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Cotisations: Why you might get an unexpected French health bill

Genevieve Mansfield
Genevieve Mansfield - [email protected]
Cotisations: Why you might get an unexpected French health bill
French URSSAF building in Lille, France (Photo by PHILIPPE HUGUEN / AFP)

Healthcare in France is state funded, but it still requires people to 'pay in' to the system - and for certain groups this can come in the form of unexpected healthcare charges known as 'cotisations'.

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France is known for having an impressive and accessible healthcare system, which foreigners can also benefit from after at least three months of 'stable and ongoing' residency.

The system works via reimbursements - you pay upfront for appointments, medication and medical procedures and, if you are registered in the system, the French state reimburses you some or all of the cost.

But of course the system itself must be funded, and users 'pay in' to the system via social charges known as cotisations.

Most people who are working in France won't really notice these - they disappear from your salary or income along with a bunch of other things including income taxes, pension contributions and unemployment insurance.

Some foreigners in France however, mainly early-retirees, may be surprised to be sent a bill for cotisations. 

Here's a look at how healthcare charges are deducted.

Employees/self-employed

The funding of the health system is done primarily via payroll deductions. These are collected and distributed by the French government body Ursaff

Workers in France (salariés) pay around 15 percent of their gross salary each month toward the healthcare system, while companies (entreprises) pay out around 29 percent of the wages earned by their employees, according to Ameli

Workers can see these charges when looking at their pay stubs (fiches de paie) where deductions are broken down into taxes (impôts) and social charges, which include healthcare.

Self-employed people are also liable for deductions from their income for social charges, organised by URSSAF.

Retirees

People who have worked in France and then retire here continue to have their healthcare covered by the French state, on the basis that they have previously 'paid in' to the system when they were working.

The system is a little different, however, for people who have never worked in France, and then retire here on a foreign pension.

EU citizens and Brits are covered by the S1 system - which is basically a reciprocal agreement where the country where you worked continues to pay for your healthcare even while you live in France. People with an S1 still register for a carte vitale and are reimbursed for the costs of their healthcare in France, but the money is reimbursed by their home country, rather than by France.

For non-EU citizens, reimbursement depends on whether their home country has a reciprocal agreement with France on state-funded healthcare.

Americans and early retirees

There are, however, some people who don't fall into either of the above categories and for these 'in-betweeners', PUMa was invented.

PUMa - or protection universelle maladie - became law in France in January 2016, making it so that all legal residents could have access to medical insurance even if they were not working in France.

It's intended to catch the people who fall through the cracks, neither working/have worked in France nor covered for health costs by another government.

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The main groups of foreigners covered by PUMa are early retirees - since social security agreements such as S1 don't kick in until you reach pension age - and Americans, since there is no existing reciprocal agreement on state-funded healthcare. 

Charges

Although PUMa is intended to ensure that everyone can access healthcare if they need it, some people may be charged an annual fee.

It is up to the government body on social contributions URSSAF to decide who still owes additional fees to the healthcare system - or cotisation subsidiaire maladie (CSM). This decision is made based on tax declarations.

There are many people who are exempt from these fees

  • The majority of full-time workers and many self-employed people
  • People collecting EU/EEA/UK or French pensions
  • Those who receive disability benefits (ie pension d’invalidité)
  • People on unemployment benefits 
  • The partner, spouse or dependent child of any of the above groups

Seconded workers and their families are usually exempt, based on the length of their secondment and their home country's social security agreement with France.

So who does pay the CSM?

Assuming that none of the above exemptions apply to you, you may therefore be liable for CSM charges.

The people charged a cotisation subsidiaire maladie (CSM) are those who fit both of the below requirements;

  • earn less than 20 percent of the annual Social Security (PASS) ceiling in "income from professional activities carried out in France". This includes self-employed people.
  • AND earn more than 50 percent of the annual Social Security ceiling in "global assets and capital" (ie passive income)

The ceiling of the PASS is adjusted each year, considering any changes in minimum wage. In 2024, the PASS was set to €46,368. As such, 20 percent of the PASS would be €9,273, and 50 percent would be €23,184.

