Social charges newbie please be gentle

Banking & Financial Tax & Social charges
1

Hi My husband and I are hoping to move to france in the next 12 months. I will have a limited nhs pension and with potential other income from gite/b&B ( i know Amanda Lamb has a lot to answer for) I do not think we will even reach the tax threshold at the start.


However it is the social charges (cotisations) that are worrying me.The Tax ( income) system we have a basic understanding of but the cotisations with 12% here and then 40% here. How to register as an EU or a MIcro is where I start to want to cry.


Basicallly if I have to pay over 50% of my income in cotisiations then we will have problems unless the gites create fantastic amounts which I doubt. We are not looking at vast turnover etc probably with a good wind and luck including my pension 14-15K euros per year.


According to some forums I will have to pay 50% on everything including my nhs pension..some say no i will have to pay cotisations of 50% on gite income, some say dont register - thats illigeal surely


I am fully aware of the need for a top up medical cover. and that I would be covered by virtue of payments here for 2 years, but that would still leave me with 10 years before the now increased state pension.


We are also aware that we will be basically broke but believe that this is something we should do now while in good health and youngish! rather than wait untill it is to late. we will be mortgage and debt free and have some funds for the first 2 years.


SAorry for any spelling errors but I am sitting in my garden in east sussex on a lovely warm day and the sun is on the screen



Regards



Tanya


Any advice, encouragment or pointers in the right direction woul be appreciated

2

;-)

3

On the advice side of things, I don't know what the Chambre de Commerce are like in general in France, but we found the one in Nîmes to be excellent. If you have a region/town in mind, find out which town the local Chambre de Commerce is in and, if you don't speak French, go with someone and talk to a business adviser there. As I say, for us in Nîmes the Chambre is *fantastic* and has given us loads of great advice. That's mainly for the gite side of things, but they exist to encourage and help small business in France and it's all free, so it's silly not to use the service. =)

4

Fair enough. I think it's a case of people don't talk about the good ones, they only complain about the bad ones. ;-)

5

Greg, I've been here years too but never needed one and repeated (and should have been clearer on that) what I've heard and read here on sfn - see the reems of complaints about accountants in the auto entrepreneur and other business related threads. you seem to be the exception to the rule although I have to say that, as ever, I think most of those caught out "ill advised" or otherwise probably can't speak French or don't speak it very well, well enough to understand your average conversation with an accountant about sarl -v- micro entreprise -v- auto entrepreneur etc!

Glad to know there are plenty of good ones around too - brother in law's farm accountant is spot on too according to him ;-)

6

this is comforting thank you.. We are aware that this is a gamble but to end uo paying 50% seems a bit daft.

I am going to seek advice in this country from someone who understands french finaces

thanks for all your replies

7

Most, but not all, French accountants do not give advice, they simply fill in the various bits of paper and expect you to know what you're doing as far as the business side is concerned.

Interesting you say that. I've spoken to no less than four French accountants from all different walks - one is a payroll specialist who looks after my company's French staff, one is with the local firm in town who does our annual return, one is a specialist in Toulouse - she deals particularly with people who have affairs in both the UK and France, and finally spoke at length with the accountant and advisor assigned to us by Nîmes Chambre de Commerce.

In every case I have found them helpful, thoughtful and full of advice. I am yet to find a "bad" accountant and I've lived here three years too. Not sure what I'm doing right... =/

8

I'd second what Greg says, especially as an auto entrepreneur. But still think you should speak to people in the Gîtes group for more specific info regarding taxes etc on gîtes. You can register for free via internet as an auto entrepreneur and do everything via internet. I'm in my third year and have never needed or used an accountant but speak French fluently which does make things easier! DO NOT set the gîte up as a sarl (limited company), that's where a lot of people have gone wrong and ended up paying everything they've earnt and more to the state! and they were "advised" by their accountants to set up as a sarl too - most, but not all, French accountants do not give advice, they simply fill in the various bits of paper and expect you to know what you're doing as far as the business side is concerned.

9

Hmm, see below. Looks like your "cotisations" for the pension *could* be 7.1% (no, they won't be a whopping 50% and could be zero, depending on British paperwork and other factors). The gite income could be covered by an auto-entrepreneurship, that would be fine, the "cotisations" are explicitly included in the 20.5% flat rate you pay. So in all likelihood you'd pay 20.5% tax on gite income, and probably something around 10% tax on pension income (including cotisations) - that would be it. There'd probably be nothing to pay on your annual return at that - or they'd take the 10% of pension then, perhaps.

