So you’ve moved – or are moving to – France and plan to work for yourself. Registering under the micro-entrepreneur (formerly known as ‘auto-entrepreneur’) banner is the easiest way to kick off your small business activities. This means that tax and accounting rules are simplified, and you can do all of your reporting online, without needing an accountant.However, there are some key things you need to know before registering as micro-entrepreneur (ME).
The micro-entrepreneur name can only apply if you’re going it alone as a sole trader. So it’s perfect for many freelancers, for example. If you intend to have a business partner, have people work for you, or would prefer to be running your business through a company structure, you’ll need to register under a different business taxation system known as regime réel. Under this, you can, for example, establish a private limited company.
When you register for ME status, you’ll need to select which category your business activity falls under.
Commercial: This is relevant if you’re selling goods, objects, foodstuffs or providing accommodation such as hotel rooms or a B&B.
Craft or Artisanal: This is for you if you’re creating and marketing your own products. Depending on the specific activity, you may need a professional qualification that is recognised in France.
Liberal: This is the right choice if you’re independently providing a non-agricultural, non-commercial service.
Some business activities cannot be registered as micro-entrepreneur, or may have certain conditions set against them. You can find the full list of jobs and their categories and conditions here. Note that although the name has now changed to ‘micro-entrepreneur’, you will still find some official sites and resources referencing the former name.
This is not an issue if you have modest earning expectations when starting out, but it’s important to note the turnover limits under ME, and keep tabs on your earnings if your small business starts to take off! If you go above your ME activity’s turnover limit in a year, you no longer qualify as micro-entrepreneur and need to move to another business taxation category, such as the regime réel. The good news is the authorities are somewhat lenient if your earnings go over the limit as a one-off in a year. However, they won’t show leniency if this happens in your very first year of trading!
The earning limits, as of May 2018, are as follows:
• Commercial: €170,000
• Liberal business: €70,000
• Craft/Artisanal: €70,000
Until recently, MEs could not charge or recover VAT. This is still the case if you’re earning a modest income, so just remember to declare on all of your invoices that VAT doesn’t apply.
However, following this year’s increase in ME earning limits, you now must charge VAT if your turnover hits more than €33,200 for liberal or craft businesses, or €82,800 for commercial ones. However, you still remain ME up until your €70k or €170k threshold. Got it?
It’s now a requirement to have a dedicated bank account for all of your ME-related transactions. This must be separate from your personal, everyday bank account. The change came in a couple of years ago as a means to tackle social security contributions fraud. However, don’t be pressured by your bank into opening a ‘professional’ (and often pricey) business bank account. You don’t need one. The rules state that a normal, everyday personal bank account in your own name, dedicated to ME-only transactions, is perfectly fine to use; and in most cases, it is also a lot cheaper.
However, a professional business bank account does come into play as a requirement if you are setting up a company structure under regime réel.
Self-employed and small business owners in France love the ME system due to its accounting simplicity compared to the usual bureaucratic hoops that exist in French administration. MEs don’t need to prepare a set of annual accounts, but they do need to keep track of the basics.
These include keeping a log of all invoices issued, work-related expenses. This log could be a paper journal or an Excel workbook.
These records will be called upon when it comes time to pay your taxes and social insurance contributions. When you sign up as ME, you can choose to pay your social security contributions monthly or quarterly. The deadline for paying your taxes will depend on which tax regime you use: micro-social or micro-fiscal.
It’s worth noting that when it comes to declaring your turnover, you only need to enter the amount of cash actually received in that period. This means that if you have outstanding invoices when it comes time to report, those amounts aren’t included.
If you don’t have any earnings in a declaration period, you won’t have to pay any charges, but you do still need to log in to the ME portal and declare your €0 turnover. You can earn nothing for a maximum of two years before you are no longer eligible to be ME.
Beware of official-looking letters with accompanying invoices for random amounts. Many new MEs report receiving a lot of junk mail from scammers targeting newbies, who pose as official-looking bodies. These are actually private companies requesting immediate payment for what are nothing more than random, commercial offers of dubious value, such as being listed in completely optional directories.
This is not applicable to all MEs, but many of those classified as artisans are required to take a general business training course (in French), usually over a period of a few days. The course can be online or face to face. While this is sometimes seen as a money-making scheme in ME circles, the official intention is to provide some essential lessons to new business owners and so maximise their chances of success.
Have you run your own business in France? Share your thoughts in the comments below, or answer the questions here to be featured in an interview!