First year tax payments

[Rob G]

Preparing to go self-employed.

Having spent ages getting my head around social charges, who they are paid to and when, I turned today to income tax. I have spent ages wading through web site after web site, trying to find out whether I will have to pay any taxes in year 1, if so how they are calculated, and if not, when are the first taxes paid?

I have managed to find out that I don't need to submit a tax return until 1st March in the year after I start up. But this in itself doesn't answer either of my questions.

Can anyone help?

Rob

[Will]

I don't know how long you have been a French resident but I am sure you are aware that every adult resident (or married couple, who are normally taxed together) has to submit a tax return.

If you run a business then income from that business goes on your tax return. If you have a small turnover, quite likely in your first year, you can include this on your personal tax form in the appropriate 'micro bic' or 'micro bnc' box. Which box, and the amount of turnover below which you qualify, depends on the nature of your business - basically if it is 'commercial' - i.e. 'bic' or 'non-commercial' - i.e. 'bnc'.

Once your business grows above this, and you become TVA registered, you will receive an additional set of forms early in the year, in advance of the personal tax forms. I received mine, and forwarded them to the accountant, a few days ago. People with other sorts of business will receive them at different times and will already have had to submit them. These are, basically, your business income and expenditure accounts, which allow the tax office to establish the figure to go on your personal tax return, which you receive, with many of the boxes automatically completed, in May so that you can fill in any other sections, sign and return it. The tax due from this will be notified around September and become payable around October/November of that year - unless you opt for monthly payments. At least that is how we think it will work, as this year is the first in which the partially pre-completed tax returns are being sent out nationally.

Although it is feasible to do your own tax returns under the micro regime with the help of your tax office (we did), unless you are very familiar with the system I would definitely not recommend trying to do your own under the régime réel, so do find an accountant (I would recommend you find an accountant even as a micro, unless your accounts are very straightforward, as a good accountancy practice will include people able to advise on social charges etc as well as tax matters). Good accountants, like mine, will even help with personal tax returns for those who are salaried or retired, for a very small charge.

Although this sounds complicated I have simplified things a bit. No doubt others will want to add something, or will be able to say how it differs for them in a different area of business. But I hope it answers your questions to some extent. The best advice of all I could give you is get a decent accountant - and do it now, not when your first tax forms arrive.

[Rob G]

Thanks, Will, for your helpful post. A lot of what you have said is confirming things I've already picked up.

For this year at least, we'll be registered under the micro-BNC category, so things should be relatively simple (famous last words). If and when we go up to the régime réel, we will certainly need an accountant. I may look into getting an initial consulation with one now, just to get things clear. Any idea how much it would be likely to cost to hire an accountant now?

From what you said, we shouln't need to worry about actually paying any taxes until mid-2007 at the earliest (although we will obviously want to anticipate them so as to be able to afford to pay them when due).

Rob

[Will]

Our accountancy practice was quoting, last year, fixed charges of 450€ upwards for setting up in self-employment (micro or réel - a bit more for a SARL or EURL), annual fees being 750€ for a micro, réel depending on type of business, but from 850€. Personal tax returns from 275€ per annum. All include TVA, and annual fees include general accounting support and advice throughout the year. You could also opt for hourly rates. No doubt others will be cheaper, a lot will charge more. Tax offices are helpful, and free, but their advice tends to be on procedures rather than reducing taxes.

You will of course need to make a tax return for every year in which you are French resident but if you had little or no income there will not actually be anything to pay.