Passive income considered for the CSM would include things like rental and property income, as well as capital gains and investment income. Generally, it covers income generated from the assets you own, not from work. It should not include pensions but it could include certain investment plans.

It does not include savings.

If you're getting lost with all this jargon, let's have a look at some examples;

Case study 1

You are a 57-year-old early retiree from the UK, living in France on a visitor visa. Neither you nor your spouse qualify for an S1 yet as you do not receive a state pension. You earn €24,000 a year in rental income from properties in the UK and neither of you have ever worked in France.

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You would be liable for the CSM payment - because your €24,000 in rents is passive income, and is more than half of the €46,368 limit.

You will, however, only be liable for CSM yearly charges until you or your spouse reaches the state pension age - at which point you register for S1 and become exempt from CSM fees. 

Case study 2 

You are a 60-year-old retiree from the USA, living in France on a visitor visa with your American spouse. Neither of you have ever worked in France or another EU country. You have an investment portfolio back in the US and this gives you an annual income of €7,000.

You are not liable for CSM charges because your passive income falls below the 20 percent PASS threshold.

Case study 3

Let's imagine the same scenario as Case study 2, but your investment portfolio now generates €24,000 a year.

In this case you would be liable for CSM charges, because your passive income is above that 50 percent PASS threshold.

How does CSM payment work?

The French government looks at your tax declarations for the year in question to see if you meet the standards set above. 

Then the taxman sends your information over to URSSAF, who sends out your bill during the fourth quarter of the year (usually around November). It is not part of your annual tax bill, but rather a separate charge levied by URSSAF.  

You can make payment on the URSSAF website by creating your own personal 'PUMa' account, or you can pay via cheque or bank transfer.

Payment is due within 30 days, though in some cases you may be able to request staggered payment.

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How much is the fee?

The standard CSM formula is as follows: 6.5% x (Global Passive Income - 0.5 x PASS) x [1 - Professional income in France ÷  (0.2 x PASS)]

Let's pretend you do not fit any of the exempt categories and you earned no professional income in France, while earning €150,000 from real estate. 

6.5% x (150,000 - 23,184) x [1 - 0 ÷ (9,273)]

6.5% X (76,816 X 1) = 4,993.04

As such, this person would owe €4,993.04 in SCM for that year.

It is also worth noting that there is also a cap - 8 times PASS (€370,944 in 2024) - on the maximum amount of global passive income that can be taken into consideration.

As such, the maximum CSM charge possible as of 2024 was €22,604 per year. This would only be applied to the highest passive income earners (those making €370,944 or more) who have no professional income in France.

Why is it randomly applied?

If you spend any time amongst foreigners in France, you will find a lot of confusion surrounding CSM charges.

This is partly due to all of the exemptions that exist but it may also be due to errors by URSSAF.

The system is largely geared towards French people and the system for foreigners can be complicated, which means that in reality we often see an uneven application of charges - some people billed when they should be exempt while others who technically should be paying are never sent a bill.

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If you think you have been incorrectly billed, you can contest the bill directly with URSSAF by sending a proof of your situation. They are supposed to assess your claim within 30 days.

American pensions

The system is especially ambiguous when it comes to American pensioners.

EU/EEA/UK pension holders, who are are able to qualify for S1, tick the 8SH 8SI boxes on their French tax form to let authorities know they are affiliated with an EEE (Espace Economique Européen), Swiss or British social healthcare. 

But the situation is a bit ambiguous when it comes to American retirees.

Jonathan Hadida, from Hadida Tax Advisors, who offers tax consulting for Americans living in France to be tax compliant in both countries, told The Local: "I have called URSSAF, and I was told by the representative that they should be paying for PUMa. But in practice, I have not seen many American pensioners charged for it," Hadida said. 

"It may be that French authorities see the pensioner status and they do not charge it, even though a US pensioner based on the law would be expected to pay for PUMa. 

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"This may not continue to be the case forever, but the gavel has not dropped," the tax expert said.

Hadida also stressed that US pensioners benefit from several other tax advantages in France, including the fact that the US-France tax treaty makes it so American pension income is not taxed in France, even though it must still be declared in a yearly return.

