Entrepreneur PER, a good plan to reduce your taxes and prepare for retirement?

PER, a good plan to reduce your taxes and prepare for retirement?

Anxious to attract the French to long-term savings, the government has chosen to play with the new PER (retirement savings plan) the double card of flexibility (we can recover this savings in the form of capital at maturity or before term in the event of release following an accident of life or the purchase of his main residence) and reduced taxation.

Before the creation of the PER, only the annuity schemes, today closed to marketing (but still likely to be funded by their subscribers) such as the PERP, the Préfon, Corem, Madelin and company contracts ( Article 83), took advantage, in return for their binding nature, from an attractive deductibility regime. Now extended to PER, this substantial tax saving (which escapes the cap on tax loopholes), however, requires to be weighed against its overall impact, the capital (or the annuity) resulting from this plan long-term being taxable during the liquidation phase. Some benchmarks are needed to better define it.

A multi-speed deduction

Each year, the individual and optional contributions paid by a saver in an individual PER (or collective subscribed by the company on behalf of its employees) are deductible from his overall taxable income within a double limit: 10% of the net professional income of costs for year n-1, themselves capped at 8 times the Pass * (annual social security ceiling) for year n-1. Or, in 2020, a maximum of 32,419 euros, a floor of 4,052 euros being provided for low income. Be careful, as Pierre-Emmanuel Sassonia, associate director of Eres, specialist in retirement savings, reminds us, “It is necessary to deduct from this amount the pension contributions which the taxpayer may have benefited from within his company in year n-1 (contribution, compulsory supplementary pension contributions, etc.) and not to forget that a payment made on an ‘old’ PERP is also starting this envelope ”.

This tax advantage benefits all subscribers, including TNS (self-employed) when the latter choose to deduct their PER contributions from their overall income. However, in line with what prevails for the old Madelin contracts, the TNS can still opt for a calculation based on their professional income. The deduction then corresponds to 10% of the taxable profit (BIC, BNC, etc.) for the year, limited to 8 times the Pass for the year * (i.e. 32,909 euros in 2020).

But for self-employed workers whose profit exceeds one Pass, it is increased by the equivalent of 15% of the fraction of this same profit between 1 and 8 Passes (i.e. a maximum of 43,193 euros in 2020). Clearly, this means that we can in this case deduct this year up to 76,101 euros for his retirement savings.

“The TNS can choose the deduction method that is most profitable for each payment, explains Olivier Rozenfeld, president of Fidroit. In general, we recommend paying in priority to the limit of deduction of categorical income in order to be able to take advantage, if necessary, of the postponement of the limits of deduction of the overall income that the PER manages. “

An adjustable contribution

Like the PERP before it, the PER indeed offers a significant icing on the cake: the annual deductibility ceilings not consumed are valid for three years, and can therefore be used retroactively under very flexible terms. To keep the margin from one year to the next, we can dilute the retroactive effect of our PER, by gradually consuming this “reserve”. As this rule applies to each of the spouses, certain pooling strategies are proving to be very effective for tax purposes (see table).

“The PER can be particularly suitable in the case of an exceptional inflow of money”, Olivier Rozenfeld notes. Given the progressive nature of the tax scale, it should however be borne in mind that it is not always necessary to contribute to the “stop” of the retirement ceiling to optimize the tax advantage of the PER. A married taxpayer with two dependent children who pays a little more than 11,000 euros in tax for a taxable income of 85,500 euros, will thus benefit, with a maximum payment of 8,550 euros on his PER, from a tax saving of l ‘around 2,000 euros. It would be 1,700 euros by paying 3,000 euros less (5,600 euros), which is relatively more profitable. “Lean deduction systematically requires preliminary calculations”, recalls Olivier Rozenfeld.

PER, a good plan to reduce taxes?

Relative tax savings

Retirement savings: all you need to know before taking out a PER. And as Pierre-Emmanuel Sassonia notes, “It will be all the more effective as the retiree who recovers this savings will fall to a lower marginal bracket because of the drop in his income”. Whether they take the form of capital or life annuities, the sums generated by the PER during the liquidation phase are taxable according to specific terms.

If we opt for a one-shot or scheduled capital outflow (to generate regular income), savings will be subject to the income tax scale (IR) excluding capital gains, which are liable of the PFU (single flat-rate deduction of 30% of which 17.2% of social contributions taken only on departure). If you prefer to receive a life annuity, it will be taxed on the basis of the retirement pension scheme, but social contributions will be due only on 40% of the annuity between 60 and 69 years and 30% beyond.

Note, if the PER is subscribed in a collective framework, the savings share generated by company premiums (profit-sharing, participation, contribution, etc.) remains exempt from income tax (only capital gains are subject to social security contributions). As for the annuity resulting from this same quota, it will be taxed on the basis of a declining base according to the age of the annuitant (scale of life annuities against payment also applied for social security contributions).

Overall efficiency

“In 95% of cases the leverage effect induced by the entry deduction on the final capitalization supplants the additional tax cost of the exit”, nevertheless indicates Olivier Rozenfeld. 10,000 euros invested by a subscriber taxed at 30% correspond in effect to a savings effort of 7,000 euros, but it is indeed 10,000 euros that bear fruit. “The net capital gain of a PER investment is almost always greater than that of life insurance, for example it is + 17% for a saver taxed at 41% on entry and exit and + 36% if the same person is taxed at 30% at the time of retirement “, specifies Pierre-Emmanuel Sassonia.

* Annual social security ceiling set at 41,136 euros for 2020 and 40,524 euros for 2019.

To note

The subscriber can irrevocably waive for each payment (and not for the entire duration of the PER), the tax reduction on entry. He will then benefit at maturity from a tax-exempt capital (only capital gains will be taxed at the PFU) or an annuity taxed on the basis of a reduced base (40% or 30%) depending on the age of the retiree.

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