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Small Business Owners Get Rates Review

Tuesday 04 December 2012

Auto-entrepreneurs have been granted an exemption from the payment of business rates for 2012, with a review promised for all small business owners.

The announcement by the government came very late in the day last month, as many tax offices had already sent out business rates demands.

So if you have received such a demand you will need to write to your local tax office seeking a 'dégrèvement' (relief) from the tax. The application will need to be made by 31st Dec 2012.

The reason for this approach is that the exemption does not apply to all auto-entrepreneurs; those who ran the same business under a different business status prior to 2009, but who later transferred to auto-entrepreneur status, do not get an exemption. It applies strictly to new start-ups.

Since the auto-entrepreneur regime was set up in 2009 those who have adopted this business status have not been liable for rates, due to an existing automatic entitlement to 3 years exemption for all new start-ups.

The rates in question is the Contribution Economique Territoriale (CET), a tax made up of two parts, of which only one part – the Contribution Foncière des Entreprises (CFE) – is payable by small business owners, such as auto-entrepreneurs.

In 2009 this tax replaced the former system of business rates, called the taxe professionnelle. In both cases it is a tax based on the rateable value of the property used for the business activity.

The introduction of the CFE has not met with universal approval, with the most vocal of the critics the auto-entrepreneur movement itself, who have expressed their disquiet that the tax does not operate on a progressive basis relative to turnover.

There is also widespread concern about the variations in the level of the business rates across the country. Local councils are responsible for determining the level of the CFE, albeit within a minimum and maximum range set by the government.

In most cases, for those who work from their home the bill is no more than a few hundred euros a year, but councils can charge up to a maximum of €2,000.

In their statement on the cancellation of the imposition of the tax for 2012 the government stated that, "it is clear that the imposition of auto-entrepreneurs for the CFE was neither prepared nor coordinated by the previous government."

As comforting as this may sound it omits to say that the government is planning an increase in the level of social security contributions payable by auto-entrepreneurs.

A report on the taxation (including social security contributions) of auto-entrepreneurs is due before the end of the year, and it is envisaged that some increases will be introduced commencing January 2013.

While auto-entrepreneurs will no doubt give a sigh of relief that they have been exempted from business rates for a further year, the same does not apply to those small business owners who do not have this business status. They remain liable for the tax, which has shot up substantially this year as cash strapped local councils seek ways of bolstering their revenues.

Local councils do have the discretion to grant a general 50% reduction in the tax for those businesses with a turnover less than €10,000 pa, but it seems few have decided to do so.

As a result, the government has been forced to commit to a review of the liability of all small business owners to rates, stating recently that, "the previous government manifestly failed to anticipate all the consequences of the reform of business rates" and that "every effort will be made, as soon as possible, to reduce the impact on small businesses."

Pending this review local authorities have been given discretion to reduce the CFE bill for 2012, and business owners have been given additional time to pay their rates bill. Those who consider they may be eligible should contact their mairie.

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