• France edition
 
JobTalk France
The pitfalls of France's auto-entrepreneur status
France's auto-entrepreneur scheme is an easy way to get started, but it has its downsides.

The pitfalls of France's auto-entrepreneur status

Published: 16 May 2013 08:00 GMT+02:00
Updated: 16 May 2013 08:00 GMT+02:00

France’s “auto-entrepreneur” scheme has been a saving grace for self-employed foreign nationals since it was introduced back in 2009. But as two experts explain to The Local, the system does have its drawbacks and expats should be aware of them.

For many self-employed or even unemployed foreign nationals in France, the “auto-entrepreneur” system is the perfect way to make a living or at least test your hand at running your own business.

There’s minimal red tape (once you have set yourself up), no need to pay taxes or charges up front and many employers will welcome you with open arms as they avoid having to pay the steep charges that come with having a contract.

Since 2009, around one million people are believed to have signed up to the status that was originally designed by former president Nicolas Sarkozy, to help those who wanted to work more and earn a second income.

But there are drawbacks and with the government promising to tighten the rules, expats need to consider whether it’s the right path for them to go down.

Should you really have a contract?

Although some employers, especially English teaching academies will push you to be an auto-entrepreneur, you should be wary, lawyer Jean Taquet tells The Local.

“The government knows a lot of language schools employ teachers on an auto-entrepreneur basis when really they should be putting them on their payroll. These teachers can suddenly get caught in the crossfire when authorities decide to audit a school,” Taquet says.

“The government is using auto-entrepreneurs (AEs) as bait to go after the companies,” he adds.

Andy Denison, who runs an advice website for Anglophones on all things administrative adds: “We have known of a couple of companies who were only employing AEs when really they should have had salaried people on their books and these businesses have been caught out.”

Only one client?

Under the rules of being an auto-entrepreneur you should have more than one client paying you for your services, because if you don’t then really you should be on a contract and the auditors will be looking out for this.

“If you are constantly working for someone or especially if you sign some kind of exclusivity agreement with them, then that will be an issue with authorities,” Denison warns.

When the work dries up so does the money?

Obviously, by paying a reduced rate of social charges you are not covered for some social benefits, one of those being unemployment benefits. So when the work dries up, you cannot fall back on the state to help you out.

Costs not taken into account

One of the advantages of the AE system is that it helps people test the market and try their hand at setting up a business without too much risk. But that does not mean it provides ideal foundations from which to launch a company.

“You need to consider whether you are going to be paying out a lot of costs when you start out because as an auto-entrepreneur you have to pay charges on whatever incomings you have,” Denison warns. “It does not take profits into account. So if you have a lot of costs and are losing money you will still have to pay social charges.”

“The first thing I tell people is to look at costs and try to lay out a business plan about what they want to do. If it looks like they won’t have that many costs for the first year then the AE scheme could be good for them,” says Denison.

Beware, time limits are coming

Ever since the socialist government came to power last May there has been lots of talk about tightening the rules around the auto-entrepreneur system, because it gives those using it as their main source of income an unfair advantage over tradespeople.

The government says it will introduce a time limit for how long someone can spend as an auto-entrepreneur. There has been talk of a five-year maximum as well as a three-year maximum but anyone going onto the scheme should be aware that it probably won’t last forever.

“If you start out as an AE and get your feet wet, you will realize pretty quickly whether or not your business will be viable. If it is, then you should you change your status to move onto a different scheme,” Taquet says.

Make sure you invoice correctly

Obviously being self-employed means you will have to invoice all the clients you work for and keep a track of payments. It might sound simple enough but issues can arise as one auto-entrepreneur named Bill tells The Local.

“Setting myself up as an auto-entrepreneur in France was surprisingly easy. I went online, signed up and received the proper documentation in less than a couple of weeks,” Bill says.

“Learning how to bill properly however was another matter. One agency hadn't paid me in a couple of months, and when I emailed to see what the matter was, they told me that I hadn't put a declaration regarding VAT payments and that I needed to redo my invoices.

“Apparently, no one was going to bother telling me this. So that's something to remember - you need to be precise in your billing or an accounts department may reject your invoice out of hand and neglect to inform of this.”

Don't earn too much

Earning too much does not sound like a pitfall, but breaking the strict annual revenue limits set for auto-entrepreneurs (€32,600 for trades and services, €81,500 for sales of goods) could see you wrap yourself up in knots in the very red tape you thought you were avoiding.

Allow auto-entrepreneur Bill to explain: "I once received €6,000 from an advertising gig and declared it in my first trimester. Well, they took this amount and multiplied it by 12 and several months later I received notice from URSAFF that I had to pay some exorbitant tax bill on my projected €72,000 annual income.

"I told them that the €6,000 was a one-off gig, but they told me 'rules are rules' and that I should have declared the 6,000 over several months, if it was only one-off.

"After a lot of arguing, a few insults, several apologies and many lost days waiting in waiting room at different offices across Paris, I was finally able to get out of paying tax on the fortune I would not be making and, alas, haven't made since.

Andy Denison runs the website www.monamiandy.com which specialises in administrative support for Anglophones living in France.

Lawyer Jean Taquet describes himself as a 'cultural bridge'. You can contact him at www.jeantaquet.com or find out more about his Living in France guide by clicking here.