I would seriously talk to a French accountant. You'll find it very helpful and I'm sure you'll find it's nowhere near as scary as you initially feared. The French tax system isn't out to get ordinary people - it's businesses that pay for everything while the people have a relatively low tax burden, and with the gite income handled as an auto-entrepreneur I'd be amazed if any other assets were subject to much more than a fairly nominal tax. =)

10

PS - I know little about pensions, but this looks like it tells you roughly how much you can expect your pension to be taxed. It seems reasonable, it's much lower than normal tax and NI (and in the UK you pay income tax if you have a very good pension too!) ...
http://www.french-property-news.com/expert-advice-finance-in-france-protect-your-uk-pension-in-france--53711

11

I think I understand what you are saying. Would my NHS pension be liable for socail taxes.

With a joint income of under 13k (euros) ( pension+ other think we avoid huge taxes) however the cotisations concern me would my NHS pension be included in these or just the gite income. Which I think if I am correct will be 50% if you do not register as a EU or 13% if you do. My god this is so confusing. The income over pension is important but we will be mortgage free and I WANT TO GIVE THIS A GO!!!!!!!!!

12

I'm not an accountant, but I've been around the houses a few times with this and have a pretty good understanding of the French system these days -

The easiest way to think of tax in France is it is *exactly* the same as tax in the UK, except NI contributions are 50% instead of about 12%. Ouch! That's the scary part if you have a small business. For example, if you have a small Limited company equivalent (SARL) and you pay yourself 20,000€/year, your SARL will have to pay the French government approx. 10,000€/year for the pleasure of having you on the books, before we even talk about personal income tax, etc. If it's just you with your own company, that *feels* like it's all income tax, even though it really isn't.

In fact, actual income tax, etc. is not too bad at all in France. Similarly, corporation tax is at a comparable level, not too bad at all. It's just the company NI contributions that are the killer. That, and there's no dispensation for lower NI if you're self-employed like there is in the UK. To work for yourself you need to register somehow, and as soon as you stick your head above the parapet along come the social charges. How else can France pay for the fabulous healthcare and school systems? ;-)

In France people do the same thing as you would do in the UK. Register a company, pay yourself as low a salary as you can get away with and pay yourself the rest in dividends, as it's only your salary that is subject to the horrific social fees, not dividends. The only difference is French businesses end up paying much higher NI and there's no avoiding it. It all balances out in the end though - better services, but lower salaries, is the general upshot. If you embrace the system and work within it properly you'll find you're no worse off. Anyway...

There is a BUT - these days enter the auto-entrepreneur system. It's still pretty new, one of Sarkozy's first initiatives for business, but it's perfect for people like you. I think Andrew's right - this is the way to go for most people of modest income.

With auto-entrepreneurship, it's a special type of sole-trader effectively. You have an income cap of around 32,000€ (but this goes up each year, might be more than that now) and you cannot offset any costs against your profits for tax purposes, but as long as those two factors don't bother you then the advantages are:

- It's very easy to register (go to the local Chambre du Commerce and they will help you fill in the forms)
- We pay (or rather my wife does, I'm salaried now) 20.5% flat rate for charges (the rate varies depending on the classification of your business, I don't know what it would be for a gite owner, but it will be there or thereabouts)
- Your payments are automatically divided up amongst the necessary bodies
- Also, if you're a couple you can both register and declare separate incomes so your household income can be much higher without actually going over the AE limit (though be aware there are other limits in place, the Chambre du Commerce should be able to advise)

I'd do that and I'd still hire an accountant to help with your annual tax return - it should only cost a few hundred Euro a year and will save you a lot of stress and worry if someone else just does it for you.

13

Hi Tanya, try posting this in the Gîtes group where you'll get some more specific info from those running gîtes - I don't but I am an auto entrepreneur and pay 21% of turnover for tax and charges sociales but your fears for other regimes are founded as my brother-in-law (a french farmer) pays over 50% (nearer 60%) of turnover. there are so many traps and at times it simply isn't worth doing business even if you make money because the system will stop you from making a profit. I know that sounds mad but it does happen and there are many people on this form who have come unstuck.

Do you speak French? Many think it'll just happen when here - it doesn't (apart from young kids at school here) and a good grasp of French (fluent if possible) will make life easier.

Bonne chance !