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Small Business Owners Lose Accounting Tax Relief

Tuesday 03 February 2015

Certain tax advantages granted to small business owners who use an accredited accounting centre are to be abolished.

Many small business owners in France are affiliated to a network of small business accounting centres, called Centre de Gestion Agréé (CGA).

Some accountancy firms also have this status.

The role of these centres is to provide accounting, training, business and tax support.

Only those businesses who are taxed through the régime réel basis of taxation (actual costs and revenues) would need to use such a centre

Micro-entrepreneurs who are taxed on the basis of a fixed costs allowance (régime forfait), would have no need for them.

The average cost of affiliation to a centre is around €200 a year, although it can vary from around €50 to €900, depending on the services provided by the centre.

In return for affiliation, a business owner receives a number of tax breaks, some of which are now to be abolished.

i. Income Tax Deduction - First to go is a deduction in income tax, worth €915 a year. Earlier this year a report by the French National Auditor, the Cour de Comptes was critical of this advantage, which it stated was of limited value in improving affiliation to the CGAs, or the sincerity of business owners in the handling of their tax affairs! Of course, this benefit was only of any use if you paid any reasonable amount of income tax.

ii. Spouse Salary - Also being abolished is the right to the unlimited tax deductibility of the salary of a spouse of the business owner. In future, this deduction will have a ceiling of €13,800, as occurs for those who do not affiliate to a CGA. Once again, a benefit of only limited use to a minority of business owners.

iii. Rectification Period - Finally, the right to a shorter time lapse period of two years for tax rectification and recovery by the tax authority is removed. There will now be a three year period that applies to all businesses.

Nevertheless, all is not entirely lost, for CGA adherents continue to be exempt from the otherwise automatic increase of 25% in profit that is applied by the tax authority to other small business owners for the purposes of calculating liability to income tax.

For those not affiliated to a CGA, the taxman makes the automatic assumption that you are cooking the books!

These changes are planned to be operative from 1st January 2016.

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