Published on: November 19, 2024 | By: @rprasanth_kumar
Hiring a domestic worker comes with various tax incentives in France. Whether you’re currently employing someone or planning to hire, knowing your rights, obligations, and available tax benefits is essential. This guide details the eligibility, declaration processes, financial advantages, and specific requirements.
Keywords: Salarié à domicile (employed at home) and Emploi à domicile (home employment).
What Is a “Service à la Personne”?
Services à la personne (SAP) cover a wide range of in-home services designed to assist individuals in their daily lives. SAP includes activities like housekeeping, minor gardening, childcare, tutoring, and personal assistance for elderly or disabled individuals. Currently, 26 categories of SAP activities qualify for private employment under French law. Certain services require specific declarations, certification, or authorization to ensure quality and safety standards.
The person doing this work is known as Salarié à domicile. A complete list of 26 types of activities as per article D.7231-1 is available in Quelles sont les activités de services à la personne?.
Some examples of eligible activities:
- Housecleaning and minor home maintenance.
- Childcare and after-school tutoring at home. Ex: Babysitting, pickup and dropping kids at school, etc.
- Preparing meals, including shopping time.
- Laundry collection and delivery if bundled with other home services.
- Non-medical support for the elderly or disabled, including assistance with mobility.
- Minor gardening, like mowing and light pruning.
- Basic DIY services.
- Assistance with IT and internet use at home.
Important:
- You must be tax resident in France, to employ someone.
- The person must work at your primary or secondary residence or that of an eligible elderly family relative.
- All services rendered must be in France.
How to hire a Domestic Worker?
There are three primary options for hiring a domestic worker in France:
- Direct Employment: Hiring directly means you are responsible for recruitment, payroll, social contributions, and administrative paperwork, including employment contracts and salary payments.
- Childcare-Specific: For in-home childcare, declarations should be made through Pajemploi.
- Other SAP Services: Use the Cesu declarative or Cesu prefinanced system for simplified payroll and contributions.
- Organisme mandataire: A mandate agency offers assistance with administrative aspects of employment, but you remain the official employer. The agency can help with drafting contracts, payroll calculations, and social contributions, though you retain responsibility for payments and managing the employment relationship. Example: shiva.fr, petits-fils.com, etc..
- Organisme prestataire: Here, the service provider agency acts as the employer, assuming all administrative duties. You simply pay for the service provided. This option does not confer employer status on you, as the agency manages employment contracts and payroll for the worker assigned to your home. Example: vivaservices.fr.
Obligations as a Domestic Employer
If you choose to employ someone directly or via an agency, you must comply with all employer responsibilities outlined by French labor law:
- Employment Contract: A formal contract is required, specifying the job scope, hours, pay, and conditions. For help drafting contracts, you can consult your mandate agency.
- Legal Compliance: Review and adhere to relevant regulations in the French Labor Code, and refer to the applicable Collective Agreement for Domestic Employees.
For more information, please consult Cesu-Urssaf.fr.
Declaration and Payment via Cesu
The Cesu (Chèque Emploi Service Universel) system offers a streamlined way for private employers to declare and finance domestic work. There are two main Cesu options:
- Cesu déclaratif: This system simplifies the process of declaring wages and social contributions. Urssaf automatically calculates and withdraws these contributions based on your declarations, providing your worker with an official wage certificate. For more details, What is the purpose of the Declarative Cesu?.
- Cesu préfinancé: Prefinanced Cesu works as a payment method that can cover part or all of a worker’s salary. It is in the form of a checkbook with a specified amount but you must be registered at CNCesu to get one. You can then order CESU checkbook from the relevant funding agencies including your employer, insurance, mutual, pension fund, etc. If you use this option, it does not exempt you from reporting the wages and hours worked by your employee to CNCesu. For more details, What is the purpose of Prefinanced Cesu?
For Childcare Services: Use Pajemploi for declaring and paying caregivers or nannies, similar to Cesu but specialized for child-related services. Pajemploi+ even allows for a “no-advance” salary payment system.
Financial Benefits and Tax Credits
Hiring a domestic worker can qualify you for a tax credit of 50% on eligible SAP expenses, with specific spending limits based on your household situation:
- Standard Deduction: A maximum of €12,000 per year, with potential increases:
- +€1,500 per dependent child or senior household member.
- +€1,500 for elderly dependents living in a separate residence, eligible for APA.
- First-Year Exception: First-time applicants hiring a direct domestic worker may have their threshold increased to €15,000.
- Maximum: This enhanced cap cannot exceed €18,000.
- Increased Cap for Disability: Households with a member holding an “invalidity” mobility card can qualify for a cap of €20,000 without additional increases.
Additionally, specific services have their own annual limits:
- Small DIY projects: Up to €500 annually, with a maximum two-hour service limit.
- IT Assistance: Up to €3,000 per year.
- Gardening: Up to €5,000 annually.
Immediate Advance Option
Since January 2022, the Immediate Tax Credit Advance allows you to apply your tax benefit at the time of payment, covering half of the salary and social contributions up to your annual threshold. Available for direct hires or through an agency, this option simplifies cash flow and avoids waiting for the tax credit from the tax department (Impots).
Income Tax Declaration and Tax Credit
To qualify for tax credits, the Finance Law mandates additional declaration requirements. So, Taxpayers need to submit two declarations (online or offline): the 2042 K income tax return and the 2042 RICI annexure.
- The amount spent on home employment in 2023 through Cesu or Pajemploi is pre-filled in line 7DB of the 2042 K income tax return form.
- Detailed amounts paid for employing a home worker must be reported by type of expense on the first page of annex 2042 RICI, in boxes BDA to BEA.
- Known and received aid amounts for employing a home worker (like APA, PCH, pre-financed CESU, etc.) are pre-filled in line 7DR, “Aides perçues pour l’emploi à domicile,” of the 2042 K. If this amount is incorrect, it must be corrected and deducted from the total in line 7DB, “Dépenses d’emploi à domicile.”
- Private employers using the simplified declaration service “Cesu +” or a service provider can activate the immediate advance for tax and social benefits for personal services.
- If you received an immediate tax credit advance for home employment, the amount received is pre-filled on page 4 of the 2042 K, line 7HB, “Avance immédiate de crédit d’impôt pour l’emploi d’un salarié à domicile en 2023.” This amount will be included in the calculation of your income tax balance.
Note:
- Keep all expense receipts in case the tax administration requires proof that you actually employed a home worker.
- If your tax credit amount exceeds your income tax, the surplus (or the full amount, if non-taxable) will be refunded to you by the tax administration.
Additional Social and Financial Benefits
- Social Security Reductions: As a domestic employer, you benefit from a €2 hourly reduction on certain employer contributions, along with special exemptions for elderly, dependent, or disabled employers, capped at 65 hours monthly.
- Targeted Financial Aid: Certain groups, such as seniors, disabled individuals, and families with children under six in childcare, may receive further financial support.
DISCLAIMER
Any finance-related information shared is not professional legal, tax, or investment advice. The information provided is of an educational and general nature and is not investment advice within the meaning of Articles L. 321-1 and D. 321-1 of the French Monetary and Financial Code. Investment carries risks of loss and past performance does not guarantee future performance. Please consult a financial advisor for any professional advice.