Guide to Micro-Entrepreneur Business in France
- What is a Micro-Entrepreneur?
- Business Registration
- Social Security
- Income Tax
- Business Rates
- Status of Spouse
- Should You Elect for Micro-Entreprise Status?
- Payment of Taxes and Social Insurance
- Business Accounting
- Running a Chambre d'Hôte
- Multiple Business Activities
6. Status of Spouse
Where a spouse/civil partner plays a regular part in the running of a business, even though it may be run primarily by their partner they are legally obliged to be registered in the business.
In part this is to ensure the spouse has some form of social protection in the event of the death of their partner, but it is also to control the use of undeclared labour.
A law passed in 2018 reinforces the penalties for a failure to declare a spouse, as we set out in Declaration of Spouse in a French Business.
Where the spouse is involved in the running of a micro-entreprise business there are three options:
i. Separate Registration - As a general rule, it makes no sense for the spouse to also register separately as a micro-entrepreneur, for although each may perform different roles there is only one business entity and sales.
That said, if there are two distinct set of products or services that can be invoiced separately then separate registration might make sense.
ii. Salaried Employee - It is possible for the spouse to be a salaried employee of the business, but the social security obligations of this option are such that it would be an expensive and unnecessary route to take; the salary and employment costs of the spouse would not be tax deductible, as would be the case in a company structure.
iii. - Associate - A more sensible solution is for the spouse to become a conjoint collaborateur in the business.
This status is open to both married couples and those in a civil partnership, but not to those merely cohabiting together.
The social security and tax implications of conjoint collaborateur status are considered below.
6.2. Social Security Contributions
In terms of social security contributions (cotisations) a conjoint collaborateur pays at the standard fixed percentage micro-entrepreneur rate that applies for the type of activity.
That is to say, for 2018 the basic rates are as follows:
- Commercial Activity - 12.80%
- Service Activity - 22.0%
- Liberal Activity - 22.0%
However, unlike the main owner who pays the fixed rate on 100% of the turnover of the business, the conjoint collaborateur has the choice of paying that standard fixed rate on either:
- A lower percentage of the total turnover of the business, or;
- A notional profit figure.
The choice of which option to use is up to the business owner and their spouse. You need to carefully do your maths, as the differences can be significant.
i. Percentage of Turnover
Under this option the spouse pays cotisations on either 58% or 46% of the turnover of the business. The 58% figure applies to all business activities except for those in one of the CIPAV affiliated professions libérales who pay on 46% of the total turnover.
So the formula for determining the amount payable, depending on business activity, is as follows:
- Commercial Activity - Turnover x 58% x 12.80%
- Service Activity - Turnover x 58% x 22.0%
- Liberal (CIPAV) Activity - Turnover x 46% x 22.0%
(The _cotisation'_rate for letting of a meuble de tourisme is 6%.)
The percentage rate of cotisations' will increase if the spouse opts to pay income tax with their social security contributions (see below).
ii. Notional Profit
The basis of the calculation with this option is a notional profit formula set by the government.
In technical terms the base figures are the percentages above, multiplied by one-third of the 'plafond annuel de la sécurité sociale' (being €13,508 in 2019), with a fixed tax abatement that is applied for costs - 71% for commercial activities, 50 % for service activities, or 34 % for CIPAV activities.
Thus, in the case say of a conjoint collaborator running jointly with her partner a commercial activity, the calculation is 12.80% of €26,488 (58% x €13,244/29%), which gives €3,390.
6.3. Income Tax
In terms of income tax the total income of the business is taxed as part of the total household income under the personal income tax system, although it is possible to opt for separate fixed percentage income tax deductions, which we set out in our section on Income Tax.
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