Ben McPartland (ben.mcpartland@thelocal.com)

Don't miss...X
Left Right

Your comments about this article

Today's headlines
Ex-France international Makélélé faces tax probe
Ex-France international Claude Makélélé, once of Chelsea and Real Madrid faces a tax probe in Switzerland. Photo: Bertrand Langlois/AFP

Ex-France international Makélélé faces tax probe

French tax authorities have asked their Swiss counterparts to start a probe into former France international footballer Claude Makélélé, who played for English club Chelsea and Spain's Real Madrid among others. READ () »

France will stick to EU debt target, minister says
France will stick to EU deficit targets the country's finance minister promised this week. Photo: Joel Saget/AFP

France will stick to EU debt target, minister says

The new French finance minister vowed this week that his country would stick to the tight deficit reduction targets set by Brussels and rubbished speculation that Paris were hoping to persuade the EU to give them more time. READ () »

Dylan hate charge thrown out by French court
Hate charges against Bob Dylan over comments he allegedly said about Croats have been dismissed by a French court. Photo: Mandel Ngan/AFP

Dylan hate charge thrown out by French court

A court in Paris has thrown out a case against US singer Bob Dylan on charges of incitement to hatred filed after he was quoted allegedly comparing Croats to Nazis, his lawyer said on Tuesday. READ () »

French slang: Everyday words you need to know
French slang - here's a list of words you need to know but perhaps should be careful about using. Photo: Shutterstock

French slang: Everyday words you need to know

As if learning French wasn't hard enough, the language of Molière has a wealth of informal slang words, that you should know as well - even if it's to avoid saying them in case you offend someone. Here we've picked some of the most common everyday words and translated them into French slang. READ () »

JobTalk France - Tax returns
French tax declarations: Key things to remember
What to remember when filling in your French tax declarations. Photo: Shutterstock

French tax declarations: Key things to remember

It's that time of the year again. The 2013 "Declarations des Revenues" forms will be popping through your letter boxes in the coming days so we have asked a French tax expert to let us know the most important things to remember when it comes to filing your tax returns. READ () »

British firm to shut French cigarette factory
One of France's iconic cigarette brands will soon mostly be made abroad. Photo: Der Wunderbare Mandarin/Flickr

British firm to shut French cigarette factory

A British tobacco company will close one of its factories in France that makes Gauloises cigarettes, meaning the signature French brand will be made almost exclusively abroad. READ () »

French MEP: EU means 'porn without borders'
A European Parliament from France sees 'porn without borders' as good thing in EU. Photo: M_Max/Flickr

French MEP: EU means 'porn without borders'

For a French member of European Parliament one of the key benefits of an EU without borders is easier access to porn movies, according to an interview he gave to a local newspaper. READ () »

French TV viewers resent needless use of English
French public are not happy about the over use of English on TV and radio. Photo: Patrick Herzog/AFP

French TV viewers resent needless use of English

In its annual report released this week French TV and radio regulators revealed that French language and culture regularly suffers as the sector expands and that viewers’ main cause for complaint is the unnecessary use of English. READ () »

French to help Britain treat nuclear waste
A French company is going to help Britain build a nuclear waste treatment facility. Photo: Avail/Flickr

French to help Britain treat nuclear waste

French nuclear power group Areva said on Tuesday it will help build a plant to treat radioactive waste at a facility in northwest England. READ () »

Paris cops told to ‘purge’ Roma from posh area
A Police in a posh Paris neighborhood have been ordered to 'purge' Roma people. Photo: Kenzo Tribouillard/AFP

Paris cops told to ‘purge’ Roma from posh area

Police in Paris’s posh 6th arrondissement have been ordered to count up Roma people and “systematically purge” them from the area, media reports said on Tuesday. The public outrage prompted by the orders forced France's top cop to wade into the row. READ () »

RECEIVE OUR NEWSLETTER AND ALERTS
Business & Money
French tax declarations: The key points to remember
Gallery
French slang: Everyday words you need to know (but use cautiously)
National
Paris cops told to ‘purge’ Roma from posh neighbourhood
International
VIDEO: ‘Anti-French’ Cadillac ad sparks anger in France. See why.
Features
Buying property in France? Here's 10 things you need to think about
National
What will the future map of France look like? The answer lies within.
Politics
'The 27 French regions aren't the problem, it's the 36,000 towns'
Culture
Ex underage call girl Zahia picked to embody Marie Antoinette
Gallery
Buying a house in France? Ten things you need to think about
National
France bans work emails after 6pm! Sadly it's not quite true.
Opinion
Reader Rants: Why don't the French do charity? Is it down to taxes?
Society
VIDEO: The Paris zoo is back but this time the animals are in charge
Advertisement:
National
This will be the most expensive road in France - Only €1.66bn for 12km!
Society
Only in France? Gourmet pensioners party lands village in hot water
National
What's the worst thing to do when you realise you're on the wrong train?
From showers to kissing: Anglos tell Twitter what's weird about France
National
'A big quake will hit France and there will be casualties' - Scientist warns
Culture
After all the dozens of books is France still worth writing about?
Sponsored Article
Why it pays to avoid banks when making overseas transfers
Opinion
Paris or the suburbs - where would you live?
National
VIDEO: Walk the line - crossing the Seine on a tightrope
Society
Innocent dating or pimping? French 'sugar babies' site hit with lawsuit
National
Chef Gordon Ramsay seeks expat Kitchen Nightmares in France
Society
Barking mad? Dog testifies in court in French murder case
Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Germany

More news from Germany at thelocal.de

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

Latest news from The Local in Sweden

More news from Sweden at thelocal.se