If you’re planning to set up a business in France then you need to understand the micro-entreprise (formally auto-entrepreneur) tax regime and how it can help you run a business
What is the micro-entreprise regime?
Created in 2009, the auto-entrepreneur regime (now called the micro-entreprise regime) is a form of self-employment in France. Under this regime you basically pay a fixed percentage of your gross income (turnover or chiffre d’affaires) in tax (micro-fiscal regime) and social security contributions (under the new micro-social regime) with no allowance for expenses.
What are the advantages of the micro-entreprise regime?
1. Your contributions are calculated on your actual income, which may fluctuate, compared to other regimes where contributions may be fixed or estimated and have to be paid whether you earn sufficient income or not.
2. Calculating what you owe is relatively simple and the regime particularly suits small service businesses with low or no overheads (say, a consultant working at home). Contributions and tax are paid periodically (monthly or tri-monthly) and if you happen to earn no income during a period, you simply submit a ‘nil return’ with nothing to pay.
3. You pay lower social charges – the tax and social security rates for 2016 vary from 13.4% social contributions and 1% tax if you buy and sell (vente de marchandises) to around 23% social contributions and 1.7% to 2.2% income tax if you provide a service or are classed as a profession libérale.
4. You can work full or part-time or intermittently under this regime and even combine it with a (full-time) job or other activity.
5. The micro-entreprise remains outside the VAT system. This is an advantage if your clients are the general public (not other businesses) who cannot normally reclaim VAT paid on the goods and services they purchase, as your rates can be cheaper than a competitor who has to charge VAT.
What are the disadvantages of the micro-entreprise regime?
1. There are limits on turnover under this regime, currently €82,200 annually if you ‘buy and sell’ (broadly described as activités commerciales) and €32,900 if you provide a service (either artisanale or libérale).
2. Social charges are calculated on your incomings not your profit so this might not suit a business which have a lot of costs – for example if you buy goods to sell or create objects to sell and have to buy raw materials.
3. For older people and those perhaps already retired and receiving a (British) pension, note that you will still pay retirement contributions as part of your social security payments
4. Note that some activities are highly regulated (activités réglementées) and require evidence of experience and/or recognised qualifications, and may be disallowed under the micro-entreprise regime. They include virtually all aspects of building and construction/repair (from major works to plumbing, electrical etc), repair and maintenance of motor vehicles of all types, preparing or producing food for sale (baker, butcher, fishmonger etc) and hairdressing and beauty. Many liberal professions are also controlled, including medicine, the law etc.
How do I register?
The business of registering as an auto-entrepreneur has gradually been simplified and can normally be done online. The new business also has to be listed with the local RCS (register of commerce and services) or RM (for artisanal activities). If you are registering as an artisan you may find you have to attend a compulsory training course, not to learn about your trade but on how to run a business in France.
If you are unclear about which category your proposed activity may fall into – commercial, artisanal or libérale – the auto-entrepreneur.fr site has lists of jobs or occupations and a table showing which category they come under, for example ‘services divers’, ‘expertise’ or ‘services à la personne’. You need to choose the job title that most closely describes what you intend to do and its category. The activités libérales list alone runs to seven pages so there are plenty of options.
Some occupations require compulsory (third-party) insurance and you should seek professional advice before embarking on your new activity, which may not, for example, be covered by your domestic household policy, or by your vehicle insurance if you’ll be transporting clients as opposed to family members and friends.
What else do I need to know about the micro-entreprise regime?
Social contributions are paid either to RSI (Régime Sociale des Indépendants) or CIPAV (largely for the liberal professions) depending on your type of activity. Note that benefits payable normally depend on a prescribed amount of contributions made.
In terms of accounting, you are now obliged to open a separate bank account for your enterprise – this need not necessarily be a ‘business account’ as described by your bank (and with higher charges) but simply separate from, say, your household account.
Husband and wife can work together provided they are registered separately and not as a partnership. You are not allowed to employ someone under the scheme but you could collaborate with another auto-entrepreneur. You can protect your personal assets, such as your home, in much the same way as you would separate them from your business assets if working through a limited liability company
Written by Peter-Danton de Rouffignac MA LLM lives in Perpignan and advises on all aspects of living and working in France FranceMedProperty.blogspot.com
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