Employees hired in France or posted to France from abroad may be exempt from contributing to French pension schemes due to France’s effort to transform economic growth and aid businesses. The new ‘PACTE’ (Action Plan for Business Growth and Transformation) law adopted in April 2019 includes a specific exemption of pension contributions for inbound expatriates in France, even if they are affiliated to the French social security system on a compulsory basis. This exemption applies for up to six years, provided certain conditions are met.
Who is affected by the changes?
Employees hired in France or assigned to France (and not seconded from a social security standpoint) from abroad as of July 11 2018may be exempt from contributing to the French basic and complementary compulsory retirement schemes. This exemption lasts for a three year period which can be renewed once, provided they were not affiliated to the French system for the five years preceding the start of their activity in France. This exemption is aimed particularly at lowering the global burden of French social security contributions for employees who already benefit from a pension scheme in another country and contribute to such scheme for a minimum amount of € 20,000 per year (possibly shared between the employer and the employee).
What action is required? And by when?
Employers and employees eligible for this exemption must send a formal request to the French social security authorities within the 60 days preceding the affiliation of the employee to the French social security system, in order to be exempt from payment of retirement contributions as of the date of affiliation. Employees who started working in France from July 11 2018 who have already paid retirement contributions may claim a refund. The request to the social security authorities will have to be accompanied by three documents:
- Statements from the pension institution of the payment of contributions to another pension scheme (overseas or in France) for the minimum of € 20,000 per year;
- Payslips of the employee for the five year period preceding the affiliation in France; and
- A sworn statement from the employee that they were not affiliated to the French social security system in the past five years
Companies should therefore assess whether some of their employees may benefit from such exemption, inform employees accordingly and prepare corresponding claims for exemption and possible refund of contributions.