Cotisation - Deductable costs?

[StartingOut]

Hopefully a straightforward question which will give me a clearer idea of what tax regime I should be going for:

Are your cotisations considered a cost and therefore deductable from profits?

Just in case I've worded that badly, I'm in IT and my costs will be minimal so Micro BIC looks appealling, not just due to it's simplicity, but if cotisations are considered costs then maybe reel becomes more interesting.

Thanks for any help,

 

Bob

 

I see this question is being viewed but not responded to, is this beacause it's not straightforward, a stupid question or something else?

[Nick Trollope]

You have a bit of a circular question here....

The payments for a micro are fixed, so from what would you propose to deduct them? If income tax, then yes, although most micro's don't pay any.

If you go for reel, then the 1st year is calculated for you and these payments are deducted from what you actually need to pay. But you can't count payments as allowable expenses as that would have the effect of continiously reducing the amount due.

This is similar to the UK IR rule (based on the same argument) that accountants fees for the preparation of annual accounts are no deductable....

In your case, with no real expenses, I would suggest that you try the micro first & see how it goes. You can always change regimes at a later date.

[Will]

What Nick says is quite correct, but the French system is not known for its straightforwardness.

With a micro regime, there is a fixed percentage allowable against tax - cotisations are included in this allowance.

For a reel regime, most (though not all) of the charges you pay for health, retirement, unemployment, family allowance, the national debt etc can be deducted from your profit for tax purposes. Cotisations are normally paid as you go, while tax is paid each year on the previous year's income. You really are better off using an accountant to make sense of it all, unless you are either very familiar with the French systems or you have a micro regime with particularly simple accounts and few allowable expenses. In France, accountants fees can often be offset against taxable profit, particularly if you use an accountant linked to the appropriate bureau de gestion or similar organisation.

[StartingOut]

Thanks for that Nick, I think I understand what I need to know, but to clarify my question and position:

If I go for a reel system, and cotisations are not classed as costs then I doubt I'll have costs approaching the 45% allowance in a Micro and therefore with the added simplification I think my mind will be made up for me.

I believe you're saying that the cotisation payments are not deductable as costs? I can see the circular calculation this would lead to.

As regards the accountants fees (I know you where quoting UK), I was told at the CdeM course that these where deductable? This in part lead to the question about cotisation.

As for starting a micro then changing, I guess that's the best course but I was also told at the course about the exoneration from tax on profits in a ZRR which look attractive and that these where only available if I started in a reel system and where not offered after a switch.

Thanks again.

[hastobe]

[quote user="nicktrollope"]

This is similar to the UK IR rule (based on the same argument) that accountants fees for the preparation of annual accounts are no deductable....

[/quote]

These are deductible costs in the UK - what you can't deduct is the costs of a tax enquiry.

Kathie

[StartingOut]

Thanks Will

Having just read and replied to Nick's response I'm know confused.

So the majority of the charges are deductable? In this case I'm back to thinking I may have costs somewhat higher than expected and therefore possibly in a position to make the most of a reel system, especially with the tax breaks.

Well I think that's my mind made up, I need to pay out and go and see an accountant - my slight concern was would they be inclined to suggest going for a reel as they'll not get much business from me if I'm in a micro. Or am I still being cynically English?

 

Can anyone recommend an English speaking (I know, I am working on my French) accountant around the St Junien area?

[Russethouse]

[quote user="hastobe"][quote user="nicktrollope"]

This is similar to the UK IR rule (based on the same argument) that accountants fees for the preparation of annual accounts are no deductable....

[/quote]

These are deductible costs in the UK - what you can't deduct is the costs of a tax enquiry.

Kathie
[/quote]

Glad you posted Kathy, we claim these and have done for years - I was beginning to doubt that we were right (although we have an excellent and very correct accountant.)

[Will]

Angelweb

I don't think most accountants in France are exactly short of work, I know ours (actually based in Brittany, near Rennes) is quite happy to deal with either micro or reel regimes and advise accordingly, without bias. In my case, with just the one major client, my accounts were simple and we came within the micro limits so we did them ourselves initially, with the help of our local tax office. In the second year, I was beyond the micro limit so, what with possible TVA implications, we went with an expert comptable. He actually managed to reduce the overall profits, despite having a greater income, so if your allowable costs are relatively high (I didn't think mine necessarily were) it could well benefit you to go for reel rather than micro. That had the effect that cotisations for subsequent years were actually slightly lower than for the micro year. I'm not sure exactly how he does this, but I'm not questioning it, as long as the impots and the caisses don't. The accountant oversees our household's other taxation etc issues as part of the package, which has also proved worthwhile for us.

I pay a small subscription to something called AGPLA, to which the accountant is affiliated, and this brings certain benefits, such as allowing the accountant's fees against tax. The bureaux de gestion linked to the various chambres de metiers or de commerce work similarly I think. Exactly how well you can work the system depends not only on your accountant but on what you do, as this affects what you pay, to whom, and what allowances you can offset against profits. Having an accountant is definitely worth it, ours has recently managed to get a demand for nearly 15,000€ from one of the caisses reduced to just over 3000€, much more manageable. Even so, he reckons on an estimated 46% for cotisations - and then you are liable for tax on what is left.

[Nick Trollope]

[quote user="hastobe"][quote user="nicktrollope"]

This is similar to the UK IR rule (based on the same argument) that accountants fees for the preparation of annual accounts are no deductable....

[/quote]

These are deductible costs in the UK - what you can't deduct is the costs of a tax enquiry.

Kathie
[/quote]

Quite - the last time I needed an accountant to prepare accounts in the UK was 1991.....

 

[hastobe]

I didn't realise you had been in France as long as that Nick - almost as long as Twinkle [:)]

Kathie

[Nick Trollope]

I haven't, I just stopped talking to the Inland Revenue!