Posted: 18th May 2017 | Written by: Patrick Maflin
In the words of David Crosby ‘You got to speak out against the madness, you got to speak your mind if you dare’. The yachting community definitely spoke its mind yesterday evening in response to the French Decree (Décret no.2017-307) announced on 9 March regarding changes to French Social Security payments for yacht crew.
The event was advertised as French Social Security - The Answers, with a panel of speakers and social security experts organised by yachting associations the PYA, GEPY and Italian Yacht Masters, hosted at the Monaco Yacht Club. Professor Patrick Chaumette, Jerome Hellikman from ENIM and Arnold (DAM) from Affaires Maritime formed the expert panel of representatives for the French Government.
Overview from the Panel
Professor Chaumette was the first to address the audience of over 300 ranging from captains to business owners in the sector. His discussion merely sowed the seeds of discontent and did little to answer the questions that the audience was so desperate to be addressed.
Jerome Hellikman spoke second and continued to add confusion to what is already a very heated topic of discussion, suggesting that residency may be judged on an individual spending three months consecutively in France, breaking from the fiscal model. By the time Arnold (DAM) spoke it was quickly becoming clear that the panel were as ill informed as the audience, although far less prepared to admit it!
The most salient point communicated amidst all the confusion is that although ENIM are happy to listen and potentially adapt policy to assist the industry, they are not moving the deadline from 1st July. They do however accept that as of 1st July they may not yet be in a position to effectively monitor social security payments, but they will be working towards it. In answer to all the questions raised to the panel, they played the part of true civil servants providing weak or vague answers in order to avoid upsetting their superiors.
Questions from the Floor
Once the panel had finished speaking the debate was opened to the floor, with many valid questions being raised, such as whether there will be consideration given to those who are aged 55 and over regarding social security payments. The panel, now fully at home with their roles as civil servants in a war zone, tried their very best to provide non-committal answers and the debate raged on.
It was evident by the time that Nick Hill from Hill Robinson spoke that many were now beginning to place their hope in the Decree being abolished. Ince & Co, under the instruction of Nick Hill, has even taken legal action against the implementation of the Decree. They are challenging it on the grounds of ‘recours pour exces de pouvoir’, in the hope that it will be cancelled in the same way that the Superyacht Tax was overturned under Mitterrand.
The fundamental difference between the Decree and Mitterrand’s Superyacht Tax is that the ILO are involved and will take legal action against France if they do not bring their social security laws in line with the mandatory requirements of the Maritime Labour Convention (MLC).
The industry might therefore reap greater benefits from working more closely with ENIM to adapt policy that will work for all rather than have it overturned.
Below we have compiled a list of the facts that we know as of today:
We now know that there are two routes that will result in crew and yachts alike being subject to these changes:
Route 1: The vessel spends significant time in French waters, which is defined as 181 days. Days will be counted from 1st January and be examined over a calendar year, not a rolling 365-day period.
Route 2: The crewmember is a French resident. The definition of a ‘French resident’ is determined by the questions below. If you answer ‘yes’ to any of the following you will deemed a French resident:
The Seafarer has his home (foyer) in France. In general, an individuals’ home is the place where he or his family usually lives, ie, his usual place of abode. This definition allows France to tax an individual working abroad if family (spouse and children) live in France.
The Seafarer has his principal place of abode in France. This criterion focuses on where the individual spends most of his time, even if it is in a hotel while his family lives abroad. In general, if an individual spends more than 183 days in France during a calendar year, he or she will be deemed to have their principal place of abode in France.
The Seafarer engages in a business activity in France. This criterion attracts an individual into the French income tax net if he engages in a remunerative activity in France (whether salaried or not), unless the business activity is simply accessory.
The Seafarer has the center of his economic interest in France. An individual has the center of his economic interest where he manages his investment activity or where he has the headquarters for his personal business activities. This could be the place from which he earns the majority of his income.
ENIM has not yet published the exact percentage of social security charges to be levied for employers and employees. However they have begun to set out the process they will apply to yachts:
The employer will need to provide crew details, including the salary of those who are residents of France.
ENIM will calculate the monthly contribution and multiply it by six to establish a security deposit to be paid by the employer.
This process will be repeated every six months, with leavers and joiners being taken into account.
Statements need to be submitted on 25th of each month.
If you are a French resident or your yacht spends ‘significant time’ in French waters providing your domicile or, you are resident in another country, then you can opt to make social security payments in that country prior to 1st July. If you do not start making social security payments in another country prior to 1st July you will have to make them in France by registering with ENIM.
Private or Commercial - There is no precedence in French or EU law to exempt seafarers on private yachts from being regarded as employed, hence they will also be liable to pay social security contributions under the Decree. If such an exemption were to be given by ENIM the case would almost certainly be challenged at the EU.
The message that we are trying to communicate in this article is that you should take the time now, before 1st July, to examine your options and affect a positive outcome in whereby your employer may not have to pay social security contributions in France.
An example would be where a British citizen who is resident in France can, up until 1st July, opt to pay National Insurance in the UK. If the individual does not work on a UK or IOM flagged vessel and is not employed by a company in the UK or IOM, they may only have to pay Class II contributions at £2.80 per week. This would provide a significant saving compared to registering in the French Social Security system.
Furthermore, as a company, we are of the opinion that those looking for work who have addressed this issue, and can demonstrate that they have their tax affairs in order and are making social security or NI contributions will immediately be more appealing to a potential employer. Food for thought.
If you require further advice please contact Parick Maflin at Marine Accounts.
Any advice in this publication is not intended or written by Marine Accounts to be used by a client or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party matters herein.