What if I have private insurance?

Many foreigners in France opt to never sign up for the French healthcare system and prefer to pay for a private policy for the entirety of their time here. Americans may prefer to continue to rely on a US-based health insurance policy.

Many believe that private insurance will protect them from paying for CSM, but this does not mean you will avoid the charge. URSSAF's website is quite clear on this one: "If the conditions for eligibility are met, taking out private insurance does not exempt the person from paying the subsidiary health contribution."

The calculation is done based on your tax declarations, without reference to whether you are registered in the French health system.

That being said, there have been some reports of people with private policies contesting the charge successfully by demonstrating enrolment in a private plan.

"I tell most folks - prepare for it. In the worst case (for Americans), it is probably still a lot less than deductions you would pay in the United States," Hadida said. 

If you want to contest the charge, Hadida added: "I often recommend that American retirees hold onto documents showing that they are registered with social security and medicare. They may be able to use this as proof."

The tax expert also said "I sometimes recommend that people switch onto the auto-entrepeneur status, that way they can earn a bit of money just above the minimum €9,273 per year." However, this may be easier said than done, especially considering the fact that people on the visitor visa would need to switch onto one that allows freelance work. 

READ MORE: France's 'entrepreneur visa' and how to apply for it

But the tax treaty says my income is 'tax free' in France.

This depends on the tax treaty and what you are being charged for. All French residents, regardless of nationality, must file yearly tax returns and they must declare all global income. 

However, whether or not you are taxed by France depends on bilateral tax treaties. For example, France does not tax American pension income, even though it must still be declared in a yearly return.

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However, the CSM is a cotisation (social contribution) not an impôt (tax). They may feel like very much the same thing, but social charges are not counted as a 'tax' in France, so you may have to pay them even on income that is otherwise tax free.

That being said, it may be possible to get tax credits in your home country from 'social contributions' paid in France.

Bilingual attorney and tax expert Vincent Berthier De Bortoli, from VBD Tax, whose firm specialises in assisting both US and UK citizens living in France, said: "When it comes to the social contribution category, on a domestic level France does not consider these to be taxes.

"However, when you apply international tax treaties, they are treated as tax. This means that Americans can get tax credits in the USA for social contributions paid in France."

Berthier De Bortoli referenced an example from 2019 - when the US and France reached an agreement on other types of social contributions (CSG and CRDS), allowing American taxpayers to claim foreign credits on them by using the US-French tax treaty.

However, the situation is less clear for the PUMa cotisation

"There is less of a case precedent," Hadida added. "I tell clients, if they are charged, we can try to use the tax treaty. If it works, mazel tov."

Digital Nomads

It has become increasingly popular to live abroad while continuing to work online in your country of origin. Although a lot of people do it, the 'digital nomad' status is still a bit of a grey area in France - mostly because the relevant immigration laws and tax treaties were written before it became possible to work remotely using online tools.

Digital nomad - What are the rules on working remotely from France? 

The general confusion around how to treat remote workers also extends to healthcare charges.

When considering the formula for how CSM is applied, the only professional income considered is that which is earned in France.

"Technically, you should be paying social charges in France because they are meant to be applied based on where you are living," Jonathan Hadida said.

"This is where the immigration and tax side may not add up. From an immigration stand-point, you may be in line as a digital nomad on a visitor visa, but from a tax stand-point it gets more complicated, especially surrounding social security."

This grey area is one that Hadida expects to see clarified in the coming years. For the time being, it is possible, though unlikely, that a digital nomad would be charged CSM fees.

READ MORE: Ask the experts: What's the deal with remote working and France's visitor visa?

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Jeffrey Weihl 2024/02/07 18:10
American retiree. I have to say that I am still confused. Case study 3, and the quote from Jonathan Hadida imply that my "investment income" is subject to CSM. However, my investment income is from Individual Retirement Accounts (IRAs), which France, for tax purposes, considers equivalent to pensions (not taxed). I wonder if they are also considered to be pensions by URSSAF, and thus exempt from CSM, or are they considered passive investment and thus subject to CSM?

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