I know zero of the costs of being an AE in France, so some help appreciated.
I want to take on some domestic help, and like I do with the gardening contractor I have, I want to declare it on my tax return so that I only pay tax on 50% of the outlay.
When I mention this to applicants, the price shoots up - “emphasised textbecause I lose 25% of my earnings to the AE scheme, so both you and I are better off paying cash…”emphasised text
My question: is this true? Is the cost of being an AE high here? More so than the UK?
If you pay them au noir then they won’t be paying social charges and probably not tax either. Go via an asso, then you can get your 50% off and whoever comes will be insured and accountable.
Bear in mind if you employ someone undeclared you are the criminal.
I don’t know about being an EPAE in the UK but I expect it is super cheap compared to France because the UK is very 3rd world in many ways.
Yes, very much so, and administratively more burdensome, although it also depends quite a lot on what kind of activity (provision of services or goods) you do as an AE, and how much you turnover in any 2 year window. I am self-employed, but don’t qualify as an AE, as my turnover exceeds the limit provided for the AE/micro-entrepreneur scheme (77 KE/yr). Those who put forward the argument about the 25% loss might be referring to the application of a default 25% income tax surcharge on top of their normal income tax for those self-employed workers who weren’t members of a tax authority accredited auditor association, as these auditor associations behave in essence like a tax inspector and require adequate bookkeeping in order to certify your accounts. The cost of being a member of an association like that isn’t huge (100-150 EUR/yr), but they are a bit of a pain in the backside with their questions, and if they don’t certify your accounts, you’re pretty likely to have a tax inspection shortly after. From Jan 1st 2023, the income tax surcharge no longer applies by default, so it is no longer a requirement to have a certified auditor association certify the books. Note that even if you paid an accountant to make your returns, the 25% income tax surcharge still applied.
The problem with the AE system is that it is only really of any use to people who have low turnover, or who have low paid, irregular work. Put another way, it incentivises people to not declare all of their turnover to avoid being pushed over the yearly (or cumulated 2 year) limit, and being forced to change tax regime, i.e. becoming an Entrepreneur Individuel (EI), or moving to another corporate structure, such as a single share capital company (SASU), or a simplified share capital company (SAS). The relative complexities and administrative costs are approximately 30% higher with structures like these than with AE, or Entrepreneur Individuel.
My daughter used this scheme for a few years when her children were young and from what she said it is ideal if you have next to no expenses. She worked online from home and did not have to purchase any equipment or consumables so in effect her turnover was her profit, and she calculated that her contributions under this scheme were significantly lower than under another setup. I do not know exactly how much she earned but I believe the ceiling is around 70k, no? which is perhaps a low turnover for some types of business but if 90% of that is profit I would not class it as as low paid irregular work.
But coming back to the original post, is it true that if you employ a micro entrepreneur for domestic help you can recoup 50% tax? I thought this only applied if they were registered services à la personne which many are not. I would have thought you would have been better off all round using CESU.
Wow - I did not know it was that complicated! Thanks for the explanation, although not sure that I completely understand….but I can see how it fuels the black market.
I had heard that knowingly paying cash is illegal, but yes, for odd jobs and casual work I have been guilty, but as you say Vero, for something more regular, I need to have it all above board - and be able to avail of any tax breaks offered to me!
CESU scheme operated by URSSAF is the way to go for small regular help - used to be called Chèque emploi. You register with URSSAF, do the necessary paperwork required and they supply pay slips with all the deductions made by the patron and the employee. I worked with that system for 5.5 years and it works well as the employee and yourself are well protected and they get pension and health rights too.
This is a good site that has a lot of good information. The AE status has been simplified in recent years, nut still quintessentially French.
But I think your question relates to the service à la personne/CESU scheme (which incidentally you can’t use for your gîte as these tax benefits are for individual help and not for them to help your business).
So a person who does gardening/cleaning etc as a side hustle can do this quite legally and declare it in their tax return. They get their health cover some other way (via employed family member, being retired, etc). However if they sign up to these formal schemes then they have to pay cotisations which takes a big chunk of the money. The cotisations cover health, unemployment etc etc which if they have this dealt with in other ways is not much benefit to them.
Overall I seem to recall reading that the costs of an AE business can absorb 46% of your turnover - but don)t have a reference for that.
Yes that is right.
In France it is generally the individual’s responsibility to find out what they should do. There is lots of support for fledgling businesses via eg the chambres des métiers. However you have to speak French, and know the questions to ask.
It is one of the lessons we have learnt here that if you ask a question people will do their best to answer it, but won’t volunteer information. In our first years, and particularly doing the renovation work, there were a huge number of times when conversations ended up with us saying “but why didn’t you tell us that”. And the answer being “You didn’t ask that question”.
I do not think that unregistered side hustles that make money are ever legal, apart from passive things like property rental or selling personal items. Anybody doing gardening or cleaning and getting paid without either having a siret number and paying cotisations or going through CESU is certainly not legal, you cannot just declare earned income on your tax return. That was auto entrepreneur was introduced in the first place, to enable people to legally make a small profit from a hobby business or occasional spare time work?
The plague of French society - identify a problem, create a specific measure to address the problem, then realise that it isn’t all it turned out to be, or has been abused, etc. In legal terms this is often called neo-legislatization or in French, the rather euphemistically coined “législation positive”…
Yes, a siret number is always required, however you can still be an independent and not signup to be an auto-entrepreneur. (Edit- but may still have to cotise. I think I’m thinking if the exceptions for students!!)
Spécificités administratives
Le plus important lorsque vous devenez indépendant : se déclarer ! C’est à l’URSSAF que cela se passe, et il y a des délais à tenir : autant être bien renseigné.
Sinon, évidemment, l’alternative CESU (Chèque emploi service universel) est une possibilité, qui vous simplifiera une fois de plus la vie. Cotisations, charges et contrat : tout est souvent intégré dans ce processus.
Attention cependant, il y a une différence entre le statut indépendant et le statut auto-entrepreneur. Les spécificités ne sont pas les mêmes, et les clients non plus. Si une femme de ménage auto-entrepreneur peut intervenir pour des professionnels ET des particuliers, une femme de ménage indépendante ne peut avoir des missions que chez des particuliers.
Agreed you do not have to register as an auto entrepreneur but you do have to register with URSSAF and you do have to pay cotisations, you are not excused from cotisations on the grounds that if you did not have this income your healthcare would be covered by another route. You do have this income so you pay cotisations on it.
I do not know what website that quote is from but it is strangely worded because it is not a case of being either a micro entrepreneur or an indépendant. The micro entrepeneur status is one of the various status that indépendants can choose. There is not a status called “indépendant”, there are many statuses under the indépendant umbrella, And I do not understand the bit about some indépendants can only work for individuals. I wonder if there is some confusion here with CESU. Is this from a government website and not a clickbait site?
I never thought that I would ever, ever hanker after anything British - but I have found something: the good old village stickerboard where you wrote a simple note out seeking a cleaner and then just got on with it
I guess only France can make it complicated! And certainly explains why I have a myriad of prices from potential applicants, and maybe explains why I never hear from some again when I say that I want an invoice
thanks for all comments though (an no Jane, not for gite - I never said this! For me and only me!) Thank heavens I will never have to wade through the minefield
As I said I may have mixed myself up with young people who can do a certain amount of work without these formalities.
Never said you did! Just a lesson we learnt when we were contemplating getting a cleaner to help with our gîte which hadn’t occurred to us before. It is logical as if you are declaring with the microfoncier abattment of 50 or 71% why should one be entitled to further tax breaks - but we hadn’t thought that through.
