Introduction: Retirement Challenges for Entrepreneurs
In France, the social security system for self-employed workers (TNS) differs substantially from that of employees, particularly regarding retirement contributions. This disparity directly affects the retirement capital accumulation of individual entrepreneurs or majority shareholders. In light of the reform of the Retirement Savings Plan (PER), which is gradually replacing the Madelin scheme, it is crucial to optimize retirement savings mechanisms. Furthermore, structuring through an active holding company can provide additional fiscal and financial levers. This article offers a detailed and quantified analysis to help entrepreneurs maximize their retirement by combining PER, the former Madelin, and holding companies.
1. Retirement Contribution Gap: TNS vs Employee
TNS contribute to mandatory schemes that are generally less expensive than those for employees, but also less protective. According to the Banque de France (2023), an employee contributes about 25% of their gross salary for basic and complementary retirement, whereas a TNS contributes on average 17% of their net professional income.
This difference creates a gap in retirement rights and results in lower pension revaluation. For example, a TNS executive with an annual net income of €60,000 contributes approximately €10,200 per year, compared to €15,000 for an employee with an equivalent gross salary. This differential impacts the final retirement benefit, encouraging the building of complementary retirement savings.
Type of Contributor
Annual Income
Retirement Contribution Rate
Annual Contribution Amount
Employee
€60,000
25%
€15,000
TNS
€60,000
17%
€10,200
Source: Banque de France, 2023
2. From Madelin to PER: Regulatory Evolution and Tax Advantages
The Madelin scheme, dedicated to TNS, allowed the deduction of contributions paid into a complementary retirement contract from taxable income. Since the PACTE law (2019), the Retirement Savings Plan (PER) has gradually replaced Madelin, offering harmonization between employees and TNS.
The individual PER still allows tax deduction of contributions within certain limits, but with more flexible rules and the possibility of partial capital withdrawal at retirement. For 2024, the maximum deduction is linked to the annual social security ceiling (PASS), set at €43,992.
For an entrepreneur, the maximum deduction equals 10% of net taxable professional income, capped at €32,909 (i.e., 10% of 8 PASS), with a global ceiling of €4,114 if income is low (below €41,314).
Scheme
Maximum Tax Deduction
2024 Ceiling
Retirement Payout
Madelin
10% of net income + 15% between 1 and 8 PASS
Approximately €38,000
Mandatory annuity
PER
10% of net income, max €32,909
€43,992 (1 PASS)
Partial capital or annuity
Sources: Légifrance, INSEE, AMF 2024
3. Contributions Deductible from Taxable Income: Impact on Cash Flow and Tax
Contributions paid into a PER or a Madelin contract are deductible from the company’s taxable income, which directly reduces income tax or corporate tax (IS) depending on the tax regime. For a sole proprietor subject to income tax (IR), the deduction can reduce payable tax according to their marginal tax rate (TMI).
Example: an entrepreneur with taxable income of €60,000 (TMI 30%) contributing €6,000 to a PER achieves a tax saving of €1,800 (€6,000 x 30%). If the company is subject to corporate tax at 25%, the tax reduction on the company will be €1,500 (€6,000 x 25%).
4. The Active Holding Company: Lever to Optimize Retirement
Setting up an active holding company can be an effective strategy to optimize an entrepreneur’s retirement by facilitating dividend distribution and tax management.
An active holding company is a parent company that carries out a genuine management and animation activity of its subsidiaries, allowing it to benefit from the parent-subsidiary regime (95% exemption on received dividends from corporate tax) and advantageous tax treatment on capital gains.
Dividends paid by the holding to the entrepreneur can be optimized via the flat tax (PFU) of 30% (12.8% income tax + 17.2% social contributions) or via progressive taxation after a 40% allowance depending on the situation.
5. 30-Year Simulation: PER Alone vs PER + Holding
To illustrate the impact of a combined strategy, consider a TNS entrepreneur contributing €6,000 annually to a PER over 30 years, with a net annualized return of 5% (source Bloomberg, average euro funds and unit-linked funds). Two scenarios:
Scenario 1: Individual PER only, payout as annuity.
Scenario 2: PER + active holding, dividends reinvested within the holding, payout as capital.
Parameters
Scenario 1: PER only
Scenario 2: PER + holding
Annual Contribution
€6,000
€6,000
Duration
30 years
30 years
Net Annual Return
5%
5%
Capital Accumulated
€349,000
€349,000
Taxation at Withdrawal
Annuity taxed at income tax scale
Dividends taxed at 30% PFU + possible reinvestment
Net Amount After Tax
~€244,300 (estimate)
~€274,300 (estimate)
The holding company enables a fiscal and financial leverage effect by allowing reinvestment of dividends net of tax, thereby increasing the capital available at retirement.
Conclusion: What Strategy for the French Entrepreneur?
For a TNS entrepreneur, building complementary retirement savings via the PER is essential to compensate for the contribution gap with employees. The PER, replacing Madelin, offers greater flexibility and an attractive tax deduction, reducing immediate tax burden.
Moreover, creating an active holding company allows optimizing the taxation of retirement income in the form of dividends and benefits from leverage through reinvestment. Over a 30-year horizon, this combined strategy can increase net available capital by more than 10% compared to an individual PER alone.
Verdict: To optimize retirement, the entrepreneur should prioritize subscribing to a PER with regular contributions to benefit from tax deductions, while considering setting up an active holding company if their activity allows, to optimize income taxation and long-term asset growth.
Sources: Banque de France (2023), INSEE (2023), AMF (2024), Bloomberg (2024)
