- Category: Social taxes
Understanding your social coverage
The structure of an SA (The French equivalent of the Public Limited Company) can vary, but generally, it is directed by a board of directors, a chairman (who is a member of the board), and a manger if necessary. As such, your social coverage depends on your role in the company.
- The social coverage of the directors
- The social coverage of the chairman or manager
1- The social coverage of the directors
The social regime of directors:
Generally, directors will receive different types of compensation:
- Director’s fees, which they receive for their role in the board of directors. These are optional, so they will not necessarily receive them
- An exceptional remuneration, given to the for specific tasks or mandates entrusted to them
- Remuneration for technical functions (those that are distinct from their functions as directors), that are performed under an employment contract. Again, this is optional.
As such, to determine what their social regime is, two situations have to be distinguished:
- The director does not have an employment contract:
They will not contribute to any social regime, since Director’s fees don’t count as actual remuneration
- The director does have an employment contract:
Though, for starters, for that to even be possible, a few conditions have to be met.
There are rules specific to the employment contract:
- The functions described in the contract have to be real,
- The director has to be subordinated to his employer
- The technical functions described in the contract have to be fundamentally different from his functions as administrator
As well as rules specific to directors:
- The employment contract has to come from before their nomination as directors
- Only one third of directors in a given company can have an employment contract
Since 2012, if less than 250 people work in the SA, and either the turnover is less than 50 million €, or the total profits represent less than 43 million €, then the director will be able to have an employment contract (as long, of course, as the employment contract refers to real functions).
The tax regime of the directors:
- they are subject to Income Tax under the “investment” category
- they are tax deductible as long as they don’t exceed 5% of the average remuneration of the best employees times the number of directors
- If the director has an employment contract then he benefits from the Employee social regime. As such, his salary is subject to Income Tax under the “Wages and salary” category. Though, the director can either deduct 10% of his from this amount because of corporate fees, or deduct his real fees (as long as he can prove/justify them).
- The salary is considered as tax-deductible for the company
- These are deductible from social benefits, as long as they are “reasonable”
- They are either taxed under the “non-commercial benefits” category, or under the “wages and salary” category, depending on the activity
2- The social coverage of the chairman or manager
The social regime:
They can receive up to two types of remuneration:
- Remuneration for their social mandates (managing the company, representing the company for third-parties)
- Remuneration for their technical functions distinct from their social mandate (employment contract)
For their remuneration for their social mandates, they are considered as “assimilated-employees”
- They benefit from social security coverage, as regular employees do
- However, Pôle Emploi (the National French Employment Center) doesn’t cover them against unemployment. It’s still possible to get insurance from other entities, though
- They also do not benefit from paid leave, notice, compensation for unjust dismissal, or other employee benefits
- If they are ever at odds with the company, they cannot refer to the Conseil des Prud’hommes (the industrial tribunal)
The assistant director does benefit from the social regime of employees, though.
For their remuneration covered by their employment contract, they are considered as regular employees. This means that they are automatically covered against unemployment, for example.
The tax regime:
They are always subject to the Employees tax regime, whether they have an employment contract or not. As such, their salary is subject to Income Tax under the “Wages and salary” category. Though, just like the director, they can either deduct 10% of his from this amount because of corporate fees, or deduct his real fees (as long as he can prove/justify them).
Again, just like the director, their remuneration is tax-deductible for the company as long as it remains “reasonable”.
Since 2013, if they receive dividends, then these will be taxed under a progressive scale by segments. Furthermore, they are also subject to an additional 12.8% tax as down payment for the income tax. Well, they are sometimes exempted from these 12.8%, though.