Would you like to run your own business in France? Would you like to escape the 9-to-5 rut, yet still receive social security? Are you already working, but have an idea for an exciting side project in France? Registering as a Micro-Entrepreneur could be your next best move.
The paperwork required to start a business can be a mineﬁeld in any country, and with the French penchant for bureaucracy, it can be even more complicated. You have many possible structures, depending on how many owners there will be and your estimated revenue. However the easiest way to register your business and obtain a social security number is to set up a Micro-Entreprise.
Known as Auto-Entrepreneur before 2016, this list status has really taken off since its creation, and by 2016 there were over 1.1 million MEs registered.
The beneﬁts of ME status over other types of business structures are:
• Social charges are paid as a percentage of your revenue
• Streamlined tax ﬁling
• Exemption from TVA (VAT or Value-Added Tax)
To decide whether ME status is right for you, you need to consider the following questions:
What work will you do?
ME status is not appropriate for all lines of work. Artistic pursuits (portrait painter, musician, author, dancer, etc) often fall under a separate regime, while regulated professions (accountancy, psychology, travel agent, real estate and so on) cannot operate as an ME.
Let’s take some examples:
Trades and businesses you CAN operate as a ME: Chambres d’hôtes, photographer, language teacher, wedding planner, IT advisor, beautician, hairdresser
Professions which CANNOT operate as a ME, due to their regulated status: accountant, lawyer, chiropractor, osteopath, general works builder, architect, midwife, dietician, ﬁnancial advisor, estate agency, developer, ﬁnance companies, rental companies
Trades and businesses where it would not be cost-effective to be a ME:
• If your raw materials or overheads allow you to reclaim your VAT (as this is not possible as a ME)
• If you have salaried staff, as you won’t be able to deduct the salary costs from your income
Contact your local Chambre de Commerce or Chambre des Métiers for a full list of businesses that are not eligible for ME status.
How much can you earn?
The maximum turnover or revenue limits have doubled as of 1 January, 2018.
Revenues up to €33,200 for services and €82,800 for MEs selling goods or materials are still exempt from VAT. However if your business brings in revenues over those limits, the excess will be subjected to VAT. See the table below.
How much can you spend?
You must also consider whether your business will incur many operating expenses or large purchases to amortise. MEs can neither amortise nor deduct costs directly from their turnover for income tax purposes. Flat rate percentages are used to calculate income tax and social charges.
For MEs selling goods or providing housing, 71% of your turnover is deducted for operating costs, so income tax is calculated on 29% of the turnover.
For MEs providing services, 50% of their turnover is deducted for operating expenses, and therefore income tax is calculated on half of the turnover amount.
Thus if the costs to run your business amount to more than 71% or 50% of your revenues, as applicable, the ME regime may not be the most proﬁtable choice.
Do you need health coverage, a pension and other social beneﬁts?
One of the main advantages of the ME regime over others is immediate coverage for health and social beneﬁts without having to pay provisional social charges. If no revenue is collected for the period, no social charges are due.
• For MEs selling goods or providing unfurnished housing, the social charges are 13.1% of turnover collected (not simply billed)
• For MEs providing furnished holiday lodging (chambres d’hôtes, gîtes, etc), the rate is 6%.
French social security covers you for up to two years without any collected revenue, so this means you risk very little in trying out your business idea with a ME.
Do you need an accountant?
As explained earlier, the beneﬁt of the ME status over other self-employment regimes in France is its simplicity. Not only are the income tax and social charges calculations based on ﬂat rates, there is no VAT involved. Therefore a Micro- Entreprise’s accounting is much more straightforward and no accountant is required.
Does this all sound a bit confusing? It certainly can be, especially when going through the process in a foreign language!
If you’re not sure how your business will take off, try registering as a ME, as even if your sales are zero for a couple of years, you are still ofﬁcially ‘in business’ and covered by social security.
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Dennelle Taylor Nizoux
+33 411 932 599 +33 624 250 394