Independent Contractor setup and freelancer taxation in France

Independent Contractor setup and freelancer taxation in France

You need to register your own company if you want to work as a freelancer in France.

You may choose between "société pluripersonnelle" (SA, SAS, SARK, SNC, etc.) and "société unipersonnelle" (SASU, EURL, "auto-entrepreneur"). If your service sales are more than €176,000 or €72,500, you can only form a "société pluripersonnelle" or an EI (independent company).

If you want a "société unipersonnelle," you can choose between EURL (the partner doesn't get employment benefits but has fewer accounting requirements) SASU (the partner is considered an employee) and "auto-entrepreneur."

How can an individual in France become an "auto-entrepreneur"?

In France, getting an auto-entrepreneur status is easy and only takes a few steps.

First, you must complete an online form on autoentrepreneur.urssaf.fr . For this step, the only thing you need is a scan of your ID. Once you get the declaration, the CFE (Centre de formalités des entreprises) will look at it based on the type of work you do.

You can set up an EIRL, which lets you keep your business assets separate from your personal ones.

About ten days after making a request, if the CFE agrees to give you auto-entrepreneur status, you will be given an identification number (SIRET) and a code to qualify your activity (APE). With the SIRET number, you'll be able to send out bills and get paid.

Don't forget to open a separate bank account to keep your business and personal money separate.

Compared to other types of independent contractors, auto-entrepreneurs have less paperwork to do. They don't have to register as traders, and the process of becoming a company is sped up.

Alternatively, you can use Abillio - invoicing and tax compliance service for cross-border freelancing. In Abillio's case, you don't need to establish a legal entity, open bank account or apply for VAT - with Abillio's company-as-a-service solution you can start your freelancing business right away. Register your free account here >

What is a micro-entreprise?

The micro-entreprise is the little sister of the entreprise individuelle. To say it simply, a micro-entreprise is an entreprise individuelle that benefits from an attractive social system.

An entreprise individuelle with a simplified scheme

The micro-entreprise is an entreprise individuelle that benefits from a social system, a tax scheme and reduced accounting obligations.

As an entreprise individuelle, a micro-entreprise has no legal personality of its own. You and your company are the only one and same legal entity. The obligations and rights of your auto-entreprise are yours.

As you will have understood, if your micro-entreprise is you, then you cannot have any partner in your micro-entreprise.

However, you can have employees, even if the micro-entreprise is not really adapted to hiring.

As it has no legal personality, the micro-entreprise also has no capital of its own. You are responsible for the debts of your micro-entreprise. If your business gets into debt, you get into debt. The micro-entreprise is therefore not adapted to the implementation of risky activities. If your activity presents financial risks, even moderate, consider subscribing to the EIRL option (Entreprise Individuelle à Responsabilité Limitée).

Turnover: limits that shall not be exceeded

To benefit from the micro-entreprise system, your turnover must not exceed certain amounts.

If you exceed these limits two years in a row, you leave the micro-entreprise scheme and are subject to the traditional entreprise individuelle scheme as of 1st January of the following year (i.e. in 2021 if you exceeded the threshold in 2019 and in 2020).

The limit below which you must stay depends on the activity you are undertaking:

– €72,500 euros ex-VAT for services and self-employed activities.

– €176,200 euros ex-VAT for commercial activities of selling goods and accommodation.

But be careful, the application of these thresholds involves subtleties. Beware, for example, in your first year of activity, these thresholds are prorated !

What activities can be carried out as a micro-entreprise?

As a micro-entrepreneur, you can carry out the following activities:

  • a freelance activity such as a consultant, coach, designer, iconographer, and so on…
  • a commercial activity of purchase and resale or sale of services (registration to the Registre du Commerce et des Sociétés – RCS = Trade and Companies Register)
  • a craft activity (registration in the Répertoire des Métiers) such as carpenter, baker, hairdresser, and so on…

You can also combine several activities. However, in these categories, some activities are not eligible for the micro-entreprise scheme.

