Executive pay and social security in St. Barths: how it works

In St. Barths, the absence of income tax does not extend to social security. Social security has remained a matter for the French State: a company executive contributes under French rules, through a local fund. How their compensation and dividends are then taxed depends on their status and on how long they have lived on the island.

The St. Barths social security fund (CPS)

Since April 1, 2017, the Caisse de prévoyance sociale de Saint-Barthélemy (CPS), run by the French agricultural social insurance network (MSA), has been the single point of contact for the social security of employees, the self-employed and executives treated as employees. It covers health, family benefits, the basic state pension and the collection of contributions.

Contribution rules are those of French law, at the rates of the general French scheme, with limited local adjustments. The supplementary pension schemes (Agirc-Arrco) apply. French employment law also applies in full: the Labor Code, the national minimum wage and collective bargaining agreements. Unemployment insurance is handled by France Travail, the French employment agency.

What is the social security status of an SAS or SARL executive?

An SAS is a simplified joint-stock company; an SARL is a limited liability company.

Executive	Status	Contributions
Paid SAS executive	Treated as an employee	Employer and employee, from the first paycheck
Unpaid SAS executive	No enrollment	None
Majority manager of an SARL	Self-employed	On compensation and part of the dividends

A paid SAS executive bears the standard employer and employee contributions and is enrolled with the CPS from the first paycheck. With no pay, there is no enrollment and no contribution.

The majority manager of an SARL pays CPS contributions on compensation and, under the standard French rules, on the portion of dividends exceeding 10% of the share capital.

The choice of legal form, covered in our insight on setting up a company in St. Barths, therefore directly affects the executive’s coverage. See also our insight on the flat annual business contribution (CFAE).

Is executive pay taxed in St. Barths?

The St. Barths tax code has no income tax, as set out in our overview of the taxes that apply in St. Barths. That rule only benefits an executive who has had their tax home on the island for at least five years.

Before that, they remain a French taxpayer on all of their income, including the salary paid by their St. Barths company. After five years, France continues to tax, as it would a nonresident, salaries for work performed in France.

Are dividends taxed in St. Barths?

Three situations need to be distinguished.

Shareholder’s situation	Tax on dividends
Island resident for five years, company tax resident on the island	No local tax
Still tax resident in France	30% in France
Island resident, dividends from a French company	12.8% French withholding tax

A shareholder is “still tax resident in France” when they moved to the island less than five years ago, or when they live in France.

A more technical point concerns the French tax resident who holds at least 10% of an island company whose assets are mainly financial. Article 123 bis of the French General Tax Code allows France to tax that shareholder each year on their share of the profits, whether distributed or not. This charge is set aside when the holding has neither the purpose nor the main effect of locating profits in a low-tax territory, which is shown by real activity and genuine substance.

Example: two shareholders, €50,000 in dividends each

Take a services company (an SAS) whose place of effective management has been on the island for more than five years. It pays €50,000 in dividends to each of its two shareholders: Anne, who moved to the island seven years ago, and Marc, who arrived three years ago. The amounts are assumptions, chosen for illustration only.

Shareholder	Anne	Marc
Time on the island	7 years	3 years
Tax residence	St. Barths	France
Dividends received	€50,000	€50,000
Tax on the dividends	No local tax	€15,000 in France
Left after tax	€50,000	€35,000

For Marc, the calculation is: €50,000 × 30% = €15,000, leaving €35,000 after tax. The company and the dividend are the same, but residency is assessed shareholder by shareholder. For Anne, the absence of local tax does not settle the question of social levies, covered below.

Another situation: Sophie is the majority manager of an SARL with share capital of €10,000, which pays her €30,000 in dividends. The 10% threshold comes to €1,000. The portion above it, €29,000 (€30,000 less €1,000), is included in the base for her social security contributions, on top of her compensation. This example is simplified: it illustrates the base, not the amount of the contributions.

Social levies in St. Barths: a debated point

The French social levies on investment income (CSG, CRDS and the solidarity levy) call for particular caution. These are taxes whose territorial scope is set by French law. The Conseil d’État, France’s highest administrative court, in an opinion of November 20, 2013, and the French tax authorities regard them as not having been transferred to the island for the investment income of St. Barths residents enrolled in a French social security scheme.

In practice, social levies are claimed on French-source investment income. Whether they apply to the local-source income of five-year residents, dividends included, is debated and handled case by case. The position should be checked every year.

Executive pay in St. Barths: common mistakes

• Assuming social security contributions are local. They follow French law, at the rates of the general French scheme.
• Taking it for granted that no social levies apply to dividends. The question has not been settled uniformly.
• Overlooking the five-year rule. A recently arrived executive remains taxed in France on both salary and dividends.
• Believing the company shields the shareholder. It is exempt only for itself, and only if it meets the residency condition.
• Assuming an unpaid office means enrollment. With no pay, an SAS executive is neither enrolled nor contributing.

Executive pay in St. Barths: the bottom line

In St. Barths, executive social security follows French law: the same contribution rules, at the rates of the general French scheme, through the local social security fund, the single point of contact since April 1, 2017. A paid SAS executive is treated as an employee; a majority manager of an SARL, treated as self-employed, also contributes, under the standard French rules, on the portion of dividends exceeding 10% of the share capital. Dividends are not taxed locally for a five-year resident, but a shareholder still tax resident in France is taxed there at 30%. The balance between salary and dividends depends on each situation and calls for professional advice, bearing in mind that the question of social levies remains open.

A note for U.S. readers: this article covers French and St. Barths rules only. U.S. citizens and green card holders remain subject to U.S. tax on their worldwide income wherever they live.