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Micro-entrepreneur: All you need to know about being self-employed in France
The Local France - [email protected]
Published: 30 Nov, 2018 CET.
Updated: Fri 30 Nov 2018 16:49 CET
Often people turn to France's "micro-entrepreneur" (formerly auto-entrepreneur) system as a way of starting a small business or freelancing when they move here. Tracy Leonetti tells us what you need to know about the scheme to figure out whether it's right for you.
Here's a look at some of the key points of this very popular business structure.
Advantages
- Good chance to test your business idea out for a while
- Simplified bookkeeping (so you don't need to pay an accountant)
- Quick to set up
- Easy to close down or modify
- Gives you access to healthcare in France
- Fixed social charges – based on your earnings
- Fixed reductions for income taxes
Disadvantages
- In order to keep the status there is a limit on your earnings
- No reduction of running costs that you get with other business structures (important for businesses which buy materials or products, such as plumbers)
- Difficult to get investments from banks
- You are solely responsible for your business
Photo: Depositphotos
Recent changes you need to know about
The auto-entrepreneur status is now actually called micro-entrepreneur but given that many people still refer to it under it's former name we have described as auto-entrepreneur in his article.
On January 1st 2018 the earnings limit for for auto-entrepreneurs went up however this isn't all good news for people signed up to the scheme.
In fact, I was very surprised that everyone was so happy about the earnings limit going up at the beginning of the year because while President Macron allowed the doubling of the earnings ceilings, he did not double the TVA (VAT) limits.
That means many auto-entrepreneurs, originally part of a simplified system, find themselves in a hybrid situation of having to declare TVA half way through the year because they are earning so much they are required to, while at the same time paying social charges as an auto entrepreneur.
This is often the time to start thinking of other business structures that better suit your situation and I think it is the real reason the government has doubled the limits because it encourages people to move over to the ‘Réel’ system for small businesses.
Photo: AFP
New Earnings Limits and TVA (VAT) from January 1st 2018
To benefit from the fixed rate of social charges, your earnings limits must stay within the limits below:
€70,000 for manual activities and services
€170,000 for trading companies: buying and selling products
To avoid paying TVA your earnings limits must stay within the following limits:
€35,200 for artisanal (manual) activities and services, gites activites (if your previous years’ earnings did not exceed €33,200)
€91,000 for trading companies: buying and selling products (if your previous years’ earnings did not exceed €82,200)
Photo: Depositphotos
What to do if your earnings limits go over the TVA limits as an auto entrepreneur
Many customers are coming to me as they find themselves in this hybrid situation of being an auto-entrepreneur but earning an amount that means they have to pay TVA.
Generally, we look at the whole business and see if it would benefit you to come out of the auto-entrepreneur system by asking some key questions concerning the growth of your business.
However, if you find yourself in this situation, the most important is the planning. Follow your numbers carefully to plan when you will need to start charging your clients TVA.
Here are some tips to get you started:
- Ensure that you start adding the VAT to your invoicing from the first day of the month.
- You should approach your local tax office as soon as possible in order to request a TVA number and this can also be done via email.
- Make sure that this number is on all of your invoices
- Activate your TVA account online in your professional space at impots.gouv.fr
- Track the TVA invoiced using a correct invoicing system. Keep receipts if you wish to recuperate TVA paid.
- If you pay your TVA yearly twice a year rather than on a monthly basis, you declare your earnings and TVA using the CERFA form (3517) and then you pay online in your professional tax space: 55 percent in July, half in 45 percent December of the following year.
- Declare and pay your TVA online.
What do my social charges cover?
Almost all auto-entrepreneurs benefit from sickness, maternity, retirement and family benefits as part of their social contributions.
The RSI became the SSI
In January 2018, the French social security scheme for independent traders and freelancers known as the RSI was abolished and replaced by the SSI.
This remained reasonably transparent for auto-entrepreneurs in that contact with the SSI remained the same.
However, a transition period of two years began in order to merge the Social Security System of independent workers (SSI) to that of the social security system of the employed sector (CPAM).
How does this affect new auto entrepreneurs in 2019
New independent workers will be directly linked to their closest Caisse Primaire d’Assurance Maladie (CPAM).
That means it will be CPAM who will be responsible for healthcare, payment of sickness benefits, pensions and invalidity reimbursements of auto-entrepreneurs.
Independent workers will have an online account with Ameli.fr much like salaried employees have now and they will no longer need to choose their own healthcare provider.
How does this affect auto-entrepreneurs who already have a business?
If you are already an auto-entrepreneur in 2018, this transfer will take place in 2020 in the final phase of the transition period which means that in 2019, you will continue to be attached to the SSI and be reimbursed by your current healthcare provider.
Tax at the source for auto-entrepreneurs
If you are already an auto-entrepreneur and have already declared tax in France, you should be aware of how tax at the source (paying taxes directly from income) will work for you.
You will see on your ‘Avis d’impots’ that you can find in your personal tax space, the amount you will pay each month from 15th January 2019 and the percentage this represents.
