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
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% (2020), 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.
As a general rule VAT is not chargeable on imports and exports intra-business within the EEA, provided the businesses are VAT registered.
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 (2020):
- Commercial sales and classified furnished accommodation - €85,800.
- Services, unclassified furnished accommodation and professions libérales - €34,400.
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 €94,300 for sales and €36,500 for services (2020).
In addition, the turnover limits correspond to a full year, and operate pro-rata for business activity less than 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 - €72,500 or €176,200, depending on your business activity.
In such circumstances it is questionable whether there would any advantage in retaining micro-entrepreneur status, as VAT registration creates significant additional tax and accounting requirements.
Although a micro-entrepreneur can still maintain basic books of accounts if VAT registered, in practice they are likely to need to maintain full accounts, 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.
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 to your local tax office - Service des impôts des entreprises.
An official sample letter that you can use is available at Demande d'attribution d'un numéro de TVA intracommunautaire.
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.
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