do i have to register and what will it cost

[MKT]

Oh dear, i really hope soemone can help here!

Spent  2 years  renovating house here and living on our savings (we had health cover with E106) This year we have finished the work and rented out our gite at last - and thus earned income (around €13 000) on which i assumed we would have to a) pay tax  and b) pay into medical fund and had understood rate for that was about 10% of taxable income. We can JUST about manage to live off that if careful.

visited CPAM yesterday to ask what to do when curent cover expires on 31/dec and she started into this long explanation that seemed to be

• we are not going to come under them anymore but i need to go to some other office called 'independent workers' and get taken on by them - they will provide my health cover from then on.
• i need a Siret number to get taken on by the 'independent workers' lot. To get this i have to register as a business.

Does this sound right to any of you?

a morning spent reading old threads on this forum about registering as a business leads me to think that i will have to pay about €4000 a year to do this. Clearly this makes it un-doable and i would be better simply to close or sell up (shame, we had considered it to be succesful - we had good take up and everyoen seemed to like it). However, i had understood health contributions to be about 10% not 45%, so have i got it wrong?

I receive the money i the UK, if that makes any difference. if i dont register, but pay tax on the income of course, do i just drop out of the health system?

if i sell up and put the money in the bank, thus just living off the interest and capital, do i come under CPAm then? do i have to register as anything then?

grateful for any light anyone can shed on what appears to be a can of worms Ive opened that is threatening to shatter my dreams of running a succesful but small enterprise renting out my house for about 10 weeks a year.There must be an alternative to registering as a business for someone this size as i dont expect earnings to increase much as years pass either.

Maria

[Will]

I think the problem arises from whether or not you have any other income. For somebody who is employed, or self-employed, then rental from gites and B&B can usually be just declared on the appropriate section of your tax form (for income from renting furnished property), and thus added to your other declared income for assessing taxation and social charges. If you have no other income then it seem that many officials expect you to register your gite as a business, with all the paperwork and charges that entails.

I don't think this applies universally, so I hope somebody else with direct experience of this matter can help you out.

France is not at all small business friendly, although recent changes seem to be favourable for businesses with 5-10 employees there is little or no help for smaller enterprises.

[Poppy]

Hope I can help a little.

Several years ago we had a gite and the income less an allowance for running costs was entered on the tax return, together with interest earned on savings. We did not have to register as a business.

Assuming that you are French resident and this is your only income if I was you I would check the current rules with your local tax office. If the rules are the same, ie you declare gite income less an agreed allowance I would go back to CPAM with this info. After all residents of France have to enrol in the French health system.

Jan

[Ty Korrigan]

Hello, my French family rent out a gite to a student. They don't have to register as a business if the income is below a certain level which may be why so many places are available at 350euros per month or 4200euros per year which I remember as being around the level...

13,000euros per year income though requires registration as a business me thinks especialy as this is around the SMIC.

The authorities take around 48% in social charges from your profit after 'expenses' so depends on your 'expenses' really...

 

[MKT]

Thankyou Jan and TY for your help....

- it was the tax office who told me to put the income down under 'micro bic' on my tax form . I dont think theres a probelm with paying tax on it - i expect to and will.

- if social charges are going to take 45% TY, then i shall not stay in business - i cannot live on €6000 pa.

What i dont understand is why a 'normal' person would pay 8% to the CPAM and i would have to pay 45%?????? what is the rationale here?

If i sell up and live off the capital and interest(looking more liekly by the minute the way this is going), how THEN would i get into CPAM? and what is the difference? i mean why does it matter HOW I earned the €13,0000.

Why dont they just charge me contributions to cpam off the basis of my tax return and thus my income? I have filed a tax return each year since living here, albeit mostly with zero income.

sorry to still be confused/panicking/packing for the UK

Maria

 

[Ty Korrigan]

Why not do as many other do here...

Rent out your gite taking sterling for the Brits and Euros for the others that stay.

Do a bit of gardening... I am now informed that gite owners can offer this service...moot point...

Yes it is maddening that here they take 48% of your money for social charges when back in the 53rd state its half that (tax+N.I)

Prehaps I shall ask clients to pay sterling into a U.K account....Hmmmn.....

Prehaps...the only person who can answer this is an accountant! So when you have the facts can you post them here...?

[MKT]

er TY, I DO receive the money in sterling (for my clients convenience, not mine), in the Uk, but as i am french resident, gloabl income must be declared here....its not the tax i have a problem with, its how to get into cpam and why i should pay 45% when everyone else pays 8%

 

Maria

[BJSLIV]

I think the problem is that you have allowed for health contributions of about 8 to 10%, which is what you have to pay on any income coming in to France from abroad. However if you are running a self employed business in France then you have to contribute to four distinct pots ie health insurance, pensions, unemployment benefits and family income support.

