Micro-Entrepreneur Turnover Thresholds Doubled
Friday 08 September 2017
The turnover levels for microentrepreneurs are to be doubled, but the measure is unlikely to be of significant value.The micro-entrepreneur business tax regime has enjoyed enormous success since its introduction in 2009, and we are aware from your mails that many of you have chosen to adopt this status to run your small business in France.
One of the key characteristics of the status is that it is is subject to a maximum turnover, the level of which depends on the nature of your business:
• In a service based business, or a 'professional' activity, and for unclassified gîte accommodation, the turnover cannot exceed €33,200 per year.
• Those whose main activity is either sales based, cafe, restaurant, hotel, chambre d'hôte and classed gîte accommodation, have a turnover limit of €82,800 per year.
These levels are generally increased each year, although not by a significant amount.
If your turnover exceeds these levels you are required to move to a different tax status – régime réel – although some leniency is granted if the limit is only exceeded for one year.
In the fulfillment of an election promise the government this month announced that these thresholds will be doubled for 2018 onwards.
Thus, the present limit of €33,200 will increase to €70,000 and the €82,800 limit will be increased to €170,000.
As part of the measure, the government have agreed that these limits will not be applied on a pro-rata basis for new start-ups.
From 2019, those with an annual turnover of less than €5,000 will also be exempt from business rates - the cotisation foncière des entreprises (CFE).
However, the government have stated that there will be no increase in the VAT (TVA) registration exemption limit, which will remain at the previous levels (€33,100 and €82,800).
The decision to keep the VAT threshold has been made for a variety of different reasons - a wish not to incur the wrath of the professional associations, who have railed against the allegedly favoured tax and accounting status of micro-entrepreneurs; the cost of an increased exemption to the public purse; and a potential row with the European Commission about such a concession.
Accordingly, that if you exceed the previous turnover limits you will need to register for VAT and charge VAT to your customers.
If that is necessary it is questionable whether there would any advantage in retaining micro-entrepreneur status, VAT registration creates significant additional tax and accounting requirements.
Only if the fixed tax allowances under micro-entrepreneur are were materially lower than the tax relief that would be available under the régime réel would it be worthwhile. We considered this issue in our article Autoentrepreneur or Régime Réel?
The only saving grace in all of this is that it will remain possible to temporarily exceed the current VAT turnover limits for 2 years and escape registration.
These limits are known as the franchise en base or seuil de tolérance.
Under these second tier limits a business that exceeds the basic VAT threshold is granted continuing exemption from VAT registration for two years, provided their turnover does not exceed €91,000 (sales) or €35,200 (services) during this period.
Accordingly, if you exceed the turnover limit in Year 1, you will continue to be exempt if you remain with the tolerance level in Year 2, but in Year 3 your exemption will cease from 1st January of that year.
This article was featured in our Newsletter dated 08/09/2017