In particular, the following are excluded from the micro-entreprise scheme:

  • agricultural activities under the MSA
  • certain self-employed activities – related to justice, health, accounting or insurance for example
  • building rental activities
  • certain artistic activities
  • activities relating to VAT on real estate

As a micro-entrepreneur, am I subject to VAT?

As an auto-entrepreneur, you are subject to VAT but, below a certain amount of annual turnover, you benefit from a VAT exemption which makes you not liable for VAT. If you take advantage of the VAT base exemption, that means that you do not collect VAT from your customers. You therefore do not have to charge VAT. Therefore, you do not remit tax to the State, so you do not have to report it.

Here again, the thresholds not to be exceeded in order to benefit from this VAT “exemption” vary according to your category of activity:

• € 94,300 for commercial or accommodation activities.

• € 36,500 euros for service activities.

From the first day of the month in which you have exceeded the thresholds, you must charge VAT to your customers in order to remit it to the State.

Please note that there are also low thresholds:

• € 85,800 euros for commercial or accommodation activities.

• € 34,400 euros for service activities.

If you exceed these low thresholds two years in a row, but remain below the high thresholds, you lose the benefit of the VAT exemption. You become liable for VAT on 1st January of the third year.

If you exceed these limits, or if you apply for it, you no longer benefit from the exemption of VAT.

All the information on exceeding VAT thresholds and turnover limits is explained in our dedicated article.

To declare your VAT, you must notify your Service des Impôts des Entreprises (SIE = Corporate Tax Department) and subscribe to the VAT payment service in your professional area on the impôts.gouv.fr website.

You will then have to declare and remit VAT on a regular basis.

Alternatively, you can use Abillio - invoicing and tax compliance service for cross-border freelancing. In Abillio's case, you don't need to establish a legal entity, open bank account or apply for VAT - with Abillio's company-as-a-service solution you can start your freelancing business right away. Register your free account here >

Social charges

The social charges must be paid to URSSAF, which is the French organization that collects social contributions. It is a percentage that is based on how much money you make. The part of your paycheck that goes to things like maternity leave, health care, retirement, and training. Even if you work for yourself in France, you have to pay into the healthcare system.

How much you contribute to society will depend on what you do. It will go from 12.8% for buying and selling to 22% for everything else.

As a business owner, it's your job to pay your social contributions every month or every three months. No reminders are being sent to you that you have a duty. So if you set up a reminder, you won't have to pay late fees.

The two main micro-entrepreneur taxes will be income tax and business property tax.

Income tax

As soon as you have an income, you need to declare them. Many criteria are taken into account, like your family size, your family situation, your income level, the type of income…

But as a general rule, a single person earning around under €10,000 per year will not be taxable. Beware, that this doesn’t exempt you from declaring your income. The tax office will then determine if you are tax-exempt and will give you a tax notification stating that you are not taxable. This document can be very useful to receive some government aids from CAF for example.

CFE (Contribution Foncière des Entreprises)

It is the business property tax that every entrepreneur (not only micro-entrepreneurs) have to pay annually in December from the second calendar year of their activity. This also applies to people working from home or not having a dedicated office, like people working at a client location, etc.

You will very rarely receive a payment notification from the tax office. To pay this tax, you’ll need to create your professional online tax account on https://www.impots.gouv.fr/ and click on Espace Professionnel . This is your responsibility as an entrepreneur and a taxpayer to pay your micro-entrepreneur taxes on time (even without receiving notifications…).

You can request an exemption by email to the tax office via your online Professional Tax account if your annual turnover was under €5,000.

More on the CFE on the official website (translated in English).

Alternatively, you can use Abillio - invoicing and tax compliance service for cross-border freelancing. In Abillio's case, you don't need to establish a legal entity, open bank account or apply for VAT - with Abillio's company-as-a-service solution you can start your freelancing business right away. Register your free account here >>

Note: This information is from official sources and should not be considered as a substitute for legal advice. Always check official websites or consult a lawyer or tax consultant before taking action.

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