The Micro Entrepreneur Tax France is something you need to know about if you think about setting up your tax residency in France because it’s one of the few ways to limit your tax burden.Â
In a previous article we already discussed the general rules that apply if you get French tax residency.
The conclusion is clear: under the general tax rules you’ll pay high taxes and social contributions.Â
Therefore, if you think about moving to France, it is even more important to look at options to optimize your taxes.
One option is the micro entrepreneur tax regime or micro entreprise.
What is a Micro-Entrepreneur in France
The micro entreprise France is a simplified tax regime for freelancers (Entreprise Individuelle).
It combines a simplified calculation of your income taxes on the one hand and your social contributions on the other hand.
Eligibility and Turnover Thresholds
You qualify for the regime if you don’t exceed a certain annual turnover/revenue threshold. The exact threshold depends on the activities you perform.
From 2023, the threshold is €188.700 if you sell goods or provide accommodation.
If you provide services, the threshold is €77.700.
In case you start out during the year, these amounts need to be prorated.
When you combine different activities, specific rules regarding the thresholds apply.
If you exceed these thresholds for two years in a row, you can no longer qualify and you have to switch to the standard rules and rates.
Furthermore, certain activities (e.g. regulated liberal professions) are exempt from the application of the micro entrepreneur tax France.
How Income Tax is Calculated within the Micro-Entrepreneur Regime in France
The good thing about the micro entrepreneur regime is that it provides fixed lump sum cost deductions.
Therefore, you don’t need to closely track your expenses.
The cost deductions are a percentage of your turnover and depend on the sector you work in.
The cost deduction amounts to 71% if you sell goods. For other (listed) commercial activities the deductible percentage is 50%. For non-commercial activities the cost deduction is 34%.Â
If you act as a freelancer, you will most likely fall under the last category and get a cost deduction of 34%. Yet, if you – for example – run an ecommerce business, one of the higher percentages might apply.
This cost deduction is of course interesting as it will lower your profit and taxable income. Accordingly, you will pay less taxes.
If we put this in an example, it means the following.
Let’s assume you make €50.000 per year as a freelancer. If we apply the general tax brackets to this income, you would be paying around €7.000 in income taxes. However, if you apply the cost deduction of 34%, it means that your taxable income is actually ‘only’ €33.000. Consequently, you’ll only pay around €3.500 in taxes.
Please note that if you also receive other taxable income, you need to add this to the income from your micro entreprise and pay tax on it. Unless it is income that is taxable at a separate rate (e.g. dividends).
Social Contributions in the French Micro-Entrepreneur Regime
Also for paying your social contributions, a specific method applies under the micro entrepreneur regime.
Unlike an employee or ‘normal’ self-employed individual, you don’t pay social contributions on your actual income but on your turnover. The amount again depends on your activities.
If you sell goods or provide (unfurnished) accommodation the rate is 12,3%. For the rental of furnished tourist accommodation the rate is 6%. In all other cases, the rate is 24,6%.
If we jump back to the previous example that means you would be paying €12.300 in social contributions on an income of €50.000. If we add the income taxes of €3.500 to it, this means a total tax burden of €15.800 or 31,6%.
This is definitely not a low percentage but way lower than what you would pay in normal circumstances in France.
VAT Rules and Exemptions
For Value Added Tax different rules apply than for income taxes and social contributions. If you exceed certain thresholds, you also need to register for VAT and immediately start charging it.
If you provide services, the threshold amounts to €41.250.
For commercial activities and providing accommodation the threshold is €93.500.
However, if you deal with clients outside of France, you still need to register for VAT but you might not need to charge any actual VAT.
When the Micro-Entrepreneur Status is No Longer Beneficial
As long as you qualify for the micro-entrepreneur status because your activities qualify and your income is under the thresholds, it is probably recommended to try to use the system.
Using the regime won’t make France a tax haven but it is still better than paying the based on the standard rules.
How to Register as a Micro-Entrepreneur
Hereby an overview of the steps to register for the micro entrepreneur tax France.
Check Eligibility Criteria
- Make sure your activities fall within the scope of the regime
- Check the maximum turnover threshold for your activity
Prepare Documentation
- Passport or national ID
- Proof of French address
- Details of activities you want to perform (NAF-code)
Actual Registration
You can register online by taking the following steps:
- Visit the official website of Urssaf
- Create an account
- Provide personal and business information
- Select your activities
Alternatively, you can also file an application in person with the Chamber of Commerce (CFE).
Recurring Filings & Payments
If everything went well during the registration process, you will receive a business number and your online account will get activated.
You are now ready to manage your recurring tax payment and social contributions.
FAQ on Micro-Entrepreneur Taxes
Let’s have a look at some Frequently Asked Questions about the micro entrepreneur tax France.
Can a Foreigner Become a Micro-Entrepreneur in France?
Yes, a foreigner can become a micro-entrepreneur in France.
However, applying the micro entrepreneur tax France requires you register as a freelancer in France. To do so, you’ll need to personally register yourself in France as well. This will normally trigger tax residency in France.
So, although the micro-entrepreneur regime is open to anyone, you need to make sure you can live and work in France.
Moreover, you want to consider the tax consequences attached to it.
Do Micro-Entrepreneurs Pay Income Tax in France?
Yes, micro-entrepreneurs pay income tax in France.
The specific rules and rates from the micro-entrepeneur regime will apply on any business income that falls under it.
Furthermore, you need to declare your worldwide income in France and pay French taxes on it.
What are the Turnover Limits for Micro-Entrepreneur in France?
If you want to qualify as micro-entrepreneur in France your turnover needs to be under a certain threshold. The exact threshold depends on the nature of your activities.
Hereby an overview of the thresholds:
- Sale of goods and providing accommodation: €188.700
- Providing services: €77.700