Posted: 1st April 2017 | Written by: Patrick Maflin
When new French social security laws come into force on 1 July 2017, yacht crew who spend over 183 days in France within any period of 365 days will be liable to make social security contributions in France, or to another EEA state, or to any state having a bilateral social security treaty with France.
However, while the USA and Canada hold bilateral treaties with France, Australia and New Zealand do not.
Following much discussion on the yachting forums, and based on the information so far available, Patrick Maflin clarifies the position for US, Canadian, AUS and NZ yacht crew.
Taxes under the Federal Insurance Contributions Act (FICA) are split into two contributions:
Social Security is paid as a percentage of earnings up to $127,200 for income earned in 2017 (this figure changes every year). The current percentages for social security are 6.2% paid by both the employer and the employee or the full 12.4% paid by the self-employed.
Medicare Tax is paid at a rate of 1.45% by both the employer and the employee, or the full 2.9% paid by the self-employed.
However when an individual's earnings hit $200,000, the employer must withhold an Additional Medicare Tax of 0.9%. The same threshold and percentage applies to the self-employed. For married couples, it is payable on joint earning of $250,000 or $125,000 if they file separately.
To avoid double payment of social security taxes, the US has entered into Totalization Agreements with several countries. Therefore, when a US citizen or resident is working in one of these countries, they may be given credits towards future US social security payments for the amounts contributed in those other countries.
However if they work in a country that has not entered into a Totalization Agreement with the US, and are not eligible for Foreign Earned Income Exclusion, it is likely that they will owe FICA taxes on their income.
Under Australia’s Superannuation System, employers must contribute 9.5% of wages into an employee’s chosen Superannuation Fund. Employees may then make further voluntary contributions to their fund, with possible tax benefits as a result. Australia also plans to gradually increase contributions to 12% between 2021 and 2025.
A non-resident may contribute to a Superannuation Fund at 15% of their income as long as they have a Tax File Number (TFN). Without this they will be taxed at the much higher rate of 49%.
In New Zealand, KiwiSaver deducts a minimum of 3% of gross income from employees, matched by employer contributions. If the employee is a NZ resident, the government also contributes to the account.
After making contributions for 12 months, an employee can take a 'contribution holiday' for up to five years. During this time they are exempt from compulsary contributions, as are their employers, although employees can still make voluntary contributions if they wish.
As already mentioned, seafarers can opt out of making contributions in France if they pay social security contributions to any EEA state, or any state having a bilateral treaty with France, providing this is in place before 1 July.
Therefore, where Australian and New Zealand seafarers have dual nationality with the UK, they may have the right to make social security contributions in the UK. However, this will only be granted if the seafarer has a legitimate connection to the UK such as 'domicile of origin' recorded by HMRC.
Currently the French social security agency for seafarers (ENIM) has yet to decide exactly how to enforce the new Decree, and there may be further clarification on contributions made to countries that are not on the published list. It is therefore difficult to comment with any authority at this stage.
For further advice on your individual situation, please contact us 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.