The Micro Entreprise France for digital nomads is something you need to know about if you think about setting up your tax residency in France because it’s a way to limit your tax burden.
In a previous article we already discussed the general rules that apply if you become a tax resident in France. You can find the article here. The conclusion, however, is that if you are subject to the general tax rules, you will probably pay high taxes if you also take into account social contributions.
Therefore, if you think about moving to France, it is even more important to think about how to optimise your taxes. Depending on your situation, the possibilities might be limited. In any case, you can look at the micro entreprise France for digital nomads. Because I often get questions around this regime, I decided to dedicate a specific article to it.
What is the micro entreprise France for digital nomads?
The micro entreprise France for digital nomads is a simplified tax regime for freelancers. It combines a simplified calculation of your income taxes on the one hand and your social contributions on the other hand.
You qualify for the regime if you don’t exceed a certain annual turnover/revenue threshold. From 2023, the threshold is €188.700 if you sell goods or provide accommodation. If you provide services, the threshold is €77.700. If you start out during the year, these amounts need to be prorated. When you combine different activities, specific rules regarding the thresholds apply.
Nevertheless, if you exceed these thresholds, there might still be a way to qualify for the micro regime after all.
Micro entreprise France for digital nomads: income taxes
The good thing about the micro entreprise France for digital nomads 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 (liberal) activities the cost deduction is 34%.
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 France for digital nomads. Unless, of course, it is income that is taxable at a separate rate (e.g. dividends).
Micro entreprise France for digital nomads: social contributions
Also for paying your social contributions, a specific regime applies under the micro entreprise France for digital nomads. 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 21,2%.
If we jump back to the previous example that means you would be paying €10.600 in social contributions on an income of €50.000. If we add the income taxes of €2.000 to it, this means a total tax burden of €12.600 or around 25%.
If you exceed certain thresholds, you also need to register for Value Added Tax or VAT. If you provide services, the threshold amounts to €36.800. For commercial activities and providing accommodation the threshold is €91.900. 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.
If you want to set up your tax residency in France as a freelancer, the micro entreprise regime is definitely worth looking into. First of all, because of the way it is organised, it limits the administrative burden on your business. In addition, you’ll also pay less taxes because of the lump sum cost deduction. However, you should not forget about social contributions which will increase your overall tax burden.