self employed taxation

[melmoth]

I wish to start a business in France and want to know if there's a minimum that I can earn in one year so that I pay a basic tax - I'm put off by the tales that I hear that self employed workers are ruinously taxed in France - I don't need to earn much, really just to live on and the odd luxury..

thank you

[Patf]

As I understand it , the "killer" is not tax , but cotisations, rough equivalent of british national insurance payments, but much higher than in UK. There are different business regimes which others know more about than I do. Pat.

[Val_2]

Pat is right, self employed pay a lot more in social charges(cotisations) than actual income tax .The biggest problem is that whatever profit you make one year,the cotisations for the following year go up in leaps and bounds and there is little you can do - nearly everyone I know now are in trouble with the new RSI system which is the three major social charges and which used to come three or six monthly and are now monthly and for us,more than 1500€ taken automatically from your account which you can do nothing about. I have filled in the forms to have this reduced by 50% in view of our projected turnover for the rest of the year BUT if we exceed the amount stated we have to pay 30% interest back. The system in France for payments for the self employed don't compare at all to the UK self employed setup and you will need a pot to tide you over for the first two or three years until you can stand on your feet regularly and not worry. This system for the semf employed prevents us from actually taking on employees in numbers,something which to me is very wrong but thats how it is.

[Frank]

Hi Val_2

I have read your post with interest, (being a newbie to cotisations[:-))]) is there any chance you could elaborate on the charges please??  The reason I ask is I had a visit at home from the chap for the RSI from the chamber of commerce to explain all the different charges etc. and when we discussed signing the declaration for projected turnover, like you to keep costs more realistic, there was no mention on additional interest charges.  He said that if I exceeded my estimated declaration, then I would pay to them the difference, but if I didn't reach my turnover, then they would repay me, and for my second yr, I could declare expected turnover and then have the following yrs based on them.  Any advice greatly received.  Many thanks in advance

Jetlag

[JimJams]

Things might be about to change. The minister of the Economy has launched 'Le projet de loi de Modernisation de l'économie' (http://www.modernisationeconomie.fr/).

If the law is passed, as from 1 January 2009 those who fall under the BNC regime (services - max. turnover 27,000 euros/year) or BIC regime (trade - max. turnover 76,300 euros/year) will be subject to a combined tax and cotisations charge of 23% and 13%, respectively, on their actual turnover (i.e. no more estimates of next year's income), payable monthly or quarterly after the period in question (i.e. no more paying in advance).

Registration and de-registration will be simple (one online form to complete in both cases) and turnover will be declarable online (no turnover in a certain month = no charges for that month). At the end of the year, entrepreneurs will simply add up the figures that they provided monthly/quarterly and enter the total on their tax forms (goodbye accountant!). The law will also protect the main residence of an entrepreneur against seizure in the case of bankruptcy/litigation.

The law is to be voted on in July (it's already passed through the Senate and has just been presented to the National Assembly).

The site http://www.modernisationeconomie.fr/ provides full information about the proposed law and its progress towards implementation.

Also keep an eye on http://www.otoentrepreneur.com/ or Google "Projet de loi de modernisation de l'Économie" - and keep your fingers crossed! 

 

[Val_2]

[quote user="jetlag"]

Hi Val_2

I have read your post with interest, (being a newbie to cotisations[:-))]) is there any chance you could elaborate on the charges please??  The reason I ask is I had a visit at home from the chap for the RSI from the chamber of commerce to explain all the different charges etc. and when we discussed signing the declaration for projected turnover, like you to keep costs more realistic, there was no mention on additional interest charges.  He said that if I exceeded my estimated declaration, then I would pay to them the difference, but if I didn't reach my turnover, then they would repay me, and for my second yr, I could declare expected turnover and then have the following yrs based on them.  Any advice greatly received.  Many thanks in advance

Jetlag

[/quote]

A different setup by the sounds of it. We are a fully TVA registered business and not a MicroBic so there is no limit to turnover and we have more expensive charges to pay. The RSI reduction in monthly payments is an official form whereby your accountant must supply the projected accounts result for th eend of the year and to which you then demand as in our case a 50% reduction on the current payment. If you exceed this amount then you pay the difference PLUS interest to the RSI of 30%. However if you go undera projected forecast by the RSI they will only repay interest at 10%

[Frank]

Thanks Val_2 much appreciated[:D]

[lmc]

Just wanted to say to ALL new micros, be very wary of paying your cotisations quarterly based on real turnover.

I know you get the advantage of not having to pay in advance and not having any catch-up payments later but it does work out more expensive (significantly more expensive).

They don't give any presents away, you know!!

Best of luck.

Lisa

[Danny]

Lisa, can you explain why it works out more expensive please?

I already have an established business under a micro regime but I am curious.

Danny 

 

[lmc]

Hi Danny

Sorry I didn't get back sooner - had my dad to stay for a couple of days.

It works out more expensive because of this.

When you declare quarterly they will work out your cotisations as a flat rate percentage of your total turnover (24.6% for BIC sevices and BNCs and 14% for BIC sales).  These calculations are definitive and will never be readjusted.

If you go about things in the normal way (ie make your provisional payments and accept that there will be a catch up payment later) then they will use this method but they will also use the abattement method.  They then compare the two and only ask you for the smaller of the two amounts.

For instance, based on a turnover of 20K, I calculate a difference of 500 euros for BIC services and a difference of about 2000 euros (!!) for BNCs.

Lisa

[lmc]

Beg pardon - a difference of 1000 euros for BNCs (still too much!)

[TroisChatNoir]

I am becoming very disollusioned with the French system of self employment & am very interested to hear peoples experiences. I am thinking of closing down my enterprise Real with TVA status and giving up the buying of materials for clients and downsizing to a Micro regime as after only 18 months and a healthy order book in front of me, I am unwilling to pay the increasing Cottestation charges demanded by the RSI it will soon get to the point where I am giving a predetermined sum equal to 40% of my earnings to a government body of some description regardless of current income, Defaulting clients etc. Are the charges for Micro as expensive as Enterprise Real?

[Will]

It depends on what you do, how much you earn, and the general nature of your business. But my experience was that the réel regime offered quite a substantial cost saving over the micro, particularly for cotisations, even taking into account the additional accountancy fees.

 

[lmc]

Will is right about this - it does depend on what you do.

But it sounds like you're an artisan and that means that whatever business structure you choose then you can expect to pay 40% of your revenue in cotisations.  Usually it's around about 45%.

The legislation has recently changed as far as micros are concerned, supposedly to lighten the cotisation burden but in practice it works best for those with very small incomes (less than about 12K) and this is unlikely to be you.

Micros are generally not too good to people in the building trade because you often have quite high costs (eg tool purchase) and the abattement allowed doesn't actually cover all of your real expenses.  At least with a regime reel you have the opportunity to deduct real expenses and if you make a loss then you can declare a loss whereas a micro can never declare a loss.

Also, if you are at the 18 month stage now then it is the next 18 months that are going to be the most expensive for you (I hope you've put some money aside) and the third year will always be the most expensive for you whether you transfer to micro now or not.

I'd grit your teeth and stick with the regime reel in your shoes.

Best of luck.

Lisa