are taxed at the 7.5% rate, other early retirement, retirement and invalidity benefits are taxed at 6.6% and other substitution income benefits (unemployment, sickness, maternity, work-related accident, occupational illness) are taxed at 6.2%.
However, recipients of substitution income benefits19 are exempt from CSG if their income does not exceed certain amounts, at which levels they are also exempt from local taxes. Those who do not meet the condition but whose annual amount of income tax does not exceed the collection threshold, set at €61, are liable to CSG at a reduced 3.8% rate, wholly deductible from the income tax base.
CSG on earned and substitution income is deductible from income tax except for a 2.4% fraction.
CSG on income from personal assets
CSG is levied on income from personal assets at 8.2%.
The following are liable to CSG:
• income from real property;
• purchased life annuities;
• income from capital assets other than income liable to withholding tax and income on which CSG has been deducted at source (see “CSG on investment income” below);
• capital gains and profits liable to income tax at a proportional rate, including long-term business capital gains and capital gains on transferable securities before any length-of-ownership deduction, for capital gains on transferable securities realised by private individuals;
• business, professional or agricultural income not liable to CSG in respect of earned income;
• income of indeterminate origin taxed by administrative assessment and amounts taxed by administrative assessment for non-production or late production of the tax return;
• any other income, the taxation of which is attributed to France by an international treaty.
CSG is levied on the net amount used to determine the income tax liability. However, it is assessed on the gross amount of income from capital assets received since 1 January 2008.
CSG is individually assessed and controlled in the same way as income tax.
5.8% of the CSG on income from personal assets, except for capital gains liable to income tax at a proportional rate, is deductible from income tax in the year it is paid.
CSG on investment income
Income from fixed-interest investments, together with dividends and similar income received since 1 January 2008 (with the exception of those received within the framework of a PEA equity savings plan) are liable to CSG at 8.2% where they are liable to withholding tax in discharge of income tax, where they are liable to income tax at progressive rates and the payer of the income is established in France, and where they are exempt from income tax (with the exception of certain tax-free products, namely youth savings accounts, Livret A passbook accounts, popular savings accounts and sustainable development savings accounts).
CSG on investment income is also payable on capital gains on real property and on certain movables liable to income tax at a proportional rate upon disposal.
CSG is deducted at source, generally, in the case of fixed-interest investment income, by the payer. Where products are exempt, the deduction is made in principle on payment of the income by the debtor or the intermediary, who pays the income in question and is then responsible for paying the amounts to the State.
CSG on capital gains on real property and certain movables is collected at the same time as the flat-rate income tax charge on the capital gain.
5.8% of the CSG paid on income from fixed-income investments and distributed income liable to income tax at progressive rates can be deducted from taxable income in the year in which it is paid.
CSG yielded €79.68 billion in 2007 and is expected to yield €84.67 billion in 2009.
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