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Micro-Entrepreneur Business Start-Up Relief

Tuesday 08 October 2019

The relief from social security contributions granted to micro-entreprise start-ups is to be substantially reduced.

Since 1st January 2019, a new micro-entreprise business owner benefits from three years of relief from social security contributions.

In the first year a 75% reduction is granted, reducing to 50% in the second year, and 25% in the third year.

Only from the fourth year onwards are they liable for social security contributions at the full standard rate, as shown in the graphic below.

Social Security Rates
Year 1
Year 2
Year 3
Year 4
Commercial Sales
Liberal (CIPAV)

However, in a significant volte face, the government have announced that less than one year into the current scheme, the relief will in future be granted for the first year only, at the rate of 50%.

This aligns the position of micro-entrepreneurs with those who adopt the régime reel form of tax status, who only receive assistance in the first year of their business.

In order to continue to provide existing businesses with relief, albeit at a lower level, the new scheme will not be fully operational until 2022.

Under the plan, whilst from 2020 a new micro-entreprise will be granted relief of 50% in their first year only, the relief granted to existing businesess who benefit from the present scheme will be reduced from 50% to 25% in 2020, and from 25% to 10% in 2021.

There will also be a retrospective reduction this year, down from 75% to 50%, a proposal to which there is already significant opposition, obliging the government to give the matter further consideration.

The change comes less than a year after the current univeral system of relief was introduced, having previously been restricted to young persons and the unemployed.

According to the government, the micro-entreprise business status has been a victim of its own success, with the number of new business creations up 28% from last year, in part brought about by making the relief universal, but also by the abolition of the compulsory training course for trade based activities.

As a result, the cost to the public purse, which was around €250m in 2018, was expected to rise to €1.4b if no action was taken. Given that many micro-entrepreneurs set up their business as a secondary activity, this level of support is considered by the government to be excessive.

But it is also clear the government are responding to lobbying pressure from the main trade associations, who consider that micro-entrepreneurs have an unfair competitive advantage against those who adopt the standard régime reel form of tax status. The associations have campaigned against the status ever since it was created in 2009.

As part of the change, spouses who participate in the running of a micro-entreprise business as a ‘conjoint collaborator’ are to benefit from the relief that is granted to the main business owner.

The government are extending the relief in this way so that it does not hinder the start-up of the business, stating: 'afin que la déclaration de l’activité du conjoint ne soit pas un frein à la création d’activité du fait du coût des cotisations sociales à acquitter.'

In practice, the change will be of no practical benefit, as spouses already pay a lower level of social security contributions, and any reduction will be offset by the increased charges to be paid by the main business owner.

The proposals are contained in the draft loi de finances 2020, which will not become law until the end of the year, so may yet be changed. There are already early signs that some relaxation of the proposed changes will emerge or that it may simply be restricted to certain groups, eg unemployed, young people.

You can read about setting up a small business in our Guide to Micro-Entrepreneur Business in France.

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