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Micro-Entrepreneur Business in France

  1. What is a Micro-Entrepreneur?
  2. Micro-Entrepreneur Business Registration
  3. Micro-Entrepreneur Tax Regimes
  4. Should You elect for Micro-Entrepreneur Status?
  5. Micro-Entrepreneurs and VAT
  6. Payment of Taxes and Social Insurance
  7. Running a Chambre d'Hote

1. What is a 'Micro-Entrepreneur'?

One of the most popular approaches to setting up a business in France is as a micro-entreprise or auto-entrepreneur.

Their popularity is generally because the formalities of business registration are easy to accomplish and the tax and accounting rules are less painful than other forms of business status.

Since 2016, for new business-start-ups these two business statutes have been merged, and they are now referred to officially as micro-entrepreneur.

What then is a micro-entrepreneur? We can distinguish a number of key characteristics.

i. Tax Status

First, a micro-entrepreneur is not a legal business structure – it is a specific tax status that benefits from simple tax and accounting rules.

It is only available to someone who is self-employed as an Entreprise individuelle (EI). That is to say, someone running the business as a sole trader, not through a limited company.

Accordingly, it is not available if you propose to run your business through a private limited company - such as a EURL or SARL - or other form of French company structure.

So, if someone says to you they have micro-entreprise/auto-entrepreneur status, what they mean is they are actually an Entreprise Individuelle (EI) that has chosen to be taxed as a micro-entrepreneur, rather than being taxed under the other main form of business taxation, called the regime réel.

We examine the differences between the micro-entrepreneur tax regime and that of the regime réel in later pages.

ii. Pay As You Go

There is no minimum level of social security contributions payable, in the same manner as occurs with other business statutes.

You pay your social insurance as you go, based on sales, and if you do not have any sales (actual income received) in a particular period (month or quarter) then you will pay none for that period.

Only if you declare no turnover for a period of two years do you lose the status.

iii. Accounting

A micro-entrepreneur is not required to keep any books of accounting, other than a day-book giving details of income received, although commercants (traders) are also required to keep a book registering their expenditure.

This simple accounting rules is often cited as one of the main advantages of running the business as a micro-entrepreneur, as there is no need to employ an accountant. That said, the use of an accountant is never compulsory; you can do it yourself if you feel you are competent enough to do so.

iv. Turnover Limits

The third important characteristic is that micro-entrepreneur tax status is only available if the business does not exceed certain turnover (sales) limits.

These turnover limits depend on the type of business activity you pursue.

In this respect the rules make a (rather bizarre!) distinction between those whose business activity is 'service' or ‘professional’ based, and those main activity is 'sales'.

The figures below are those for 2017.

  • In a service based business, or a 'professional' activity, and for unclassified gîte accommodation the turnover cannot exceed €33,200 per year.
  • Those whose main activity is either sales based, cafe, restaurant, hotel, chambre d'hôte and classed gîte accommodation, have a turnover limit of €82,800 per year.

In the first year of business the turnover limits are applied pro-rata to the length of time the business has been in operation. Be careful on this point, as it is often overlooked by new business start-ups.

Nevertheless, some limited tolerance is permitted in exceeding the limits after the first year, but you are unable to to so for two consecutive years.

Under these second tier limits a business retains micro status provided their turnover does not exceed €91,000 (sales) or €35,200 (services) for more than one year.

If the business does both types of activities (service and sales) then it can still be classified as a micro provided total business revenues do not exceed €82,800, and the specific service based activity does not exceed €33,200 a year.

This is notably the case with those in the building trades, where the sale of building materials receives the upper limit, whilst the building construction activity itself is restricted to the lower rate.

v. VAT

A business adopting the tax status of micro-entrepreneur cannot charge VAT on their goods or services, and neither can they recover VAT paid on purchases.

If you wish to charge VAT you cannot adopt micro-entrepreneur tax status.

vi. Exclusions

Finally, certain types of business are excluded from micro-entrepreneur status.

They include those who buy and sell property on a professional basis, estate agents, developers, finance companies and hire companies, with certain other limits on artists, writers, scientific and sports based activities.

You need to check with your accountant, or your local Chambre de Commerce/Metiers, on the full list.

In addition, the letting of unfurnished accommodation is taxed under rules of revenus fonciers, which you can read about in our pages on Letting Property in France.

Next: Micro-Entrepreneur Business Registration

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