The French auto-entrepreneur scheme
With reforms to the auto-entrepreneur scheme due to come into effect on 1 January 2015, Debbie Bradbury explains how these changes might affect your business
Setting up your business
If you want to start a small business in France, and as you already own the machinery required for your groundworks activity, you may find the easiest way to get yourself into the French system and to test the market is to set up a sole trader activity as an auto-entrepreneur business under the micro régime.
In France, there are two main tax regimes – réel and micro. There are different options under each of these regimes according to various criteria but the main points to note are:
1. Réel is the equivalent of profit and loss – you are obliged to keep accounts and your end of year results will show your turnover, your true expenditure and, therefore, your true net profit. This is used to calculate your social charges (around 45%) and income tax. Your business may be subject to VAT or you may opt for VAT according to the level of your turnover.
2. Micro is a simplified tax regime where there are no profit and loss calculations, no annual accounts and you simply declare your gross turnover each year. According to the type of activity (services/sales), a fixed tax-free allowance is applied to the turnover, and social charges and income tax are calculated from the fixed net profit (but from the results of two years previous) at the same rates as indicated above. There is no VAT as you can only be on this regime if your turnover does not exceed fixed thresholds, and currently the micro thresholds are the same as the VAT thresholds: €32,900 for services and €82,200 for sales.
The current system
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The auto-entrepreneur scheme is part of the micro tax regime and when first introduced in 2009, it offered assistance to new businesses by means of a pay-as-you-go system.
Social charges were calculated at a fixed rate of turnover (currently 14.1% of sales, 24.6% of commercial/artisanal services and 23.3% of freelance services) only when income was received.
There were no registration fees and auto-entrepreneurs had a three-year exoneration from professional tax (CFE), which was not the case for those on the classic micro or réel régimes.
The new changes
By the end of December 2014 the micro and auto-entrepreneur regimes will be merged into a single micro régime so that every self-employed person carrying out the same activity, whatever their tax regime, will be subject to the same rules.
The advantages of the pay-as-you-go system will be maintained but everyone will be liable to registration fees and professional tax (CFE), although new businesses are exonerated from this professional tax in their first year.
Income received will be declared monthly or quarterly with payment of social charges at the end of each period.
How this will affect you
In this particular case, where you will be registering in 2015, you will be obliged to pay to register your activity (€185-200 dependent on the region) as your activities come under the Chamber of Trade. You will also be obliged to follow the five-day training course for new businesses (about €250).
As groundworks is not currently classed as a regulated trade in France (all other building trades are highly regulated), you should not be required to prove qualifications or experience before being able to register. However, non-regulated trades cannot use the term artisan, which is reserved for skilled trades.
Even though the social charges appear high in France, it is important to note that your wife and children would all be covered for healthcare under your individual sole trader healthcare cover for up to a maximum of 70% of medical costs.
As with any business in France, whatever your tax regime, you will be obliged to carry out an annual income tax return that has to be submitted to the tax authorities nearest to your primary residence in the May following the financial year. Income tax is calculated on a sliding scale according to your personal circumstances and as you are bringing your family to France, you will complete a household tax return rather than individual ones and will be entitled to various allowances.
You should be aware that you can provide groundworks under the auto-entrepreneur-micro régime and install land drains and septic tanks. However, you cannot provide landscape gardening under the micro régime as this is classed as an agricultural activity which has its own specific tax regime.
It is also important to note that you cannot carry out any building works as this type of work comes under a regulated activity. Groundworks are carried out in preparation of building works by regulated tradespeople.
Debbie Bradbury is the co-ordinator of English-speaking clients at SAREG chartered accountants
Tel: 0033 (0)4 50 25 23 97 www.sareg.com