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Why your March salary could be late in France

Workers in France who receive a monthly salary have been warned that their March pay packet may arrive late, due to European banking regulations.

Published: 22 March 2024 08:58 CET

Why your March salary could be late in France

Salary payments may be delayed over the Easter weekend. Photo by MYCHELE DANIAU / AFP

For salaried employees, the traditional date for pay-day is the end of the month, and most workers now get their money transferred automatically into their bank accounts.

However this year, the end of March coincides with Easter weekend, with Easter itself falling on Sunday March 31st, and the Europe-wide Target 2 system, which handles automated SEPA payments within the EU and EEA, will be closed over the Easter weekend.

The European Central Bank, which oversees Target 2, closes the exchange system on weekends and selected public holidays – for Easter that means a four-day closure from Thursday, March 28th to Tuesday, April 2nd, according to reporting in the Journal du Geek.

Although Good Friday (March 29th) is not a holiday in most of France, it is taken as a public holiday by many other European countries.

Why is Good Friday not a holiday in (most of) France?

That means that a salary paid on March 28th won’t reach the recipient’s bank account until Tuesday, April 2nd.

Target 2 is also closed on May 1st, December 25th and December 26th – these dates don’t usually affect salary payments so it is usually Easter that is affected, when it coincides with the end of the month.

Normal banking services will continue over the Easter weekend while instant transfers and internal transfers between two accounts handled by the same bank will also go ahead as normal.

The salary delay won’t affect people who get paid in the middle of the month, or those who are paid in cash.

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Are Canadian pensions taxed in France?

Before going any further, it is worth noting that this article is meant to give an overview of the pensions situation for people with Canadian pensions. It does not replace professional financial advice, and Canadians looking to retire in France should still seek out expert financial assistance as needed.

The first step is to determine whether or not you are a tax resident in France (you can look through our guide). All tax residents must fill out a yearly tax declaration, and they must report all global income, even if it is not subject to tax in France.

You should also consider if you have a pension from another country besides Canada, as different rules may apply based on that country’s bilateral tax treaty with France. Here is the situation for British, American, and Australian pensions, and here is an overview of the system.

Where is my pension taxed?

In Canada, the pensions system includes multiple tiers of public and private schemes, but luckily the double tax treaty between Canada and France is explicit about where pensions are taxed.

The Local spoke with Isaac Barchichat, a registered CPA in France, Canada and the USA to understand the situation for Canadians in France. He is a managing partner at Monceau CPA, an international accounting firm based in Paris with offices in the US and Canada.

He told The Local: “Tax treaties usually follow the OECD model, which means that Article 18 is usually focused on pensions.

“Article 18 for the Canada-France treaty is very similar to the USA-France treaty. This means that pensions are taxed in the country that they are issued in,” he said.

As a result, any Canada-based pension – whether that is the Old Age Security plan, the CPP (Canada Pension Plan) or QPP (Quebec Pension Plan), or a private personal or employer plan (such as Registered Retirement Savings Plans, or RRSPs) – would be taxed in Canada, not France.

Barchichat explained that Canadians in France should still declare their pension income in France. Like Americans, they will receive a tax credit from France attesting that they have already paid tax in Canada on their pension.

“People should still maintain proof that the pension was already subject to tax, in case of an audit,” he added.

Barchichat also recommended that Canadians resident in France can make use of the ‘mention expresse’ section in their French tax declaration.

“Sometimes French local tax authorities fail to assess foreign income properly. Using the ‘mention expresse’ allows you to specify to French tax authorities Article 18 from the tax treaty to ensure that they process your documents properly,” he advised.

All of this being said, Canadians should beware that their pension income could still count towards your total household income in France, even though it is not taxed here. As a result, it could end up pushing you into a higher tax bracket.

What about social charges?

In addition to taxes (impôts), France also requires people to pay social charges (prélèvements sociaux) on income. However, only specific types of income can be considered for social charges, such as the CSM charge (PUMa) for healthcare.

The general rule is that pensioners and their spouses do not have to pay the CSM charge, but France specifically exempts people who have a pension from France, the EU, the EEA and the UK (people with S1 forms), as well as their non-working spouses.

There is some debate over whether American and Canadian private pensions ought to be treated as a pension (and therefore exempt from CSM) or as investment income (which can attract CSM charges).

When it comes to Americans, tax expert Jonathan Hadida from HadTax told The Local: “Under the principle of equality amongst taxpayers, URSAAF has treated most US pensions/IRA distributions/401(k) distributions akin to a French/Swiss/European pension and have therefore exempted Americans with pension income.”

“I have called URSSAF, and I was told by the representative that they should be paying for PUMa. But in practice, I have not seen many American pensioners charged for it.”

It is likely that similar standards are applied to Canadians.

Barchichat, who is licenced in both the US and Canada, said that in his opinion neither American nor Canadian pensioners should be charged for prélèvements sociaux.

“If this happens, it is a mistake by tax authorities”, he added. You can learn more about contesting a CSM charge here.

READ MORE: Cotisations: Why you might get an unexpected French health bill

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