Self-Employed Directors: How to reduce by more than one half your payroll taxes in France

A good knowledge of social and legal environment of a business can induce, in some cases, a 60% to 25% reduction of payroll tax rate applied to earnings when the director is self-employed. This can also benefit its sales force and/or certain categories of employees.

It is possible to modify and adjust the status of the director in respect of social organizations to drastically reduce the required contributions; they apply to pension schemes, sickness, or retirement.

Indeed, the Code of Social Security determines, through clearly defined coverage criteria, membership in a particular social status, himself setting the payroll tax rate and applicable mandatory membership organizations.

The payroll tax rate may vary, depending on the status (employed or self-employed) from 60% to 20-25%. Coverage criteria are based on the Director’s status and the form of the Company (SA, SAS or SARL).

The optimization of social status can significantly impact on the "social pressure". It is then essential to define the best contributions-benefits that take into account the age of the insured and his family status.

In most cases, this optimization will lead to retain the employed-status.

For benefits provided under this scheme, those relating to the coverage of the "disease" will remain the same. Only pension benefits and retirement will be slightly affected.

However, there are various tax provisions that enable a director to additionally fund his individual retirement and pension plans through insurance contract. Of course, the solution is perfectly legal. It follows from the perfect knowledge of the Social Security Law, Business Law and Labor Law in particular. But it is also the result of our Lawyers knowledge and know-how, acquired over a long period of practice.

As an example, here is a detailed test case (experienced):

Mrs. B and C have a business of new technologies. It reported a turnover of 4,300,000 € a year. They each pay a salary which cost the company 167,000 €

	Before	After
Cost for the Company	167000 €	167000 €
Employer Contribution	44800 €	None
Gross Income	122000 €	167000 €
Personal contributions + CSG + RDS	21800 €	40112 €
Net Income	100200 €	126900 €

Annual Payroll Savings: 21800 €


Payroll reduction for the sales force :

The firm of Mrs. B and C employs 10 representative agents. The average cost of one o them is 55.700 €.

	Before	After
Cost for the Company	55700 €	55700 €
Employer Contribution	15200 €	None
Gross Income	40500 €	55700 €
Personal contributions + CSG + RDS	7600 €	17400 €
Net Income	32900 €	38300 €

Annual Payroll Savings: 5400 €


Source: CANAM 2006

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