Hello everyone. I am wondering if I could propose a simple case study here of sorts?
Given that Auto / Micro Entrepreneurs seems to be one of the most common ways for expats to start working in France (and I am assuming getting the much coveted Carte Vitale) I am wondering if we could answer the following for everyone’s future reference:
I’ve heard there are revenues caps with AE/ME … what is the maximum revenue allowable per year as AE / ME?
If declaring the maximum revenue, then approx. how much would our total yearly obligations to the government for tax, social charges etc on those revenues?
You are right in assuming that AE/ME is the fastest way to get into the French social security system (usually 3 to 4 months, compared to the 6/9 months min for the ‘regular’ way with the CPAM).
Re your questions, I’ll try to answer them in the proper order:
Maximum revenue: It depends the kind of activity you’ll be doing, in 2017 the maximum is 82.800€ if you are have some sort of trading business (including the hotel business so that includes “chambres d’hôtes”, ‘gîtes’, etc.). 33.100€ for the self-employed (working in legal, medical, teaching, or selling any kind of service not a product).
Taxes: If UNDER the maximum then it also depends. To keep it simple you’ll pay roughly 23% of your revenue if you are self-employed, 13,4% otherwise (for the exact numbers / scenarios you can send me a PM and I’ll detail all that). => Note that there is a small tolerance is you overcome the maximum (in the matter it’s 90.900€ and 35.100€ for one year only). If you go over that for two years, or exceed the tolerance then you’ll be automatically switched to another status (which is the ‘Entreprise Individuelle’… way different as this one is a kind of LTD to make a comparaison). My advise in case you are in that case if to anticipate or you may be in the scenario where you switch from 13,4% to 45% tax => Again I’m here to guide you if you have any question.
Dan… in answer to your question. MEs can earn 33100€ for 2017. Depending on your activity social charges will range. As prof lib to urssaf I pay nearly 22.9% my OH pays to RSI 23%. Cotisations are much higher, because a lot of people don’t pay tax, and also caters for the excellent health care system that is benefited by those who contribute heavily and by those who register purely for the CV and contribute very little. If your business is from home you will also be expected to pay CFE on your enterprise. While there are exemptions, again depending on your activity, and you will need to either visit the impots office or work with someone to waive the exemption for you. This again ranges from area to area, department to department. There are activities that are exempt purely because you do not work from home, or are in rural areas where it is exempt full stop. With ME, you are not entitled to claim business expenses, but your relevant tax form that you complete in May, already covers 50% abatement, so if you earn 20k, you are only taxed on 10k. Each household tax differs based on children, benefits, etcetc. So again you will be wise to speak to impots or work with someone who can guide you through this process. 1st time tax registrants you will be required to make yourself present at the tax office to acquire your forms. Much has changed over the last few years. Impots are directing citizens and residents to perform their tax functions online, in particular CFE for business. This year there are changes, France is changing tax system to collect at source. While this in the main affects employed people, there is talk that MEs will also be required to pay tax on a quarterly declaration and then be required to claim it back. This is still up in the air and very few tax offices can verify what this means for ME. Elections are coming! Hope this helps
You are perfectly right, I’d like to add that the abatement is 50% when self-employed and 71% for trade activities (including gites, chambre d’hôte, etc.) and 34% otherwise (legal activity, medical / para-medical, etc.).
To be even more accurate you also have to include the national tax. But with the AE or ME status you can choose the ‘prélèvement libératoire’ which will exempt you from paying the national tax. By doing that the social tax will increase a bit, 1.7% for a gite, 1% for a trading business and 2.2% otherwise => Note that the ‘prélèvement libératoire’ is only possible if you earned less than a certain amount 2 years ago (26.764€ for a single person in 2014). Otherwise you’ll have to pay the national tax on the full amount (here as well I can explain if you fancy a tax talk ;)).
I’m struggling to understand these statements - especially your references to “self-employed” because all micro entrepreneurs are self employed aren’t they?
Also the gite calculation I don’t understand because on micro entrepreneur surely your cotisations are based on turnover, so if your turnover is 30,000€ then you pay cotisations of 13.4% of that figure, which I think comes to well more than 1,165€. Plus another 1,7% of 3,000 for income tax if you opt for prélèvement libératoire. For a micro entreprise the only figure that is taken into account is turnover, that’s the whole basis of the régime. The abattement is built into the calculation and is automatically deducted from the figure you declare, but the way you explained it, it sounds as if you are saying that you deduct the abattement yourself from your turnover before you declare it, or are you in fact talking about micro BIC not micro entreprise?
Sorry to be dim but do you think you clarify this, please, because I’m very confused now?
Hi Anna, it’s quite difficult to define ‘self-employed’ as there is no specific word in english but there are many different ‘words’ in French behind the ‘self-employed’.
