# Social charge on a private pension lump sum?



## Washand

I'm a retired UK citizen living with my US citizen wife who is employed in France and we both have French residency, French social security numbers and French private top-up health insurance. My wife submits joint tax returns but I pay no income tax in France as my state and occupational pensions are from UK government sources and are taxed in the UK. However, I have a private UK pension fund which I would like to draw down and in my understanding, it should be subject to 7.5% tax in France, and no tax in the UK. What I don't understand is whether it would also be subject to the French social charge as I have never completed an S1 form and registered it with a CPAM office. Do I need to do this before drawing down the funds? I would employ an accountant to advise me but either their quotations are in 4 figures, or they decide that I'm not wealthy enough. I just need a simple correct answer to this question. Can anyone help me please?


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## Bevdeforges

I may be mistaken, but I believe the 7.5% tax rate you have been quoted IS the French "social charge" - which isn't actually the same as "cotisations" for health (and other) insurances. Just as an example, I receive pensions from France, the US and Germany, but only the Germany pension is subject to a tax of about 9% for CRS/CRDS which is the tax called "social charge" here, but which has nothing to do with your eligibility for Sécu.

The easiest thing to do might be to schedule an appointment with your local tax office and ask them what the treatment for your pension fund withdrawals would be.


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## 1790260

Yes, you would be subject to social charges. In general, 9.1% although it may be lower depending on the amount of the drawdown. You don't need to register an S1 to do the drawdown but it _might_ be of interest to you (see my bold below)









Taxation of Pension Lump-Sums in France | French-Property.com


A favourable tax regime exists in France concerning lump sum pension payments, despite some recent trimming of these advantages.




www.french-property.com







> As a general rule, in addition to income tax, social charges (_prélèvements sociaux_) of 9.1% are payable on lump-sum pension payments, although a lower rate may be applied in the case of small lump sums.
> 
> However, you would escape social charges if you were either:
> 
> In receipt of a government service pension;
> *In possession of an S1 certificate of exemption for health cover*;
> You had health cover entirely through a private health insurance policy.


Note: the actual rate might change, the 9.1% mentioned above was of Nov 2021.

With regard to the tax itself, you do have a number of options as to how it might be treated (the above link has the details on that too), the fixed rate method _prélèvement forfaitaire_ is at 7.5% 

It might be worth looking at the other tax options as they _might_ be of interest. In my circumstances, when I looked at drawing down a small pension pot in its entirety, the quota part (_système du quotient_) was of interest due to my low levels of earnings.

Depending on the amount of the drawdown, the HMRC may deduct tax (on any taxable element, 75% of the pot perhaps) and, be warned, that can be at emergency tax rates and they can be high (fret not, you can reclaim it) As you are already paying tax in the UK (on your pensions, so you're 'in the system') you might avoid the emergency rate.

If you do need to reclaim any tax paid in the UK, you'll need a form (the exact one escapes me at the moment but I can look it up if you're likely to need it) that you fill in with the details and amount etc, get it stamped and signed by French impots and send it off to HMRC (either online via the govt gateway or in the post) 

I personally wasn't going to pay an accountant either, the lump sum being small and the procedure itself seemed straightforward enough. I did however have an appointment booked with my tax office here just to discuss the taxation options here in France, and how to declare it etc. That didn't eventuate because they cancelled it and since then the markets and exchange rates have turned and I've decided to wait.


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## Crabtree

If you getting a uk state pension then the Anglo French tax treaty states quite clearly that a UK state pension should be paid tax free in the UK and is fully taxable in France.Therefore your French and UK tax returns need to be sorted out.
Is there any reason why you have not submitted an S1?
Others have answered the question about social charges but to get the answer from the horses mouth go to your local tax office and they can also sort out the pensions tax situation


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## Bevdeforges

appunti said:


> With regard to the tax itself, you do have a number of options as to how it might be treated (the above link has the details on that too), the fixed rate method _prélèvement forfaitaire_ is at 7.5%


OK, OK, I think this 7.5% rate is similar to the way they tax assurance vie proceeds (assuming you've held the account for at least 8 years or so and a few other qualifications). But yes, assurance vie proceeds are also subject to the "social charges" so I suspect that may be the way they tax a lump sum withdrawal like that.


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## Washand

Thanks to you all for your help - much appreciated. As suggested, I think a conversation with my local tax office may help, although we have already been through that loop with my US wife's tax situation and it was a wild experience that took 2 years to sort out. I think we dealt with 18 different SIP contacts in total and everyone had a different interpretation of the US-France tax agreement, so I don't need a repetition of that experience!

As regards the 2008 UK-France tax agreement, article 18 simply states "Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid in consideration of past employment to a resident of a Contracting State shall be taxable only in that State.". Para 2 of Article 19 states "However, such pension shall be taxable only in the other Contracting State if the individual is a resident and a national of that State without being also a national of the first-mentioned State.". Since I am not a national of France and I am a national of the UK where I was employed and which pays my pension, my interpretation of this tax treaty is that I should pay income tax in the UK, and the French tax office seems to accept this.

In my understanding, the rules about a SIPP (which is what I have) are that I should apply for a Nil Tax code in the UK and elect to pay for the "prélèvement forfaitaire" in France at a rate of 7.5% on the whole amount. I think the form you referred to, appunti, is the P85 which is apparently available through a UK Government Gateway account. I think I can only do all this if none of the funds have previously been drawn down and the total amount is taken in one lump sum. There may be other restrictions like you say, Bevdeforges, and this is where I could trip up if I'm not careful. The 25% tax-free amount that applies in the UK does not apply in France, so the overall tax for the total sum in the UK and France would be at minimum 15% and 7.5%, respectively, and up to 33.75% for the UK depending on the tax band. If the French social charge of 9.1% applies, then the benefit - or deficit - of being taxed in France depends on the amount being withdrawn.

Crabtree, there is no reason why I did not apply for an S1 form so I think this maybe a way to avoid the social charge altogether.


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## 1790260

Washand said:


> I think the form you referred to, appunti, is the P85 which is apparently available through a UK Government Gateway account


Tbh, that doesn't look like the form I remember - isn't that one for when you're leaving the UK? I think I was referring to the P53 - but even that doesn't look the form I remember! There's the P55 too, that may be applicable to you with a part access. But then maybe SIPPs are different again, I know nothing of SIPPs.






Claim a tax refund when you've taken a small pension lump sum


Claim back tax that HMRC owes you on a small pension lump sum you've had using the online P53 or P53Z forms.




www.gov.uk










Claim back a flexibly accessed pension overpayment


Use the online service or form P55 to reclaim an overpayment of tax when you've flexibly accessed part of your pension pot.




www.gov.uk





Of course, if you can get an NT code then that'd avoid all of the reclaiming process. I thought, given what you'd written about being in the system already and notionally paying tax, that that might be possible. I only looked at taking a complete drawn down of a personal pension as a non-UK resident/tax payer. I really can't comment beyond that so I'll butt out!

But it reads to me that you have a really good handle on things.


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