Tax break for the self-employed

AUTO-ENTREPRENEURS have had a last-minute reprieve from a new tax that could have seen some people with tiny incomes, or none, pay up to €2,000.

A body representing people registered under the simple business regime has negotiated a change in the law with Frédéric Lefebvre, the small busness minister.

The president of the Fédération des Auto-Entrepreneurs (FEDAE), Grégoire Leclercq, said: “Parliament has rectified the law, with retroactive effect for 2010, which allows for all auto-entrepreneurs to be exonerated. We are very pleased. We were alone in this fight.”

Auto-entrepreneurs who started their businesses in 2009 (the first year of the regime) were being asked to pay cotisation foncière des entreprises (CFE, a new replacement for the professional tax, TP) by mid-December 2010, unless, when they set up, they had chosen an optional income tax system, the micro-fiscal. Even those who had registered a business but had no turnover were originally expected to pay.

While all auto-entrepreneurs pay no CFE in the year of setting up, now all of them will also benefit from a three-year exoneration available to those on the micro-fiscal.

What is more, before 2013, when the first payments will now fall due, the FEDAE hopes to negotiate a change in the way the CFE is calculated, making it proportional to turnover. Currently it is based on the theoretical rental value of the building where you work (usually the home for auto-entrepreneurs) to which a rate set by mairies is applied.

While it is possible to state that you only use a set portion of your home for work, councils set a minimum on the tax levy, which FEDAE say can vary from €200 to €2,000.

FEDAE believes making the tax proportional to turnover will be more in the spirit of the auto-entrepreneur, of which one main element is social charges paid at intervals throughout the year based strictly on turnover (and an option to pay income tax in the same way, the micro fiscal).

Many autoentrepreneurs are retired or have a salaried job, and set up small businesses for extra money on the side.

Mr Leclercq said: “The new tax is similar to the TP, but when they created the auto-entrepreneur regime, the government said, ‘Forget what was done before; we’ve created something new for you’. The whole philosophy was: you have no turnover, you have nothing to pay; you have a bit of turnover, you pay in proportion to it.”

FEDAE argued that the new tax, as originally planned, would kill off the auto-entrepreneur scheme, which has seen about 600,000 sign up, encouraged by simpler-than-usual administrative procedures, such as being able to register the business online. Many people did not take up the micro-fiscal, especially if they fall below the income tax threshold and expected to stay under it with a small income as autoentrepreneurs.

People doing an “artisan” type job of a mainly manual kind are permanently exonerated from CFE (these only make up 12 per cent of auto-entrepreneurs).

To qualify, your business must also not use very “sophisticated” equipment requiring a large capital outlay and it should not be based on “speculating on raw materials”, thus, ruling out bakers or butchers, according to APCE, the official entrepreneurship agency.