In instance here are the different ‘kind’ of self employed:
Profession libérale (self-employed is the closest) => They are working in medial / para-medical, in legal things, they are translators, architects, etc. (affiliated with the CIPAV)
Artisans => They are the builders mostly (affiliated with the RSI)
Commerçants => They are the ‘sales persons’ (affiliated with the RSI as well)
Artistes => Special category for the singers, painters, etc. It’s quite specific for them so I won’t detail that here.
So a gite for exemple will be considered as a ‘commerçant’ (the regime is ‘micro BIC’ on the imposition form). The gite business is not taxed on the full turnover, you have a deduction on your turnover from which the taxes are calculated. To remain on the same example 30,000€ turnover for a gite with the 71% rebate will be 8,700€. Then you apply the taxes on that figure (8,700€).
The abatement is done by the state, you declare the real turnover 30,000€ and you’ll get the rebate automatically based on the status you’ve applied for. So in the case of a gite, you declare 30,000€ and will be taxed on 8,700€
Finally for the regime it’s micro BIC for a gite indeed (if your turnover is less than 82,800€).
Hope this clarify things a little? Don’t hesitate if it’s still a bit blurry
Yes that helps thanks. Although I still don’t really understand why you are making a distinction between “self-employed” and “artisan”, as if you are one or the other. Self-employed in English simply means that you are your own boss, you don’t work for anybody else, you are responsible for paying your own taxes and social charges etc. So you can be a self-employed artisan or an employed artisan, just like you can be a self-employed translator or an employed translator - not all translators are self-employed. I think you will confuse Brits if you use “self-employed” to mean something different (well it confused me, though admittedly I am very confusable).
I still don’t understand the calculation.
“If you intend to have a gite and get 30.000€ of revenue on the first year then:
After the deduction you’ll be taxed on 8.700€ of revenue only so you’ll have to pay 13,4% of taxes, meaning roughly 1.165€ in that case.
Let’s say you’ve opted-in for the ‘prélèvement libératoire’ then you can add on top of that 1.7% for the national taxes which means roughly 148€.
Total taxes = 2.113€
Revenue being 30.000€ that leaves you with a profit of 27.887€ per annum”
I thought 13.4% was the level of cotisations you pay as a commerçant, levied on turnover, so on a turnover of 30k you would pay cotisations of 30 000x13.4%=4 020€. Similarly the 1.7% prélèvement libératoire is levied on turnover, so 30 000x1.7%=510€.
I just don’t get your figures, it still looks to me as if you’re applying the abattement twice.
My maths is crap but I’ll have a go; I am a self-employed proféssion libérale, so for instance if I had an annual turnover of 20 000 I would pay cotisations of 22.9%x20 000=4580. The RFR, ie the assumed “profit”, shown on my tax form would be 14520, ie the 20k turnover minus the 34% abattement. The cotisations that I’ve paid at a rate of 22.9 per cent of turnover, have been designed to work out the same as if I was paying cotisations as a higher percentage of profit, as on other régimes. As a micro entreprise I pay cotisations of 22.9 per cent of 20 000 turnover, or on a different regime I might pay them at 33%-ish of 14500 profit; either way it works out at around 4500. Same with tax - if you choose to pay “libératoire”, you pay at the lower percentage of the higher figure (ie turnover), or if you don’t pay “libératoire” then you pay tax on your RFR/assumed profit but you pay it at the normal barème, not the forfaitaire figure of 2.2 or 1.7 or whatever. On a turnover of 20 000, I can’t pay cotisations at 22.9% of only 14 500 and tax at 2.2% of only 14 500, which is what your calculation seems to be suggesting.
Sorry about the confusion re the word self-employed, I was trying to make a distinction between the people know in France as ‘profession libérale’ and the ‘artisan / commerçants’. My bad on that one, they are all self-employed, let’s just say that there are many sub categories in French.
Re the maths, I know it’s a bit confusing (to be honest, most froggy are confused as well ;)). Don’t worry the maths are good (I’m mentoring quite a lot of small businesses so I’ve seen my lot of tax statements ).
We are not applying the abattement twice, let’s put the ‘problem’ on a different angle. You declare a turnover of 30,000€ under the box ‘micro BIC’ (if you are a gite owner)… When you’ll receive your statement from the tax office you’ll see:
‘Revenu : 30.000€’ (which is your overall turnover)
‘Abattement micro BIC : 21.300€’ (which is the abattement you get for being a gite owner => 71%)
‘Revenu imposable : 8.700€’ (which is the revenu they’ll consider for the taxes)
‘Charges sociales : 1.165€’ (which are the social taxes - matching 13,4% of the taxable revenue)
‘Impôts sur le revenu : 148€’ (which are the national taxes - matching the ‘prélèvement libératoire’ of 1.7%)
Note that when applying for the status AE or ME you can’t claim any expense so the abattement are here to compensate that. Put it in an other way, if you get 2,000€ worth of expenditure to renovate the gite, you won’t be able to diminish the overall revenue to integrate that ‘loss’.