If you are new to business and have no fiscal situation in France, the advice is to go and visit your tax office from January 2nd 2019 in order to get your monthly payments in place based on your estimated earnings for 2019.
Tracy Leonetti is the head of Leonetti Business Services. You can visit her website www.lbsinfrance.com
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Here's a look at some of the key points of this very popular business structure.
Advantages
- Good chance to test your business idea out for a while
- Simplified bookkeeping (so you don't need to pay an accountant)
- Quick to set up
- Easy to close down or modify
- Gives you access to healthcare in France
- Fixed social charges – based on your earnings
- Fixed reductions for income taxes
Disadvantages
- In order to keep the status there is a limit on your earnings
- No reduction of running costs that you get with other business structures (important for businesses which buy materials or products, such as plumbers)
- Difficult to get investments from banks
- You are solely responsible for your business
Photo: Depositphotos
Recent changes you need to know about
The auto-entrepreneur status is now actually called micro-entrepreneur but given that many people still refer to it under it's former name we have described as auto-entrepreneur in his article.
On January 1st 2018 the earnings limit for for auto-entrepreneurs went up however this isn't all good news for people signed up to the scheme.
In fact, I was very surprised that everyone was so happy about the earnings limit going up at the beginning of the year because while President Macron allowed the doubling of the earnings ceilings, he did not double the TVA (VAT) limits.
That means many auto-entrepreneurs, originally part of a simplified system, find themselves in a hybrid situation of having to declare TVA half way through the year because they are earning so much they are required to, while at the same time paying social charges as an auto entrepreneur.
This is often the time to start thinking of other business structures that better suit your situation and I think it is the real reason the government has doubled the limits because it encourages people to move over to the ‘Réel’ system for small businesses.
Photo: AFP
New Earnings Limits and TVA (VAT) from January 1st 2018
To benefit from the fixed rate of social charges, your earnings limits must stay within the limits below:
€70,000 for manual activities and services
€170,000 for trading companies: buying and selling products
To avoid paying TVA your earnings limits must stay within the following limits:
€35,200 for artisanal (manual) activities and services, gites activites (if your previous years’ earnings did not exceed €33,200)
€91,000 for trading companies: buying and selling products (if your previous years’ earnings did not exceed €82,200)
Photo: Depositphotos
What to do if your earnings limits go over the TVA limits as an auto entrepreneur
Many customers are coming to me as they find themselves in this hybrid situation of being an auto-entrepreneur but earning an amount that means they have to pay TVA.
Generally, we look at the whole business and see if it would benefit you to come out of the auto-entrepreneur system by asking some key questions concerning the growth of your business.
However, if you find yourself in this situation, the most important is the planning. Follow your numbers carefully to plan when you will need to start charging your clients TVA.
Here are some tips to get you started:
- Ensure that you start adding the VAT to your invoicing from the first day of the month.
- You should approach your local tax office as soon as possible in order to request a TVA number and this can also be done via email.
- Make sure that this number is on all of your invoices
- Activate your TVA account online in your professional space at impots.gouv.fr
- Track the TVA invoiced using a correct invoicing system. Keep receipts if you wish to recuperate TVA paid.
- If you pay your TVA yearly twice a year rather than on a monthly basis, you declare your earnings and TVA using the CERFA form (3517) and then you pay online in your professional tax space: 55 percent in July, half in 45 percent December of the following year.
- Declare and pay your TVA online.
What do my social charges cover?
Almost all auto-entrepreneurs benefit from sickness, maternity, retirement and family benefits as part of their social contributions.
The RSI became the SSI
In January 2018, the French social security scheme for independent traders and freelancers known as the RSI was abolished and replaced by the SSI.
This remained reasonably transparent for auto-entrepreneurs in that contact with the SSI remained the same.
However, a transition period of two years began in order to merge the Social Security System of independent workers (SSI) to that of the social security system of the employed sector (CPAM).
How does this affect new auto entrepreneurs in 2019
New independent workers will be directly linked to their closest Caisse Primaire d’Assurance Maladie (CPAM).
That means it will be CPAM who will be responsible for healthcare, payment of sickness benefits, pensions and invalidity reimbursements of auto-entrepreneurs.
Independent workers will have an online account with Ameli.fr much like salaried employees have now and they will no longer need to choose their own healthcare provider.
How does this affect auto-entrepreneurs who already have a business?
If you are already an auto-entrepreneur in 2018, this transfer will take place in 2020 in the final phase of the transition period which means that in 2019, you will continue to be attached to the SSI and be reimbursed by your current healthcare provider.
Tax at the source for auto-entrepreneurs
If you are already an auto-entrepreneur and have already declared tax in France, you should be aware of how tax at the source (paying taxes directly from income) will work for you.
You will see on your ‘Avis d’impots’ that you can find in your personal tax space, the amount you will pay each month from 15th January 2019 and the percentage this represents.
If you are new to business and have no fiscal situation in France, the advice is to go and visit your tax office from January 2nd 2019 in order to get your monthly payments in place based on your estimated earnings for 2019.
Tracy Leonetti is the head of Leonetti Business Services. You can visit her website www.lbsinfrance.com
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