“Impatriate” employees – i.e. employees who come from abroad to work in France – benefit from a tax exemption on income from that activity under certain conditions.
Inspired by this attractive tax measure, the “PACTE”1 law created a temporary exemption for impatriate employees from the mandatory old-age pension schemes, which could represent significant savings in social security contributions.2
Impatriate employees may be exempted from social security contributions to old-age pensions
In principle, anyone who pursues a salaried activity in France must be affiliated to French social security schemes, including old-age pension schemes.
Exceptions are made for employees employed abroad who come to France for a temporary assignment and can continue to be covered by the social insurance schemes of their State of origin under the posting rules provided for by European Regulation no. 883/2004 or under a bilateral social security agreement signed by France.
The “PACTE” law now allows employees coming to work in France outside the framework of a posting to also benefit from an affiliation exemption, limited to the mandatory French basic and complementary old-age pension schemes.3
This affiliation exemption is granted for a period of three years, renewable once.
It is granted to “employees called from abroad to work in France” (Article L.767-2 of the French Social Security Code).
This definition, which is broader than that adopted in tax matters, in principle includes anyone with employee status abroad who comes to work in France with that status for the same employer or another company, whether within the same group or not, for a temporary or permanent job and regardless of their nationality.
This measure is retroactive, being available to employees who have taken up their duties in France since 11 July 2018. If the exemption covers a past period, the employer may apply for a refund of social security contributions already paid.
Provided in particular that they are covered by another scheme
The affiliation exemption is subject to several conditions4:
- the employee must be affiliated to the public pension scheme of another State or be covered by a collective or individual private pension scheme, taken out either in France or abroad. The purpose of that scheme must be to grant an annuity or lump sum on definitive cessation of activity, without the possibility of early liquidation unrelated to retirement, with certain exceptions;
- that insurance or pension scheme must require the payment of annual contributions of at least €20,000, regardless of their distribution between employer and employee. By way of comparison, contributions to the French basic and supplementary pension schemes reach this amount when annual remuneration exceeds €80,000;
- during the five-year period prior to taking up his or her duties in France, the employee must not have been affiliated to a compulsory French pension scheme, except for ancillary or seasonal activities or related to studying in France.
The exemption application must be submitted jointly by the employer and the employee, based on a template defined by a ministerial order and accompanied by various supporting documents.
It must be submitted to URSSAF at least 60 days before the date from which the employee becomes affiliated to the French social security schemes.
In the event of late application, the employer must pay the old-age pension contributions until receipt of the exemption agreement and may then apply for a refund of those contributions.
URSSAF will grant the affiliation exemption within 30 days of the application.
If it fails to comply with the required conditions, the employer is liable for an amount equal to one and a half time the amount of the contributions that would have been due in the absence of an exemption.
Employees do not acquire pension rights for the period in question
The affiliation exemption naturally means that no rights are acquired from the French pension schemes for the period in question.
Nor does it provide exemption from social security contributions due to the other branches of French social security (sickness, maternity, workplace accident, family benefits, etc.).
This exemption is less beneficial than the posting rules in this respect, since they make it possible to pay no social security contributions in France once their conditions are met.
However, this measure is of interest to roaming employees who are already covered under individual or group pension schemes and for whom affiliation to French pension schemes generates a significant additional cost.
The “PACTE” law thereby partly extends the posting rules to new situations and enhances the attractiveness of “impatriate employee” tax status with favourable employment law provisions.
1. Law on growth and business transformation no. 2019-486 of 22 May 2019.
2. This affiliation exemption is not entirely new: a similar mechanism was introduced by the law for modernisation of the economy of 4 August 2008 but abolished from 1 January 2016.
3. By targeting “supplementary old-age pension schemes”, the legislator intended to extend the affiliation exemption to the unified Arrco-Agirc scheme. However, this exemption has not been included in the standards specific to that scheme. Clarification from the scheme would therefore be welcome to confirm its application.
4. Articles L.767-2 and D.767-1 of the French Social Security Code, Interministerial Instruction no. 2019/150 of 28 June 2019.