I think the light is beginning to dawn.
But to clarify things at an even more basic level - the OP was specifically asking about micro entrepreneur. Are you talking about micro entrepreneur here? Because as a micro entrepreneur, you don’t get a statement like this from the tax office. You declare your income and pay your cotisations to URSSAF, and your income tax if you opt to do that, and as far as that revenue stream is concerned it is a fait accompli by the time you fill in your tax return. You simply enter your turnover figure in the box for micro entrepreneurs and nothing more is deducted, and your avis d’impot simply tells you your RFR and says NIL to pay. Those are the only 3 figures that appear on your avis - turnover, RFR, and 0.
So what I’m struggling to grasp now is: as a micro entrepreneur your cotisations are 13.4% of turnover, and if I’m understanding you correctly, you are saying that as a micro bic your cotisations would be 13.4%, ie the same percentage as for a ME, but charged on taxable revenue only and not on turnover? Is that really what you’re saying? Makes no sense to me why anybody would be ME, if that’s the case!
Yes, that’s what I do - I love it, no maths involved
But what’s still confusing me is, when you make your quarterly or monthly declaration, you enter your turnover, and your cotisations (and tax if you pay it quarterly/monthly) are calculated quite simply as a percentage of that turnover. They’re not calculated as a percentage of turnover minus abattement. If as a prof lib I declare a quarterly turnover of 2,000€, then my cotisations due come to 458€. So on a turnover of 30,000, a gite would pay cotisations over the year at 13.4% of 30,000 (=4,010€) and income tax of 1.7% of 30,000 (=510€).
Which is why in your example, I don’t understand the figures of 1,165€ and 148€, because as a micro entrepreneur the OP would pay more than that.
Hi Anna, well it turns out you are more in the right than the froggy Actually I confused my maths by applying the taxes using the formula for the ‘régime du réel’ but which the figures of the ‘régime micro social / micro fiscal’.
So your calculations are correct, thanks for pin-pointing my mistake(s) ;). I’ve edited my first post to match the correct figures and to answer Dan as well I’ll include an example based on his ‘regime’.
@Dan_Ravelle Let’s say your annual turnover is 30,000€ your charges will be as follow:
Taxes for the ‘micro-social’ will be 6,930€ (23,1%)
Taxes for the ‘micro-fiscal’ will be 510€ (1,7%)
CFE will probably be the minimum so 214€ (not to be paid the first year)
TOTAL taxes for the first year = 7,440€, probably 7,654€ from the 2nd year
IMPORTANT: You may not be eligible for the ‘prélèvement libératoire’ as they are some conditions. Apparently you are a couple with a child so if your fiscal revenu for 2014 was more than 67,000€ (total) then you cannot apply for the ‘prélèvement libératoire’ and will have to declare your revenues in your tax form every year. If declaring your revenues in your tax form, the national taxes you’ll have to pay will be different, let’s assume your wife is working with you (so total revenue for the couple is 30,000€) then the maths will be:
Annual turnover = 30,000€ (amount to be declared as micro BIC => “Prestation de services BIC”)
Taxable revenu = 15,000€ (50% of the global turnover as the abattement is 50% in your case)
National taxes to be paid = 0€ (as you are 2 with a child, the maths here are quite complex but I can tailor my calculations if you give me your real numbers / situation).
Hi All. Thank you for the very interesting and informative posts.
For argument’s sake, let’s say I want to set myself up under one of the above schemes for work that I propose to do in France. And in addition to this I have “unearned” dividend income from outside the EU which I want to bring into France.
I have a question to do with this unearned income; specifically would it be treated outside the scope of income earned within a A/M E and hence not add towards the maximum income threshold under such a regime? Or is gross worldwide income (including that which is unrelated to your work in France) all taken into account to calculate whether or not your A/E M activities exceed the maximum threshold? I hope that makes sense.
Under micro entrepreneur, you declare each type of earned income for which you are registered, under the appropriate category. Income earned from reselling is declared on one line; income earned from artisan activity is declared on another line; income earned from providing a service is declared on another line; you get the gist - it’s a very exact science. Income that was not earned from a registered micro entrepreneur activity, is not declared as micro entreprise revenue so it doesn’t count towards any threshold. It could be earned income, eg from a full-time job, or unearned income, whatever it is, each income stream is treated separately.
As far as I can see, the only impact it could have is that obviously it will affect your total taxable income and it may mean that the option of paying your ME income tax at a flat rate is not open to you. I think Fabien explained this. I don’t know how it works exactly but basically, as I understand it, it’s designed so that you can’t use it to avoid paying tax at a higher rate, so the flat rate isn’t an option if your total household income outside of ME is relatively high.