Jan
24
French labour law: Collective Mutual Agreed Termination: a tax jackpot for employees! (Thanks Macron)

Implemented by the ordinance n ° 2017-1387 of September 22nd, 2017 (articles L. 1237-17 to L. 1237-19-14 and articles D. 1237-4 and D.1237 -5 of the French Labour Code), is a completely new device that has not finished talking about him. (See our previous article)   

A fundamental question for the employees that will be affected by these Collective Mutual Agreed Termination (CMAT) is the incame tax and social security rules that will be applicable to the sums received in this context.

It is the Finance Law for 2018 (law n ° 2017-1837 of December 30th, 2017), adopted on December 21st, 2017, which determines this regime which turns out to be particularly favourable since the taxation and the social charges are aligned on the applicable allowances paid in the context of an employment protection plan (ESP) (Plan de sauvegarde de l’emploi – PSE)

Thereby, the legislator has chosen to make the Collective Mutual Agreed Termination (RCC: Rupture Conventionnelle Collective) much more advantageous from a tax point of view than an individual Agreed Termination (Rupture conventionnelle individuelle).

1) Exemption from income tax for the total amount of benefits

Article 3 of the 2018 Finance Act for 2017-1837 of 30 December 2017 amends Article 80 of the French General Tax Code as follows:

"1. Any compensation paid on the occasion of the termination of the employment contract constitutes a taxable remuneration, subject to the following provisions.

Does not constitute taxable remuneration:

1 ° The indemnities mentioned in articles L. 1235-1, L. 1235-2, L. 1235-3, L. 1235-3-1, L. 1235-11 to L. 1235-13, at 7 ° of the Article L. 1237-18-2 and 5 ° of Article L. 1237-19-1 of the French Labour Code; [...] "

Thus, the benefits paid under a CMAT are fully exempt from income tax with no limit of amount, like those paid under an ESP.

Example 1: Take an employee who has 8 year’s seniority and whose gross monthly salary is 3,000 euros.

If he receives a CMAT allowance of 2 months’ salary per year’s seniority, ie 48,000 euros, this sum will be entirely exempt from income tax.

Example 2: Take an employee who has 15 year’s seniority and whose gross monthly salary is 4,500 euros.

If he receives a CMAT indemnity of 1 ½ month salary per year’s seniority, ie 101,250 euros, this sum will be entirely exempt from income tax.

2) Exemption from social security contributions up to 2 ASSC (the annual social security ceiling) (PASS: Plafond annuel de la sécurité sociale).

As for social security contributions, the CMAT allowances will also be exempt but within the limit of twice the annual ceiling of the social security (ASSC) is 79.464 euros. (Article L. 242-1 of the French Social Security Code).

Example 1: Take again an employee who has 8 year’s seniority and whose gross monthly salary is 3,000 euros.

If he receives a CMAT allowance of 2 months’ salary per year’s seniority, ie 48,000 euros, this sum will be entirely exempt from social security contributions.

Example 2: Take again an employee who has 15 year’s seniority and whose gross monthly salary is 4,500 euros.

If he receives a CMAT allowance of 1 ½ month salary per year’s seniority, ie 101,250 euros, this sum will be entirely exempt from social security contributions up to a limit of 79,464 euros.

The contributions will therefore apply only to the sum of 21,786 euros.

3) Exemption from “CSG-CRDS” up to the amount of the legal or contractual severance indemnity [GSC (Generalized Social Contribution)-  CGS (contribution sociale généralisée) / SDRC (Social debt repayment contribution) - CRDS (contribution pour le remboursement de la dette sociale)]

“CSG- CRDS” will apply to the part of the CMAT indemnity exceeding the amount of the legal or contractual severance pay. (Article L. 136-2 of the French Social Security Code).

However, if the total amount of compensation paid exceeds 10 PASS, or 331,100 euros, the “CSG-CRDS” will apply from the first euro. (Article L. 136-2 of the French Social Security Code).

Example 1: Let us again take the example of an employee who has 8 year’s seniority and whose gross monthly salary is 3,000 euros.

If he receives a CMAT allowance of 2 months’ salary per year’s seniority, ie 48,000 euros, this sum will be exempted from  GSC-SDRC up to a limit of 6,000 euros (statutory severance pay = [(3,000 euros x ¼) x 8 years]).

GSC-SDRC will therefore apply only on the sum of 42,000 euros.

Example 2: Take again an employee who has 15 year’s seniority and whose gross monthly salary is 4,500 euros.

It must be an allowance of CMAT ½ month salary per year’s seniority, ie 101.250 euros, this amount will be exempts from “CSG-CRDS” up to 16.875 euros x ¼) x 15 years]).

“CSG-CRDS” is part of the sum of 84,375 euros.

Frédéric CHHUM, Avocats à la Cour (Paris et Nantes)

. Paris : 4 rue Bayard 75008 Paris - Tel: 01 42 56 03 00 ou 01 42 89 24 48
. Nantes : 41, Quai de la Fosse 44000 Nantes -  Tel: 02 28 44 26 44

e-mail : chhum@chhum-avocats.com

Blog : www.chhum-avocats.fr

http://twitter.com/#!/fchhum

 

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