Now some people have been able to prove / pretend that what they are actually doing in France really happens in the UK, so only health and income tax enters into  the tax / charges deductions. This is obviously much easier to do if you are introducing property buyers (Estate Agency) or doing internet based things. However I think they have been clamping down on things such as property rental "shells".

 

[Eslier]

Maria, you need to try and seperate what you think is reasonable from what is required under French law. If you try and compare the two things you will certainly end up confused ! Much French beaurocracy makes little sense to many people but you just have to accept it and work with it - not against it.

If renting your gite is your main sorce of income then it is most probable that the information you have been given about registration is correct. To be certain, you should consult a French Accountant who will be able to advise you correctly and make certain you do everything legally. The services of an accountant should not cost you more than around 800€ per year and, believe me, they should be able to save you that amount and more with good advice and management.

Once you have registered your business you will then be required to pay social charges to the various bodies that deal with health, pensions and social security in your department. Because of your low income, you should only have to pay the minimum amounts which will probably come to around €4,000 as you have predicted. Your income would be able to increase greatly before you have to start paying more than the minimum. You will also need to elect a tax "régime" which could be the micro-bic but it is likely that your accountant may advise you to opt for the régime réal which may allow you to claim more allowances. Under the "réal" it is probable that you won't pay any tax whatsoever. You would also be eligible for "Prime pour Emploi" which is a sort of rebate.

If there are two of you then make sure you only register the business in one of your names. This way there will only be one lot of social charges to pay but you will both be able to claim full cover if your partner is not working anywhere else.

So you see it isn't all bad - just not straightforward. To get the very best out of the system you really should consult an accountant.

There is just one other thing which may be of concern. As you have already been trading this year - this is technically illegal and could cause a problem. If, however, your intention is now to register the business and conduct matters on a legal basis then it is unlikely to cause you a problem. Explain the situation to your accountant who will probably be able to back-date your business registration application to whenever you started advertising your gite - probably last January 1st. The downside of this is that you will receive bills for social charges backdated to this date but at least it will ensure you are legal.

Good luck.

[Will]

I agree with BJSLIV in so far as the cotisations for self-employed people are concerned. I'm not sure exactly what my cotisations work out as a percentage, but I do know it's a lot more than 8%. I too receive money in sterling which is paid into a British bank account but because what I receive it for is actually done in France, then I am treated exactly the same as any other French resident who carries out work in France.

It stings a bit, but I don't have a problem with it - many British people do though. Maybe you should be talking to URSSAF rather than CPAM, as the latter is concerned only with paying into the health system (and even then many people, including me, pay into a caisse other than CPAM).

I don't quite agree with using property introduction as an example though. I'm not involved in estate agency work (but Mrs Conq is). But this type of work is tightly controlled in France though some people do think they can operate in sterling with a UK contact number and thus hide the fact that they are in France (see 'top up fees for the English and one or two other topics). Even with property finding/sales, if you do the work in France you have to be registered in France, either as an agent yourself with (or working towards) your own carte professionelle, or as whatever the equivalent of agent commercial currently is in the property business following the recent court ruling fiasco. Or on an agent's salaried staff of course.

[Jhc]

Maria - do take advice from an accountant in your area that deals with gites.  Do not register as a business unless you absolutely have to as it will cost you greatly.  I have conversed with Eslier about this issue privately before and I disagree with him that it is mandatory to register.  We have had 3 gites for 7 seasons and have never registered as a business.  We have advice from accountants in Jersey who specialise in French tax (they have done our tax returns each year), and also from a local French accountant in our part of France - and both have said that it is optional whether we register as a business and is not in our interests to do so.  There is a post from Miki somewhere else on the forum and he clearly has the same view as me - he adds, as I recall, that there is some regional variation and that some areas are 'expecting' you to register. 

If you register as a business then it will also have implications when you sell as the charges and taxes when you sell will be higher for selling a business on to someone else that also wants to rent out the gite, making you extremely uncompetitive price wise with someone who has not registered.  Do not despair - see an accountant - our local one also handles any issues that arise for his clients with CPAM and sorted out a problem for some friends of ours, filled in all the forms for them etc.  It is worth paying an accountant now in order to get it right.  Good luck.

[Quillan]

I did write a piece on this some time back but I can't find it so I will repeat it.

CSG.

