8. French Business Banking, Accounting & Insurance
8.2. Business Accounting in France
When starting a business the advice of a good French commercially orientated accountant is clearly desirable, if only to get a proper understanding of your fiscal and social security options and obligations.
However, the field is very wide, and not all accountants necessarily have the skills and orientation that, as a business owner, you might seek.
Some have a reputation to keep and their word is generally respected by the tax authority. Others may lack a degree of credibility and fail to convince.
Do not be ‘penny wise and pound foolish’ when it comes to choosing your professional advisors. Select carefully and negotiate the fee.
Try also and find a commercially orientated accountant. Book-keeping is easy, but what you want as a new business is more than that. Tax advice in particular.
In order to keep fees to a minimum, one approach you might wish to consider is to do some of the basic record-keeping yourself. Preparing a monthly spreadsheet analysis of expenses and revenues for submission to the accountant would be one approach. Discuss the issue with your accountant, and ask them what they want from you.
Be very cautious about engaging accountancy advice outside of France, if only because of difficulties concerning your legal right of redress in the event of professional negligence by the accountant. Accountants with no legal status in France operate outside of the jurisdiction of the French legal and regulatory authorities.
We considered 'fake' accountants in France in our Newsletter article Choose Your Accountant with Care.
As a small business, the accounting requirements of the statutory authorities are not severe, particularly if you do not establish a limited company.
As a sole trader it should be sufficient to maintain a day-book of receipts and expenditure, together with all the relevant bills and invoices.
A small business can opt for a tax regime called micro-entrepreneur/auto-entrepreneur under which there is no need to produce detailed accounts for the tax authorities – it is enough maintain a day book of expenditure and receipts.
Under this tax regime, when you make your tax declaration you simply state your turnover and you will be given an automatic abatement before income tax and social security contributions are charged.
There is no need to present the financial records of the business, although you will need to keep them available for possible inspection.
As the business grows (and particularly if you engage staff, become a limited company, or become liable for VAT) it may be necessary to change your tax regime, when there will almost definitely be a requirement for double entry bookkeeping and the need for an accountant.
A business start up can expect to pay circa €1,000 per year for basic accountancy support from a local firm, although much will depend on the company and your business. The support is likely to include preparation of the annual tax return.
One other option is to become affiliated to an accredited accounting centre, called Centre de Gestion Agréé (CGA). The basic affiliation fee is around €250, but varies across the country.
The CGA will provide you with business and accounting assistance and advice, but perhaps their main advantage is that if you do affiliate to a CGA you are granted some relief on your taxation liability.
This concession actually operates in a rather perverse way, because if you do not use a CGA, your net income is multiplied by 1.25 for the purposes of calculating your liability to income tax, although this does not apply to a micro registered business.
Your social security contributions will be based on your actual profit, not the above multiple.
In addition, there is also tax relief on any salary that may be paid to your spouse if he/she is part of the business.
A CGA also grants you a deduction in income tax of up to €915 to set against your accounting and affiliation costs. The formula for the relief is somewhat complex, being two-thirds of your costs up to €915. Additional costs above the relief remain deductible.
By way of an example, assume you are liable for €1,100 in income tax and that your accounting costs amount to €750 (being €600 in accounting fees and €150 for your membership of a CGA).
You will be able to deduct €500 (i.e. 2/3 × €750) from your income tax. You will therefore only pay €600 in taxes (€1,100 - €500 ). The amount of the tax reduction (€500) is reintegrated into the determination of your profit. In other words, of the €750 in accounting costs 2/3 is a tax reduction and 1/3 is a deductible expense.
However, the tax breaks of a CGA are only available to those who pay tax under the regime reel. So they are not available if you opt for micro-entrepreneur tax status.
There is also strong evidence that if you affiliate to a CGA, you are less likely to be subject to an inspection or control by the tax authorities!
Do not assume from this that the CGAs are unofficial spies for the French tax authority. They are not, but that is not to say that the service offered by some is better than others. You have to do your research, ask the right questions, and make a considered choice.
Suitably authorised accountants can act in lieu of a CGA (comptable conventionné), with full CGA benefits.
In the first year of starting the business, you are permitted 5 months grace to affiliate to a CGA, allowing you to benefit from the concession for the whole year. You can also affiliate during the year if you exceed micro turnover limits, and you get the benefit of affiliation for the whole year.
A business using a Centre de Gestion is obliged to accept a cheque payment system, a rule that many consider is honoured more in the breach than the act!
Whichever approach you take to accounting, you are required by law to retain all accounting records for 6 years.
If you do your own accounting, and it is computer based, then you are obliged to ensure that the archiving system maintains the authenticity and reliability of the records.
In the draft Finance Act 2021, the government is proposing to phase out the multiplication of income by 1.25 over a three-year period so that there will be no penalty for not using an accredited accountant. See our Newsletter article Tax Treatment of Accounting.
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