Mar
16
French Labour Law: Rupture conventionnelle Collective (RCC) or Rupture conventionnelle (RC) : what differences in terms of taxation and social contribution ?

The collective mutual agreed Termination (CMAT= Rupture conventionnelle collective) eventually borrows the individual conventional termination (rupture conventionnelle) only the name.

If the individual version constitutes an amicable way of terminating the contract of employment, negotiated directly between the employee concerned and his employer, the collective version falls within the framework of a collective agreement concluded between the employer and the unions  and on the basis of which employees can apply to join the scheme.

Another notable difference is due to the tax system of the indemnities paid in this context.

Indeed, by introducing the CMAT, the legislature intended to give it a tax and social system that is even more favourable than that of individual termination benefits.

1) Taxation: the personal income tax (Impôt sur le revenu des personnes physiques - IRPP)

1.1) The taxation of the individual conventional termination indemnity (indemnité de rupture conventionnelle)

We must distinguish whether you have (or not) reached the legal retirement age (62 for those born as of 1955).

  • If you have not reached the legal retirement age yet

Income tax: The conventional termination indemnity is exempt from tax up to the highest of the following amounts:

- The amount of the legal or contractual dismissal indemnity;

- Twice the amount of the gross annual remuneration received during the calendar year preceding; or the termination of the employment contract;

- 50% of the amount of the indemnity paid.

In those two last situations, the fraction of the indemnity that exceeds 6 times the annual ceiling of social security (238,392 euros in 2018) is subject to income tax. (C. General Taxes Article 80 Duodecies)

  • If you are of legal retirement age (age legal de la retraite)

Income Tax: The conventional termination indemnity is fully subject to income tax. (Social Security Act, art L. 242-1, 1. 6 °)

1.2) The taxation of the collective mutual agreed Termination (CMAT = RCC)

Thus, the indemnities paid under a CMAT are fully exempt from income tax with no limit of amount, like those paid under a job-saving plan (JSP = PSE: plan de sauvegarde de l'emploi).

In fact, in all cases, these CMAT indemnities are fully exempt from income tax with no limit on the amount, like those paid under a J.S.P (C. Gen. taxes Article 80 Duodecies, 1, 1 °)

2) Contributions and social charges

2.1) Contributions and social charges on the individual conventional termination indemnity

Again, we must distinguish whether or not you have reached the legal retirement age.

  • If you have not reached the legal retirement age yet

The fraction of the conventional indemnities exempt from income tax is also exempt from social contributions but only within the limit of 2 times the annual social security ceiling (79,464 euros in 2018).

However, if the total amount of the indemnities exceeds 10 times the annual ceiling of social security (397,320 euros in 2018), it will be subject to social security contributions from the first euro. (Social Security Act, art L. 242-1, 1. 6 °)

  • If you are of legal retirement age (age legal de la retraite)

The conventional termination indemnities are fully subject to social security contributions.

2.2) Contributions and social charges on the collective mutual agreed Termination (CMAT = RCC)

As for social security contributions, the CMAT indemnities 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).

3) The CSG / CRDS

3.1) The CSG / CRDS on the individual conventional termination indemnity

  • If you have not reached the legal retirement age yet

The CSG-CRDS will apply only on the fraction of the indemnities exceeding the amount of the legal or conventional dismissal indemnity. It will apply from the first euro if the total amount of the indemnities paid exceeds 10 times the annual ceiling of social security (238.392 euros in 2018).

  • If you are of legal retirement age

The CSG-CRDS applies on the full amount of the conventional termination indemnities (art L.136-2, II,5°)

3.2) The CSG / CRDS on the collective conventional break indemnity (RCC)

“CSG- CRDS” will apply to the part of the CMAT indemnities 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 the indemnities 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).

In sum, from a fiscal and social point of view, the collective conventional termination is much more advantageous than the conventional one. This is especially true when the employee is old enough to retire.

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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