As soon as you decide to adopt the freelance statusyou join a branch of social security specially adapted to your status: social security for self-employed workers (formerly called RSI, Régime Social des Indépendants).
This organization offers very simple social coverage and does not necessarily take into account all the specific needs of the self-employed.
To remedy the weaknesses of the imperative regime, the law of 11 February 1994, known as the “Madelin law”, endeavors to provide additional safeguards for freelancers, without however weighing on their activity.
In order to encourage self-employed workers (TNS) to cover themselves beyond their basic compulsory scheme, the Madelin law * allows contributions paid under so-called Madelin contracts to be tax deductible from taxable income or income tax, subject to certain conditions.
GSMC, the mutual health insurance designed for TNS
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Definition of the Madelin law
The Madelin law allows, in compliance with certain conditions imposed, a tax deduction of the contributions paid by the self-employed worker, so that he can accumulate a supplementary pension or health guarantees.
All contributions paid under these guarantees are deductible from the taxable income of the self-employed worker within the limits of a tax ceiling.
Who is affected by the Madelin law?
The Madelin law is particularly aimed at self-employed workers (TNS). You can benefit from its benefits if you fall into one of the following categories:
- TNS subject to income tax linked to the category of industrial and commercial profits (BIC)
- TNS subject to non-commercial profits tax (BNC)
- TNS subject to the tax treatment of remuneration pursuant to Article 62 of the General Tax Code
- TNS adhering to the compulsory health and old age scheme of TNS (non-agricultural), such as:
- Artisans, merchants or industrialists
- Liberal professionals: doctors, paramedics, lawyers, architects, notaries, bailiffs, etc.
- Self-employed executives and managers of limited partnerships by shares
- Unpaid collaborator spouses of self-employed workers
Contracts of Madelino
There are different types of Madelin contracts, established to meet the different protection needs of the freelancer.
Mutual insurance contract
As a freelancer, you have the right to sign up for reciprocal complementary.
However, traditional mutuals are often aimed at students and employees and are not suitable for you. The reimbursement rates and contributions are calculated on those of the Social Security …
The Madelin mutual agreement adapts to your situation as a self-employed person and offers reimbursements in line with the rates of the Social Security for Self-Employed Workers. Some health care costs “outside the nomenclature” can also be covered by this contract.
Another alternative is to subscribe to a mutual fund specially designed for TNS. This is the case with GSMC, the mutual investment fund historically committed to hedging self-employed workers.
The Madelin Retirement Agreement helps the freelancer to accumulate additional capital for his old age.
The supplementary pension is then returned in the form of an annuity at the same time as the compulsory pensions.
The social security contract provided for by the Madelin law is intended for self-employed workers who intend to benefit from the maintenance of income in the event of sick leave or disability.
This contract also allows freelancers to protect their family in the event of death.
When you have to liquidate your business, the revenue stream stops overnight. This situation is often difficult to live with, especially as compulsory expenses continue (rent, electricity, credit, water, internet, etc.) The Madelin law offers TNS unemployment insurance that helps them keep their wages, to a period defined by the contract, in the event of liquidation or cessation of business.
The advantages of the Madelin law for a freelancer
The Madelin law aims to reduce inequalities in social protection between employees and entrepreneurs. They may be eligible for better reimbursements for regular medical care, but they can also be fully reimbursed for more serious care.
In addition, they can accumulate capital to leave with a more comfortable retirement than that offered by the Social Security for self-employed workers.
It should also be understood that an unworked day is equivalent to an unpaid day. Madelin’s contracts offer more generous daily allowances than those of the Self-Employed Social Security, which help the freelancer maintain his standard of living, even if he has to remain bedridden for several weeks.
The conditions for signing a Madelin contract
To benefit from the taxation provided by the Madelin Law, you must:
- Adhere to a collective insurance contract, in the form of an association, with at least 1,000 members who exercise or have exercised an activity of self-employment
- Keep up to date with your contributions due under your statutory TNS (non-agricultural) health and retirement scheme.
- Contributions must be of a regular amount and must be paid at least once a year.
By subscribing to the GSMC mutual society, you access the conditions to benefit from Madelin taxation.
Taxation of the Madelin contract
Depending on the nature of the contracts entered into by the freelancer, the tax advantages he benefits from vary.
The deductible amounts take into account the tax regime to which the freelancer is subject (BIC or BNC).
The Madelin contract is deductible from taxable income: pension, social security or mutual aid contributions are therefore partly financed by the tax savings achieved.
Note: You cannot deduct all Madelin contributions. In order to avoid abuse, they are limited to 3.75% of professional income + a fixed rate of 7% of the annual social security ceiling.
In 2021, for complementary health insurance, the ceiling is € 9,872.64, plus 3.75% of the declared professional income.
Contributions can be paid by you or your company.
Madelin’s law: what to remember
As soon as you choose to give up your job to start your own business, it is advisable to sign Madelin contracts to protect yourself.
You are not obliged to take the most important contracts right away, but the basic contract allows you to compensate for inequalities and avoid certain periods of stress.
You can also sign contracts specifically tailored to independent states, such as the protection contract offered by the GSMC mutual insurance company.