Tax Relief for the Small Business

As a small business owner in France you can reduce your tax bill by having your accounts prepared by 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, one of the disadvantages 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. Those who elect to be taxed on the basis of actual costs and expenditure (régime réel), also face the same tax treatment, except that they can choose to have their 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 will prepare your accounts at a reasonable cost, and provide you with business and accounting advice. 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!

Neither of these tax advantages are available if you use an accountant who is not part of a CGA/AGA. 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 de 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.

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