French News Archive

Business in France

Accounting for the French Small Business

Tuesday 01 April 2008

As a small business owner in France you can reduce your tax bill by being affiliated to an accredited business accounting centre.

A small business in France can choose to either be taxed on the basis of actual revenues and expenditure, or through an automatic fixed allowance for all costs against turnover.

Whilst the use of a fixed allowance through micro-entreprise makes sense for many, those facing large costs as a percentage of sales may be better off with the régime réel.

However the disadvantage of this tax status is that the taxman makes an automatic assumption that you are fiddling the books and taxes you accordingly!

He does this by increasing your declared net profit by 25%, against which you then become liable for income tax. If you make a profit of €15,000 in the year, you will actually be taxed on the basis that your profits are €20,000!

This multiple is only used for income tax purposes; your social charges will be based on your actual profit.

Nevertheless, you can choose to have your accounts undertaken by an accredited business accounting centre, which abolishes this penalty.

These registered accounting centres are called Centre de Gestion Agréé (CGA). In the case of those in one of the profession liberale they would use an Association de Gestion Agréé (AGA).

The CGA provide you with business and accounting advice and through them you can organise the preparation of your accounts at a reasonable cost. They will also assist in the completion of your tax return. Reports suggest that, whilst not all those who use a CGA are convinced about the quality of the business advice that might be offered (if any), the formal accounting role seems to be well respected.

There are costs of affiliation to the CGA (anything from €100 to around €300 pa) and expect to incur around €1000 in accounting fees per year.

Those with a turnover not exceeding micro-entreprise limits benefit from a deduction in income tax of up to €915 a year towards these costs. So it is possible the taxman will actually pay your accounting costs!

Needless to say, the reason the Government has granted these tax concessions is to try and combat fraud, although the extent to which this service achieves this objective is highly questionable.

Whilst one of the obligations you sign up to if you register with a CGA is that they have the right, on request, to provide the tax authority with your accounts (excluding invoices and bills), this documentation is something which the tax authority could in any event ask you to supply.

Indeed, a recent report of the French Cour des Comptes stated that a business affiliated to a CGA is less likely to be subject to an inspection or control by the tax authorities.

It is possible to join a CGA at any time of the year, but in order to benefit from the tax advantages, you need to join before 31 May, permitting you to benefit from the concession for the whole year.

You should be able to find your local CGA here, or here.

Thank you for showing an interest in our News section.

Our News section is no longer being published although our catalogue of articles remains in place.

If you found our News useful, please have a look at France Insider, our subscription based News service with in-depth analysis, or our authoritative Guides to France.

If you require advice and assistance with the purchase of French property and moving to France, then take a look at the France Insider Property Clinic.