The Med season is nearly here and it’s high time for us all to acknowledge the elephant in the room; the Decree on French Social Security Laws. Announced on 9th March 2017 the Decree now requires yachts & crew to have provision in place for Social Security.
Despite many management companies and yachts comparing the Decree to Mitterand’s Superyacht Tax, the new legislation is a very different kettle of fish and one that will have far reaching implications if ignored.
2017 was filled with speculation as to how feasible it would be for the French to impose Article 31 (ENIM) when it was introduced on July 1st. Despite much confusion and many questions as to whether the social security measures could be implemented, they have been, and they are here to stay. For those who have chosen to stick their heads in the sand, the salient points to remember are, that you will be liable if:
·If the yacht spends more than 90 days continuous in French waters in a calendar year.
·A Crewmember is a French Resident/ Domicile. Please try our residency test below if you are unsure of your residency status:
Your employer must now be able to show that they are paying their social security payments. These payments must cover all risks and must also cover all family members. Failing to do so can accrue a penalty of €225,000 plus up to three years’ social security payments and a seafarer indemnity, worth six months of their salary.
The implications of the legislation have been far reaching, with MYBA President Fiona Maureo, stating “Yachts are abandoning French waters for more welcoming jurisdictions and French-resident crew are having increasing trouble finding jobs”. Reports are also coming in that vessels are now choosing Italy and Spain for berthing and that French resident sailors are being overlooked for work on foreign yachts.
The Maritime Labour Convention, 2006, has now been ratified by 86 states representing 91% of gross tonnage worldwide, including Italy, Spain and the UK and there is increasing evidence that Spain and Italy will be obligated to review its own social security regulations for seafarers resident in their territories and working on foreign flagged yachts.
Whilst there are still a number of doubts and unanswered questions over how realistically ENIM can implement and control the Decree, there are also concerns that yacht owners that do not comply will become the victims of ‘ambulance chasers’, lawyers hunting boats and creating legal disputes related to the rights of their workers. As a result, it is vital that yachts operating in French waters ensure that they have the correct processes and procedures in place to protect themselves and the rights of their seafarers.
The important question to now ask yourself is whether the yacht that you work on and members of your crew are required to make provisions for social security in France.
The Solutions to the Decree are as follows:
1. You can approach ENIM to declare your residence in France and request to pay social security contributions. You need to be aware that they will not accept any contributions unless the employer makes the declaration and submits the required information. ENIM will calculate the amount due and if your employer is outside of France, a payment equal to 6 months contributions will need to be made.
2. If you are working on a yacht flagged in a country with which France has a Bilateral agreement and you are making contributions to that country, you will be exempted from paying contributions to ENIM. Your employer will also be exempted.
3. Another route is to contribute to private social protection policies that comply with Article L111.1 of the French Social Security Code. The employer and employee will be exempted from making contributions to ENIM and the employer will need to evidence this by signing the Declaration AF03 or AF03EN, which is the English version. I have made further comments on this option below under Private Provisions.
I) If there are French residents on-board, they could opt to pay into a private policy. Mathieu Henry of WYCC Insurance told us, “Our plan is compliant with the French laws we are able to provide all social branches required. We have designed our product with Ince & Co.” Their French package is specifically designed to ensure that French employers and yacht owners cannot be penalised or prosecuted under the French Penal Code. Given that it is questionable whether ENIM can cope with the potential influx of payments and paperwork, a private option could be an extremely attractive solution.
4. John Cook at Lesia points out that:
Another solution is for the yacht owner/employer to carry out a gap analysis of what benefits are to be covered under Article L111.1 against the protections that are being provided through the insurances that are already in place. By carrying out a gap analysis the owner/employer will be able to see what the shortfall is and just arrange to extend the existing policies further or to purchase cover for the missing cover only. In most cases cover can be extended under the existing policies, with the exception of retirement provision, which will need to be provided under a separate policy.
Whichever route you choose to deal with the new French legislation, it is unarguable that the Decree is here to stay. The ILO’s acceptance of the new laws and France’s decision to not ratify further proposed changes and amendments means that yacht owners and boat crews across the Med will be affected. Now is the time to get your house in order.
If you need further advice, please contact us on the link below to schedule a consultation:
Any tax 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.