Chambres d’Hôte Owners Face Tax Puzzle
Tuesday 15 February 2011
The rules on the business registration of chambres d’hôtes have been tightened, but it still leaves unanswered questions.
It is a subject on which we receive a regular flow of e mails into the office, and one on which has been difficult to respond in a clear and affirmative manner.
The fiscal and business status of those who run a chambre d’hôte has been a bone of contention for decades, primarily because the law itself is contradictory, and application of the law inconsistent between the local tax offices and the Chambres des Commerce.
The loi de financement de la sécurité sociale recently passed in the French Parliament now seeks to give further clarification to the issue, and is likely to come as a rude awakening for many who previously felt they were exempt from the need to register as a business and pay social security contributions.
What the new law states is that any owner of a chambre d’hôte with net revenues from the business in excess of €4,670 (€4,740 2011) per annum is required to register with the Régime Social des Indépendants (RSI), and thereby become liable for the full panoply of social security contributions.
This is actually a step back from the draft bill, which proposed that all chambre d’hôte owners would be required to be business registered. The minimum income threshold was only won after heavy lobbying.
Social Security Implications
On this basis, depending on the business tax status you adopt, your social security contributions are going to be around 45% of your net earnings, or 12% of your total turnover if you are registered as an auto-entrepreneur.
However, the minimum threshold figure in the legislation fails to take into account the different business tax regimes in existence.
A micro-entreprise using the régime de base tax regime is entitled to a cost allowance of 71% against sales, meaning they are taxed on 29% of their sales (€4,670 / 0.29 = €16,103). So they would not need to register unless their sales exceeded this figure.
By contrast, an auto-entrepreneur has no cost allowance, so the figure for obligatory registration for someone registering on this basis would be €4,670 sales revenue.
Those registered as an auto-entrepreneur would pay 12% on their total turnover, as stated above.
What Business Status to Adopt?
If you consider you need to register (or indeed wish to do so) then there remains the issue of what business status to adopt to optimise your tax position.
Assuming a net income of €18,000 per year, then an owner registered under the micro-entreprise régime de base would be obliged to pay at least €2,349 a year (€18,000 x 0.29 x 0.45), although it may be slightly higher given the minimal level of contributions payable for some elements of the insurance cover.
In the case of someone with auto-entrepreneur business status then the amount payable would be €2,160 (€18,000 x 0.12%).
Alternatively, it would also be possible to step outside the whole micro-entreprise/auto-entrepreneur tax regimes and elect to pay on the basis of the régime réel, particularly if you had a high cost structure (including interest). However, a minimum level of contributions is also payable under this tax regime, and there are also more onerous accounting requirements, for which you would normally need to engage an accountant.
Income Under the Registration Threshold
If your chambre d’hôte business generates income less than the threshold required for business registration, there is actually nothing to stop you registering the business, and the best option may well be to do so as an auto-entrepreneur.
This is because, even if you are below the threshold figure for registration with the RSI, you are still be required to pay the social charges CSG/CRDS at the rate of 12.3%. As an auto-entrepreneur you would only pay total social taxes at the rate of 12%.
Business registration grants access to the French health system if you are otherwise excluded under current discriminatory rules.
So auto-entrepreneur status not only grants access to the French health system, but it also minimises the level of social taxes that are payable.
The new law leaves unstated the position of a new start-up chambre d’hôte, which has no turnover, and therefore no obligatory basis on which to register as a business.
Nor does the legislation clarify what happens when a chambre d’hôte that is business registered and paying social security contributions fails to reach the threshold level for earnings as set out above. Will the contributions be reimbursable? Will the business be removed from the business register? Who knows!
Where to Register?
Those who drafted this new law were clearly in a hurry to get it on the statute book.
Whilst the law states that business registration with the RSI is obligatory above a minimum income threshold, in fact most auto-entrepreneurs are exempt from the need to register with the RSI, as they register with the social security collections agency URSSAF, to whom they pay their flat rate social security contributions.
All of this confusion could well lead to a situation where the government decides to exclude chambre d’hôte owners from the auto-entrepreneur business tax regime. It is difficult to tell.
As usual, we await the usual plethora of décrets to try and clear up the mess that is contained in the primary legislation.
Do not confuse any of the above with the obligatory requirement to declare and register your chambre d’hôte with your local mairie (see below).