Make sense of... The micro-entrepreneur

The micro-entreprise small business regime – which rarely remains unchanged from year to year – is set for big changes again...

24 January 2018
By Oliver Rowland

Those working under the popular micro-entreprise small business regime are used to adjusting to change – and 2018 is no exception.

New changes include a doubling of permitted earnings thresholds and a phased abolition of the RSI which used to organise their social security.

Most micro-entreprises are one-person bands (although it is possible to have an employee) and the aim of the regime is simplicity in accounting and tax and social charge payments as compared to other set-ups.

The micro-entreprise was created as a simplified regime in 2003 and had a boost when the auto-entrepreneur launched in 2009 – an ultra-simple version with quick online set-up and ‘as-you-go’ payment of social charge cotisations (optionally income tax too via set percentages applied to turnover). The aim was to encourage people to try self-employment, including part-time, to complement a salary or pension rather than perhaps working ‘on the black’.

Like the alternative réel regime the business operates under the owner’s name rather than as a separate legal entity. However the réel requires paying estimated cotisations in advance with refunds or top-up payments later after annual income declarations have been made, and it involves minimum cotisations.

Over the years some simple aspects of the auto-entrepreneur, such as not having formally to register with a chamber of commerce or trade and not having to do a set-up course, were removed after complaints from artisans on the traditional regimes. Then, 2016 saw the auto-entrepreneur abolished as it merged into one revamped micro-entreprise, retaining the auto-entrepreneur’s simplified social charges.

As well as having a simplified tax and social charges systems, the micro-entreprise also has turnover ceilings above which it must switch to réel. This year these are doubled – however, confusingly, the threshold for having to charge VAT, which used to be the same, has not changed. This means it is now possible for some micro-entrepreneurs to have to charge VAT.

The president of the Fede­ration of Auto-Entrepre­neurs (FEDAE), Grégoire Leclercq, told Connexion the regime remains attractive for many people with a small business idea (as long as they do not have a lot of expenses) despite extra complexity over the years. He welcomed the raised ceilings while regretting the VAT complication. 

The ceilings are now €70,000 for services (previously this was €33,200) and €170,000 for sales (up from €82,800). The higher ceiling for sales accounts is to allow for extra expenditure.

Any firm whose income goes over the threshold for two years running must come out of the regime (the former system involved ‘tolerance thresholds’).

There are two tax options, the latter only available to those whose total household income is under certain levels (variable on family size):

  1. Declare annually under the tax bands, benefiting from set expense allowances of 71% for sales, 50% for services or 34% for professions libérales.

  2. Versement forfaitaire libératoire – these are monthly or three-monthly payments based on turnover, at 1% for sales, 1.7% for services and 2.2% for professions.

Social cotisations are levied as for the versement forfaitaire, based on fixed percentages which have slightly dropped this year, taking into account a rise in CSG but a promised lowering of cotisations towards family allowance and health.

The new 2018 cotisation rates are as follows: sales: 12.8% (from 13.1% last year), services: 22% (from 22.7%), and professions lib’erales: 22% (from 22.5%).

Micro-entrepre­neurs also have to pay a ‘professional training contribution’ and small levy towards the expenses of the chambers of commerce and trades, both levied at low amounts (less than 1%).

Some analysts in the business press note that those choosing to stay in the regime well above the old thresholds because of its simplicity may however end up paying more in cotisations than under the réel (because the more complex réel social charge calculations limit rises above certain income levels).

People are encouraged to set up at the lautoentrepreneur.fr site which was launched along with the auto-entrepreneur and it is set for a revamp in 2018. Click on Comment adhérer.

A smartphone application is planned for declaring turnover and paying cotisations.

As part of the set-up those in sales need to be registered (immatriculé) at the local registre des commerces et sociétés and artisans on the répertoire des métiers at the chamber of trade. However they are exempt from registration charges for this.

Artisans must do a short set-up course and in certain sectors you must have relevant qualifications, experience and/or insurance. You are required to have a specific bank account for the business but it does not have to be a ‘professional’ one.

Another useful site about business statuses is afecreation.fr

As of this year the RSI social security body for the self-employed is being ‘progressively’ abolished over two-years. Micro-entrepreneurs can, for example, expect in the future to be attached to a normal ‘Cpam’ for healthcare.

The government promises most new micro-entreprises will benefit from exemption from cotisations in the first year. This is now expected from January 2019, and to be in total  for businesses with a turnover of up to €30,000 and partially for those of up to €40,000. 

Also from 2019 micro-entreprises with turnover of less than €5,000 will be exempt from the CFE business tax. This aims at resolving recurrent complaints that this tax is excessive for very small ‘top-up income’ businesses. Rates for it vary around the country, however it is usually relatively low for small businesses, especially those operating from home and it is not levied in the first year of trade.

The image here was drawn by artist Perry Taylor. For more of his work see www.perrytaylor.fr

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