Status of Spouse in Micro-Entrepreneur Business
Monday 06 February 2017
What is the fiscal and legal status of a spouse who assists in a micro-entrepreneur business run by their partner?
In part this is to ensure the spouse has some form of social protection in the event of the death of their partner, but it is also to control the use of undeclared labour.
In a previous article we discussed the status of a wife who participates in a business owned by their partner, and the different forms they can take, particularly within a limited company, but what occurs where the primary business owner has sole trader status as a micro-entrepreneur?
As a general rule, it makes no sense for the spouse to also register separately as a micro-entrepreneur, for although each may perform different roles there is only one business entity and set of sales.
That said, if there are two distinct set of products or services that can be invoiced separately then separate registration might make sense.
It is possible for the spouse to be a salaried employee of the business, but the social security obligations of this option are such that it would be an expensive and unnecessary route to take; the salary and employment costs of the spouse would not be tax deductible, as would be the case in a company structure.
A more sensible solution is for the spouse to become a conjoint collaborateur in the business.
This status is open to both married couples and those in a civil partnership, but not to those merely cohabiting together.
In terms of social security contributions (cotisations) a conjoint collaborateur pays at the standard fixed percentage micro-entrepreneur rate that applies for the type of activity. That is to say, for 2017 the rates are as follows:
- Commercial Activity - 13.10%
- Service Activity - 22.70%
- Liberal Activity - 22.70%/22.50%
However, unlike the main owner who pays the fixed rate on 100% of the turnover of the business, the conjoint collaborateur has the choice of paying that standard fixed rate on either:
- i. A lower percentage of the total turnover of the business;
- ii. A notional profit figure.
These options are detailed below.
Under this option the spouse pays cotisations on either 58% or 46% of the turnover of the business. The 58% figure applies to all business activities except for those in one of the CIPAV affiliated professions libérales who pay on 46% of the total turnover.
So the formula for determining the amount payable, depending on business activity, is as follows:
- Commercial Activity - Turnover x 58% x 13.10%
- Service Activity - Turnover x 58% x 22.70%
- Liberal Activity - Turnover x 46% x 22.70%/22.50%
ii. Notional Profit
The basis of the calculation with this option is a pre-determined notional profit figure set by the government, based on the percentages above.
In technical terms the base figures are the above percentages, the 'plafond annuel de la sécurité sociale' (currently around €13,000) and the fixed tax abatement that is applied for costs - 71 % for commercial activities, 50 % for service activities, or 34 % for CIPAV activities.
The choice of which option to use is up to the business owner and their spouse.
In terms of income tax the total income of the business is taxed as part of the total household income under the personal income tax system.
Alternatively, the owner can opt to have the business income taxed on a fixed rate under the system of 'micro-fiscal', which is explained in our detailed micro-entrepreneur guide below.