Embarking on a journey as an auto-entrepreneur in France is an exciting venture, and the micro-enterprise regime, also known as auto-entrepreneur status, provides an accessible gateway. In 2021, there was a staggering 17% increase in registrations under this regime, showcasing its popularity. The allure lies in its simplicity of creation and management. Let’s dive into the essential aspects of this status!
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What is auto-entrepreneur status?
Auto-entrepreneur status is a streamlined form of individual business, distinct in its unique attributes. Formerly known as self-entrepreneur, it’s essential to understand that it’s an independent entity with specific characteristics setting it apart from other legal structures.
Particularities of the status
One of its defining features is its simplicity in formation and management. The registration process is straightforward and cost-free, a notable departure from other individual business forms. Moreover, it demands minimal initial capital, making it ideal for budding entrepreneurs with limited resources. The status also imposes reduced accounting and tax obligations, simplifying operations.
Who can become an auto-entrepreneur in France?
In principle, the micro-enterprise regime is open to all. In fact, the conditions to benefit from this status are as follows:
- Be a natural person, not a business
- Be an adult or an emancipated minor
- Be of French nationality or hold a visa/residence permit allowing you to work in France
- Have an address in France
- Plan to carry out a commercial, artisanal or liberal activity
There is, however, a limit to this principle: certain professions are incompatible with this status. Indeed, the exercise of certain activities is not possible within the framework of a micro-enterprise:
- Agricultural activities falling under the MSA (Mutualité sociale agricole, an agricultural social mutual organisation)
- Activities covered by real estate VAT
- The rental of unfurnished or professional buildings
- Artistic activities;
Certain regulated liberal activities falling under the CIPAV (Caisse Interprofessionnelle de Prévoyance et Assurance Vieillesse is a Public Pension located in Paris)
Please note: the exercise of certain regulated professional activities requires being able to demonstrate a specific qualification. This is the case for construction activities, hairdressing and aesthetics activities, medical and health activities or even certain artisanal food activities (pastry, bakery, butchery, etc.).
Furthermore, to maintain their status, the micro-entrepreneur must respect the legal turnover thresholds. These ceilings differ depending on the nature of the activity carried out:
- 188,700 € for activities selling goods and providing accommodation
- 77,700 € for BIC or BNC service provision activities.
When these thresholds are exceeded for 2 consecutive years, the self-employed person loses the benefit of the simplified regime and switches to the real tax regime.
How to create a micro-enterprise?
1. Declare the Start of Activity: Complete the online start-of-activity declaration form, or employ an authorised service provider for assistance.
2. Provide the Required Documents: Submit essential documents like a copy of your identity, proof of address, a sworn declaration of non-conviction, and any required diplomas or certificates.
3. Registration: Registration is automatic upon declaration and document submission. This enrols you in the National Business Register (RNE).
4. Take Out Insurance: Depending on your activity, acquire the necessary professional liability insurance.
5. Open a Dedicated Bank Account: If your turnover is below 10,000 € for two years, open a separate account for business transactions.
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Establish an invoice for each service provided
Issuing proper invoices after each service is crucial. This legal document outlines service details, payment terms, and deadlines. It serves both accounting purposes and acts as documentation in potential tax audits.
Like any entrepreneur, the micro-entrepreneur is required to issue proper invoices at the end of each service or sale. This is an important legal document since it sets out the conditions for carrying out the service or transaction, as well as the deadline and terms of payment. It is also an accounting document to keep for bookkeeping purposes and to present in the event of a tax audit.
To be legally valid, the invoice must include a certain number of mandatory information:
- Personal and professional information of the micro-entrepreneur: name, first name, professional address, email, telephone and SIRET number
- Customer contact details: name or company name and address
- The date and number of the invoice
- The nature and details of the service or transaction
- The total amount excluding tax
- The deadline and terms of payment
- The words “VAT not applicable, art 293B of the CGI”
- Mention of compulsory professional insurance
Please note: for each missing or inaccurate statement, the self-employed person is liable to a tax fine of 15 €.