I see that you thought it was around 10% in your original post and then you were told it's around 45%. You also want to stay in the French social system for your health care. Firstly you will have to pay CSG, CRDS and Prél. Soc. et cont. Solidarité which whilst I don't have mine for 2004 yet but I can tell you that in 2003 it was 7.5%, 0.5% and 2.15% respectivly (totalling 10.15%). Most people call this just CSG and it's payable on your French income after any tax regime (Micro BIC for example) has been implemented. So to simplify, if you earnt 10,000€ and were registered as a Micro BIC you would get tax relief on 72% so would be left with 2,800€ on which you would have to pay 10.15% CSG. It is actually worked out for each item seperatly so the calculatin would run something like this.

7.5% CSG or 2,800€ = 210€

0.5% CRDS of 2,800€ = 14€

2.15% Prél of 2,800€ = 60€

Total to pay would be 284€

I believe these charges or tax were put in place to help pay for the health overspend in France. I might be wrong on the reason but it does not matter we all have to pay.

French NI Contribution.

Commonly called cotistations here in France but I use NI like many others because it will be something English people will undestand.

I don't have the exact figure but you are right in saying it's around 45% but then it's caculated differently in France. Still using my example income above of 10,000€ in the UK they will take around 8% of the total for NI before any deductions are allowed which would mean you would pay 800€.

In France the figure is around 45% as we said but then it's taken after all allowances and tax is paid so using our example were you have 2,800€ left minus your personal allowances of 2,971 means you are negative to the tune of 171€ so you won't pay tax or cotistations and you will get free cover.

Micro Enterprise/Micro BIC.

Two terms often quoted but are actually quite different. A Micro Enterprise is a method of registering your business and not the method on which you are taxed although they often go hand in hand in as much that if you register as a Micro Enterprise the tax man will automatically enter you in to the Micro BIC taxation system. You can, and many have, only register with the tax man as a Micro BIC and not register with the Chambrers of Commerce as a Micro Enterprise.

If your Gite is 'open' more than six months of the year OR is your sole source of income you will have to register as a Micro Enterprise. You will have to pay your cotistations which in this case includes CSG via them evey year and they are fixed percentages. I won't break it down as there are a lot of things you pay, totalled these are called CSG and RDS compris.

For the first two years they are fixed sums (although you can appeal or work round them and I will explain this later). These figures are based on a figure that some governmental gnome came up with on what the cosidered average first and second year turnover of a small company will be. They are set at approxamatly 2,538€ for the first year and 3,746€ the second.

One way to not pay so much is to use the (very long) set of calculations that they will give you against your projected income then write to each body seperate telling them these figures. They in turn will recalculate and that is what you will pay. There is a catch, if you go over by even one euro then you have to pay the original figures.

Another way round it is not to visit your Chambers of Commerce for the first two years in which you have declared your self and paid tax on. Now this bit I am unsure of because I don't know exactly where this information is located other than it is on the back of your tax form. This number, perhaps it's your tax number, can be entered in to any government computer and tells them your tax situation and how much money that department can take off you. So basically the Chambers of Commerce type the number in and it tells them how much to charge you. In my case it was next to nothing for the previous two years, all I will say is that it was under 1,000€ and I don't pay for my health cover, it's free but I still pay for my top up so they don't think I am that poor.

Income From Abroad.

This is not entered on your tax form until after you get it (I'm talking about the one you get back with how much French tax you have to pay) and it is entered by you. It's on the very bottom of the last page, on the left, and next to were you sign and date it.

It is not used in any of the above calculations, in fact it is not used anywere to do with tax or French NI contributions. What it is used for is grants etc. A clasic example that comes to mind is universtity students. If you have a income from the UK and have entered it then this is added to your French income and then used to work out if you child at university is eligable for a student grant. There are many more grants and things that this is used for.

You will have to declare your Gite income as you live in France and the income originates from a property you rent out in France. However my guess is that you will have to pay very little and on the income you have stated probably nothing (except CSG) and will get your health cover for nothing. In our first year we only earn't a little over your figure and only paid CSG of 116€ and were given our health cover for nothing and like you we had no E106 cover.

Hope this helps.

[MKT]

Quillan and JHC

I will never be able to thank you enough for putting things into perspective and explaining everything so well. I may even sleep tonight. As I said before i am not trying to cheat or hide anything, and of coruse i have no problems on the sorts of amounts you suggest may be due.

