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Auto-Entrepreneur Turnover Thresholds Reduced

Thursday 04 July 2013

The government is proposing to reduce the turnover threshold for all auto-entrepreneurs, pending a broader reform of the different business tax regimes.

For those auto-entrepreneurs in a service based or ‘professional’ activity the turnover threshold will be reduced from €32,600 to €19,000; for those whose activity is ‘commercial’ their maximum turnover will be reduced from €81,500 to €47,500.

Once these thresholds have been exceeded over two successive years, the business will be required to operate under the ‘regime normal’.

In order to mitigate the impact of any increase in the level of social security contributions that might be payable, it is proposed there will be a transition period lasting 18 months during which the level of contributions payable will be progressively increased.

The government have dropped the idea of limiting the duration for which the auto-entrepreneur status can be held, as well as restricting the reforms solely to the construction sector, as was hinted by the Prime Minister, Jean-Marc Ayrault. Also abandoned are some of the other rather complicated proposals that were being floated by the Minister of Small Business, Sylvie Pinel.

Somewhat predictably the announcement has managed to anger both sides involved in the debate. The artisans have condemned the proposals as ‘too timid’, while the auto-entrepreneurs have attacked with equal vigour, arguing that the government should be encouraging auto-entrepreneurs, not trying to constrain them.

As if to pre-empt both responses, contained within the announcement the government stated that it will be undertaking a review of the status of ‘artisan’ with a view to giving it greater protection and value, but that it also intends a major reform of the various business structures, with a view to greater simplicity and harmony between the different business structures.

In a statement, they stated: "Le Gouvernement va ouvrir le chantier de la simplification de l’ensemble des régimes de la création d’entreprise. L’objectif est de simplifier et d’harmoniser les régimes juridiques, fiscaux, sociaux des TPE, et de faciliter, non seulement l’accès à la création, mais aussi l’ensemble des étapes de développement des entreprises, en offrant un véritable parcours entrepreneurial pour tous les créateurs d’entreprises."

In the first step in this process the government is proposing that the regulations governing exemption from business rates (Contribution foncière des Entreprises - CFE), are made uniform for all the regimes.

At the moment, auto-entrepreneurs are exempt for three years from the CFE, but it is likely this total exemption will end, and the amount payable by all businesses will be related more to ability to pay. The government will provide further elaboration about this proposal later this year.

In addition, the government is also proposing that the level of social security contributions payable by all new businesses with a low profit will be substantially reduced. The government has already this year introduced a reduced health contribution that is payable by those on a small income, and it looks as though this principle will be extended. Again, there are no details available at this stage.

Ultimately, therefore, this broader review of business structures brings into question whether in practice the interim changes to the auto-entrepreneur regime will actually be implemented, as the proposed change in the reduction of turnover thresholds will not be operative until 1st January 2015.

The proposals will also have to receive parliamentary consent, so it is possible that there will yet be further changes.

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