Declare your turnover and pay your taxes and charges
Under the micro-enterprise regime in France, tax and reporting duties are streamlined. Unlike other business forms, auto-entrepreneurs aren’t mandated to submit online profit declarations. Instead, they have two reporting obligations: monthly or quarterly turnover declarations, based on their chosen frequency. This declaration covers social security contributions and, if opted for, income tax, along with the professional training contribution.
Additionally, there’s an annual income tax (IR) declaration, wherein the auto-entrepreneur discloses their total turnover for the calendar year. This simplified process is one of the key attractions of the auto-entrepreneur status, reducing administrative burdens and allowing entrepreneurs to focus on growing their ventures.
What is the tax regime for self-employed people?
From a tax perspective, the micro-entrepreneur benefits from the micro-tax regime. Unless there is an option for the final payment regime, this regime applies automatically as long as the entrepreneur respects the legal turnover ceilings. Guiding self-employed people in this choice is therefore very important.
Income tax
If the micro-entrepreneur has not opted for the final payment, the taxable income is determined after the application of a flat-rate deduction on the turnover. The rate of reduction varies depending on the nature of the activity carried out:
- 71% for activities selling goods and providing housing
- 50% for service provision activities falling under the industrial and commercial profits regime (BIC)
- 34% for service provision activities falling under the non-commercial profits regime (BNC)
Once taxable income has been calculated, the amount of tax is determined using a progressive scale.
If opting for the final payment, the micro-entrepreneur pays income tax and social security contributions in a single payment. This is a single deduction made from the turnover generated. The income tax rate again depends on the nature of the professional activity:
- 1% for sales of goods and accommodation services
- 1.7% for BIC services
- 2.2% for BNC services
Basic VAT allowance
Entrepreneurs operating under the micro-enterprise regime are automatically exempt from value added tax. We are talking about a franchise on a VAT basis. They do not charge it to their customers and therefore do not declare it.
To benefit from this exemption, certain turnover thresholds must not be exceeded:
- 91,900 € for activities involving the sale of goods and the provision of housing
- 36,800 € for BIC and BNC service provision activities
Social regime of auto-entrepreneur in France
Social contributions for auto-entrepreneurs are based on turnover rather than profits, ensuring access to vital social protections. The rate is contingent on the nature of the activity and encompasses health, disability, family allowances, and pension benefits.
These contributions are calculated by applying a fixed percentage to the actual revenue received. If the turnover is zero, no payment is required. The mandatory components of the social package comprise health-maternity insurance, disability-death coverage, family allowances, generalised social contribution (CSG), contribution to the repayment of the social debt (CRDS), basic pension, and supplementary pension.
The social security contribution rates are as follows:
- 12.3% for housing sales and supply activities
- 21.1% for furnished rental activities, service provision, and liberal professions under the SSI
- 6% for rental activities of furnished tourist accommodation
- 21.2% for liberal professions governed by the CIPAV
In exchange for these contributions, an auto-entrepreneur in France enjoy comprehensive social protection, including coverage for health expenses, maternity or paternity leave, sick leave allowances, retirement benefits, family allowances, disability and death insurance, as well as access to unemployment benefits through ATI (Assurance Temporaire Invalidité).
Pros and cons of being an auto-entrepreneur in France
Advantages
Simplicity and Speed: Easy creation and management processes make it ideal for small-scale projects.
Low Financial Investment: It requires minimal capital, making it accessible for entrepreneurs with limited resources.
Flexibility: You can combine it with other activities or employment.
Disadvantages
Limited Growth Potential: Not suitable for high-growth ventures due to low legal turnover thresholds.
Reduced Social Protection: Benefits are lower compared to traditional employment, requiring additional insurance.
Confusion of Assets: Personal and professional assets aren’t distinct, potentially exposing personal assets to professional debts.
Final notes
Becoming an auto-entrepreneur in France offers a straightforward path to entrepreneurship, especially for small-scale ventures. Its accessibility and simplified processes make it an attractive option for budding entrepreneurs. Understanding its nuances and obligations is key to making the most of this status. So, take the plunge and embark on your entrepreneurial journey in the vibrant landscape of France!