I am now making enquiries about getting an accountant to deal with all this - any recomendations gratefully received (Im in dept 32gers but gite is in 65 haute pyrenees) and have also an appointment at the Marie to discuss it all next week.

thankyou so much everyone, but particularly you two, for understanding my situation and hopes and fears- Quillan, that must have taken ages to write out and i shall be forever grateful

Maria

 

[Quillan]

Why an accountant and mayor. The Micro BIC system is designed for people with small business's like B&B's and Gites (amongst many, many others) and is set up in such a way as to not require an accountant. All you will do is line another persons pocket for a service you don't require.

The Micro Enterprise/BIC does not require any book keeping except that you keep every invoice you ever create just in case there is a problem. You don't have to keep any receipts for things you buy thats why you get a 72% tax allowance to run your business.

The mayor, where does he/she come in?

[Miki]

"...The mayor, where does he/she come in?"

Quite simple Chris,

Take a look through this forum and see just how many times folks are told to go there and ask questions.

How many times did you think to go there in your early days here ? I give up on how many times I have given the same advice you posted but sadly, it does often have to be repeated, due in part of course, to the dreadful "search facility" now on this forum.

[peterw]

Quillan,

I too want to thank you for such a comprehensive reply. It is constructive posts like yours that make these forums so worthwhile. I was interested to see that you separated CSG etc from cotisations/NI. is there any reason for this? Why not just call them all Cotisations?

The reason I ask is that I get the impression from your post and others, that CSG applies to all world wide income whereas cotisations apply to just income generated in France. Is this correct? If so I can understand why you have separated the 2 charges into different groups. Having said that, it seems to me that this could not be correct, otherwise people living in France with just overseas income would be exempt from the cotisations which include health care cover. I cannot imagine that this is the case. Correct me if i am wrong.

[Quillan]

CSG and the other little 'addons' that come with it are not part of cotisations (the French equivalent of the NI) they are sperate. If you set up a Micro Enterprise they can be collected as part of their cotisations.

You will only pay tax, CSG and cotisations on world wide income which is generated from countries that are not part of the EU dual taxation treaty. Now I am no expert but I understand, ironicly, for example that the USA is a member but Canada is not. This means that Canadians, in theory can be taxed both in their home country and again here in France. Americans and English on the other hand do not pay tax and cotisations on income generated and taxed in the UK. If you pay tax and NI in the UK you can get a E106 and a P60 which can then be given to the tax office here (if required). In the case of those retiring early and drawing a private pension in the Uk but live here they will receive a P60 but of course won't pay NI in the UK so will have to enter the French system. They do this by handing over their P60 and CPAM calculate the rest. Typically this will be around 1,500€ per year.

Now some people may think, "hello there's a loop hole here" but sadly there is not. Some people think that by lets say (and I am in no way suggesting the original poster is thinking this way) that if I live in France, have a gite and rent it out and get paid in sterling in to my UK bank account I can sidestep paying tax etc in France, well you can't. The rules are quite simple, if you live here (i.e. you are resident) and your business is here (i.e. the gite) then any income generated from that business irrespective of where you put the money is liable by French law for tax and cotistaions in France.

In the case of the original post and my reply you can see quite clearly that actually, if done correctly, that they are far better of declaring their income here in France and it won't cost them a bean (other than the 10.15% they will pay for CSG) to be in the French system or the French health system and it's all totally legal.

Basically to pay tax and cotisations for a married couple in France registered under the Micro BIC system they have to have a French income greater than 20,841€ per year. You would still have to pay CSG on this but it would work out (using the 2003 percentages) of 592€ per year.

(The calculation I use is 2 X Personal allowance of 2,918€ each = 5,836€ / 28 [represents the 28%] * 100 = 20,842€ - 1€ [to keep you firmly within the limit] then I applied the 2003 CSG percentages to the total personal allowances of 5,836€ admittedly these are worked on the 2003 figures as I don't have the 2004 ones yet).

Two (possible) benefits of keeping below the 20,842€ limit and being properly registered is that not only don't you pay cotisations but you won't have to pay Tax de Habitation either as you will be considered poor by the French system. As I said this ONLY works if you are registered under the Micro BIC system because of the 72% tax allowance on income. So you can see that by registering properly there are loads of benefits and it beats trying to deal with the UK tax people especially when you are way down the south of france, you can't just 'pop in' to your UK tax office from here.

Oh yes, PeterW, I just went back to see your last sentence. CSG, as I said before, is NOT cotisations it's a tax to help pay for the deficit in the French Health system. It was, I believe, supposed to be temporary (a bone of contention amongst the French) until the debt was paid (and it looks like it never will). If you have savings in your bank over here you will see that you pay it directly on the interest earned and it is taken automatically by the bank. Even the poorest of the poor in France have to pay it.