- Category: Social taxes
You’re the manager of an SARL (The French equivalent of the Limited Liability Company) or an EURL (an SARL, but with only one associate). If you’re not sure what social coverage you’re entitled to, it’s probably because the answer can be somewhat confusing and unintuitive. Basically, it depends on how many shares you have. Indeed, there are 3 types of managers: the “Majority Manager”, the Minority Manager”, and the “Equal Manager”.
As its name implies, a majority manager is a manager who owns more than 50% of the shares of his company. This includes the shares owned by close family members (spouse, minor children, partner bound by a PACS), as well as any shares owned by a company he controls.
As you might expect, the minority manager owns less than 50% of the shares, and the equal manager owns exactly 50%.
The remuneration of the SARL manager is in principle determined by the shareholders in the OGM (Ordinary General Meeting). Depending on the case, this remuneration will result in the payment of social security contributions to the “Non-Salaried Workers” funds or to the “Employees” funds.
- The social regime of the manager
- The tax regime of the manager
- The “de-facto manager”
1- The social regime of the manager
Social coverage of the majority manager
As far as the Social System is concerned, he is a non-salaried worker (TNS). As such, he must contribute to the same funds as:
- traders, if the SARL has a commercial or industrial object,
- craftsmen, if the SARL has a craft object,
- liberal professions, if the SARL has a liberal object.
His social contributions are calculated on the basis of a flat rate at the beginning of the activity (the first two years) even if the company does not pay him a salary.
In the following years, the social charges are calculated on his remuneration. Minimum contributions are due even in the absence of remuneration.
Since January 1, 2013:
- if the company is subject to the Corporate Tax, the part of the dividends collected by the manager or by his spouse, his partner bound by a PACS or his minor children, is subject to social contributions for the fraction superior to 10% of the registered capital, premiums issue and amounts paid into current account (social security financing law of 17 December 2012).
- the majority manager can no longer deduct professional expenses from his remuneration to determine the basis of calculation of his social security contributions. However, the deduction of the real costs remains possible.
The social security contributions constitute personal expenses for the manager. As such, they must in principle be paid directly to the social organizations. They are thus tax-deductible from his professional income subject to income tax.
Be careful though! It is common for companies to pay the social security contributions of managers for them.
In these cases, the managers cannot count them as “social charges”. They consider that this is a supplement of income granted to the managers and they are accounted for in the category of “remunerations”.
Social coverage of the minority or equal manager
The minority manager is likely to receive two types of remuneration:
- a remuneration for his social mandate (management acts, representing the company for third-parties),
- a remuneration for technical functions that are distinct from his social mandate and performed under a contract of employment.
If they want to hold a salaried position, minority/equal managers have to be able to prove that they do have different functions from their social mandate, that these functions give rise to a remuneration, and lastly, that they exist in a context of subordination (Ministerial reply of 14 April 2011).
For their remuneration as managers: As far as health insurance, family allowances and pension are concerned, they are “assimilated” employees.
- They therefore benefit from the social system of employees (social protection of employees, retirement of managers, etc.),
- However, they don’t contribute to the employment center. As such, they have no unemployment insurance.
- Furthermore, since they’re not employees with an employment contract, they don’t benefit from labor law and the collective agreement. They thus don’t benefit from the provisions on paid leave, they can be “dismissed” without notice, without dismissal procedure, etc.
For their remuneration as employees with an employment contract: in principle, they are real employees.
However, as far as unemployment insurance is concerned, the employment center checks whether the conditions of the employment contract are actually fulfilled. In particular, they check whether there is a relationship of subordination or not.
As such, if the employment center does not recognize the employment contract, the manager will not pay contributions and will not be protected from unemployment risk.
It might therefore be a good idea to consult Pôle Emploi (the National Employment Center) beforehand.
Learn more about combining your social mandate with an employment contract here (ADD HYPERLINK).
2- The Tax regime
All managers, majority and minority, fall under the same tax regime.
- They must note their remuneration on their tax return, after deducting the social security contributions paid during the year and the premiums paid under the so-called “Madelin” contracts (within the limits of the ceilings fixed by the law).
- For their professional expenses (meals, transport, etc.), they have the choice between deducting their real and justified professional expenses from their income, or applying the standard deduction of 10%.
- Dividends received are taxable under income tax in the “movable income” category and benefit from the 40% tax allowance. A mandatory deposit of 12.8% will be deducted at source (except in case of exemption).
3- The “de-facto manager”
This refers to a “natural person” (individual) or “legal person” (entity representing several individuals) who has executive and managerial powers in a company, despite never actually being duly designated as such.
In terms of taxation, the de facto manager is regarded as the de jure leader: he is part of the same tax regime as the employees.
Socially, de facto leaders cannot be subject to the general social security regime. The associates, which are de facto managers, come under the regime of non-salaried workers.