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
- Professional Insurance
- Second-Hand Sales
8. VAT (TVA)
8.1. VAT in France
France has a system of VAT (Taxe sur la Valeur Ajoutée -TVA) on the supply of goods and services in much the same manner as occurs elsewhere across Europe.
The general rate of TVA for most goods and services is 20% (2023), although lower rates apply for certain goods and services, eg, a rate of 10% applies for restaurants, cafés and hotel accommodation.
The tax is, of course, paid entirely by the consumer and businesses merely act as tax collectors, who invoice customers for VAT and then remit it to the tax authority, after deduction of the VAT paid on their purchases.
Not all sales will require a VAT charge. In particular, for business to business (B2B) sales you only charge VAT to business customers in France. For those based beyond French borders the invoice is 'hors taxe' (HT) as the VAT liability is transferred to the customer by what is called a 'reverse charge', when the business handles VAT in their own country. You merely invoice for the sum ex VAT, and put your VAT number on your invoice and state that the customer is responsible for the VAT charge.
The same rules apply where you are the purchaser, but the reverse charge mechanism is extended to certain domestic transactions. This is the case, among others, for deliveries of goods and services to oneself and subcontracting of work related to a property.
8.2. Micro-Entrepreneur VAT Turnover Limits
A micro-entrepreneur with only a modest turnover does not charge VAT, under a system called regime de la franchise TVA.
As a result, they are legally obliged to make that declaration on all invoices, with the statement 'TVA non applicable, art. 293 B du CGI.'
Neither can they recover VAT paid on purchases.
In order to quality for exemption from VAT there are basic turnover limits that apply, depending on the nature of your business, as follows (2023):
- Commercial sales and classified furnished accommodation - €91,900.
- Services, unclassified furnished accommodation and professions libérales - €36,800.
- Artists and authors - €47,600.
If your business is subject to both limits (as applies, for instance, to many builders), then the exemption limit applies for each part of the business. There are separate rules for an agricultural business and certain other professions, not considered here.
Some relief is available for those who only marginally exceed the threshold granting continuing exemption from VAT for a year, although this is not available for the first year of a new business. These limits are €101,000 for sales and €39,100 for services (2023).
In addition, the turnover limits correspond to a full year, and operate pro-rata for business activity less than one year.
As stated above, the maximum threshold for artists and authors is €47,600 and for other activities of artists/authors it is €19,600, plus tolerances for marginal exceeding in one year.
However, since 2018, these maximum VAT thresholds are half the turnover limits that allow you to hold micro-entrepreneur business status.
Accordingly, if you exceed the above VAT turnover limits you will need to charge VAT to your customers, even though you may continue to retain micro status.
In other words, charging VAT no longer excludes you from micro-entrepreneur status, provided you stay within the higher turnover limits permitted for this status.
In such circumstances it is often questionable whether there would any advantage in retaining micro-entrepreneur status, as VAT registration creates significant additional tax and accounting requirements. Nevertheless, you need to examine your cost structure and capital investment plans; accountants may only be too keen to switch you over to régime réel due to the fees they will earn.
Although a micro-entrepreneur can still maintain basic books of accounts if VAT registered, in practice more bookeeping will be required if VAT registered, and they are also required to use software or a cash register system that meets the conditions of being unalterable, security, storage and archiving of data.
Some business activities are exempt from VAT, notably the letting of unfurnished accommodation and furnished lettings, although chambre d'hotes and hotels may be liable, subject to services and turnover.
In your first year you will need to charge VAT for all sales in excess of the VAT threshold; in your second and subsequent years all sales will need to have VAT applied to them.
8.3. VAT Registration
There is no need to separately register your business in France for TVA, for you are given a TVA number at the time you set up your business, when you receive your commercial registration number, the 'SIRET' (Système d’Identification du Répertoire des ENtreprises), on which your TVA number (numéro de TVA intracommunautaire) is based.
If you decide you wish or need to opt for payment of TVA you simply need to write/send a mail to your local tax office - Service des impôts des entreprises. The quickest way is simply to use your 'messagerie' in your income tax account.
If you have sales of over €10,000 outside of France/In Europe, you need a European VAT number. (numéro de TAV intra-communautaire)
An official sample letter that you can use is available at Demande d'attribution d'un numéro de TVA intracommunautaire.
If you become VAT registered, for suppliers or customers based in Europe you have to complete a DES Declaration Europeenne de Services.
8.4. VAT Declaration
In terms of payment, in the first year payment is made in May for the previous year.
In the second and subsequent years, in July and December, you will be required to make provisional payments based on your previous declaration, although if, based on your previous declaration, the balance due is less than €1,000 none are necessary.
Credits higher than €150 are reimbursed (with delay!); in other cases they are imputed against future payments.
It is possible to go on-line using your Impôts business account to make the declaration.
However, our strong advice would be to contact a good VAT accountant, as it is not for the faint-hearted.
In your regular turnover declaration to URSSAF you declare your turnover net of the VAT charge.
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