Article updated on 31/01/2023
Whatever activity you wish to carry out, whether it is a secondary activity or your main activity, it is possible to set up a micro-enterprise quickly and at very low cost. Note, however, that this type of business only concerns very small businesses subject to income tax.
It should also be noted that a new status of the individual entrepreneur has existed since May 15th 2022 (now with the possibility of opting for corporate tax on the condition of renouncing the micro tax regime), this new status will make the subject of a study that we will publish soon.
I – Conditions of access to the micro-companies regime
Registration with an administration
Since January 1st 2023, companies must carry out their formalities for creating, modifying and terminating their activity in a dematerialized way, on the one-stop shop, which replaced the old business formalities centers. This platform feeds the national register of companies, which centralizes all the information concerning them, previously distributed in different registers and directories.
Accessible from https://procedures.inpi.fr, the one-stop shop allows companies to carry out their formalities in conjunction with the administrations concerned. Any formality carried out on this site follows a validation circuit with INSEE or the competent public institutions. This new service offers users:
- Easy access to all the formalities for the creation, modification and cessation of activities regardless of the legal form or the sector of activity;
- Monitoring of formalities from a dashboard;
- Filing of additional documents.
The legal structure
A new status of the individual entrepreneur, more protective than the previous one, came into force on May 15th 2022. This regime is applicable regardless of the activity of the entrepreneur and the tax category to which his income falls (Profits Industrial and Commercial, Liberal Professions or Farmers), whether taxed according to a real tax regime or according to a micro regime.
The entrepreneur automatically holds two assets upon registration:
- Professional assets made up of the property, rights, obligations and sureties he holds and which are useful for the activity or the plurality of independent professional activities he exercises;
- Personal assets made up of personal items such as the main residence or a vehicle not used for professional purposes, and liabilities such as the loan for the purchase of a personal vehicle not included in the professional assets.
Thus, the creditors of the professional assets cannot seize assets appearing in the private assets and conversely, the private creditors are not entitled to any guarantee on the professional assets.
However, this regime suffers from several exceptions, of which here are two examples:
- The individual entrepreneur may, for a specific commitment, the amount of which must be determined or determinable, waive the protection of his personal assets;
- The separation of assets is not opposable to the tax authorities for tax debts owed on a personal basis, but whose base includes the results of the professional activity.
The following activities are excluded from the “Micro” scheme:
- Rental activities of equipment or durable consumer goods;
- Stock market operations;
- Associations and non-profit activities;
- Real Estate Broker and Real Estate Agents;
- Building rental activities;
- Liberal activities that come under a pension fund other than Cipav or social security for the self-employed, as :
- Notaries, bailiffs, judicial auctioneers, lawyers, etc.;
- Doctors, dental surgeons, pharmacists, midwives, nurses, physiotherapists, pedicurists, speech therapists, orthoptists, veterinarians, etc.;
- General insurance agents;
- Chartered Accountants and Statutory Auditors;
- Freelance journalists;
- Artistic activities remunerated by royalties.
Annual turnover must not exceed the following limits from 2023 to 2025 year:
- € 188 700 (without VAT) for the activities of selling goods or providing housing;
- € 77 700 (without VAT) for service providers and the liberal professions;
- € 91 900 (without VAT) (average turnover over three years) for farmers.
Transition from a Micro scheme to a real scheme
The taxpayer subject to the Micro Enterprise tax regime can opt for a real regime. The main reasons are:
- The operator wishes to have a partner and therefore modify the legal structure of the company;
- The activity has changed;
- The actual charges are greater than the standard abatement;
- Option for corporation tax.
In the event of the taxpayer’s voluntary option for a real regime, he must inform his tax department before the deadline for filing the overall income statement (statement no. 2042) subscribed for the year preceding that under which this option applies.
The period of validity of the option exercised by entrepreneurs covered by the micro-BIC for a real tax regime is set at one year and tacitly renewed each year for one year, as long as the taxpayers have not waived his option or this did not become null due to the increase in the turnover. The waiver of the option can be made until the deadline for filing the declaration subscribed in respect of the results (declaration no. 2031-SD) of the year preceding that for which the waiver applies.
The option for liability to corporation tax must be made before the end of the third month of the financial year for which the individual entrepreneur wishes to be subject to this tax.
On the other hand, as soon as the turnover of the company exceeds the thresholds, the transition to a real plan becomes compulsory under the following conditions.
As soon as the company’s turnover exceeds the thresholds for two consecutive years, the transition to a real scheme becomes compulsory from the following year.
In case of business creation, if the operator does not opt for a real scheme, the micro regime is automatically applied for the year of creation and the following year unless the turnover for the first fiscal year exceeds the limits set for the application of the micro regime.
When the turnover of a company subject to the real regime falls below the limits of the micro regime, the real scheme remains applicable during the whole year during which the turnover fell below the threshold.
It should also be noted that there is a mechanism for neutralizing the effects of the change in the tax regime for agricultural profits and non-commercial profits. This process makes it possible to avoid either double taxation or the absence of taxation on debts during the change of regime.
II – Functioning of the tax system of the Micro-enterprise
Companies placed under this regime should only keep a journal with daily details of their receipts. Those engaged in the sale of goods must also keep a register detailing their purchases.
The entrepreneur only indicates the amount of his annual turnover in the appropriate frame of his general income tax return (model N ° 2042). His taxable profit and the amount of his tax will be determined by the tax office of his domicile.
In some cases, the entrepreneur may opt for a lump sum payment of his income tax. If this option is made, the tax will be paid monthly or quarterly at the rate of:
- 1% of turnover for the activities of selling goods or providing housing;
- 1.7% of turnover for service providers;
- 2.2% of turnover for non-commercial income holders (B.N.C).
This option is not applicable to farm incomes.
Determination of taxable profit
The micro entrepreneur is exempt from the filing of a professional declaration of result for the purposes of Bénéfices Industriels et Commerciaux (B.I.C.), Bénéfices Non Commerciaux (B.N.C.) or Bénéfices Agricoles (B.A.). As we wrote above, he only shows the amount of his turnover on his annual tax return.
The net taxable profit is determined by the tax administration which applies a deduction on the amount declared. This abatment, which includes all operating expenses, amounts to:
- 71% of turnover for the sale of goods or supply of housing;
- 50% of turnover for service delivery activities;
- 34% of turnover for the liberal professions;
- 87% of the average turnover of the last 3 years for agricultural profits.
Companies subject to the “Micro” tax regime cannot deduct deficits.
VAT franchise (VAT exemption)
Companies taxed under the “Micro” scheme automatically benefit from the VAT exemption scheme. Thus, the company does not charge VAT to its customers, but it cannot recover the VAT it pays to its suppliers on its purchases, expenses and investments. This regime can be penalizing for activities requiring expensive equipment.
The company must display on its invoices the following statement:“TVA NON APPLICABLE ARTICLE 293B DU C.G.I.”.
The thresholds of turnover allowing to benefit from the franchise are of:
- € 91 900 before tax (realized the year before) for the activities of sale or supply of housing or € 101 000 in the previous calendar year, when the turnover for the penultimate year (year n-2) was less than € 91 900;
- € 36 800 before tax (realized the year before) for the activities of service delivery and liberal professions or € 39 100 in the previous calendar year, when the turnover for the penultimate year (year n-2) was less than € 36 800.
Farmers are in principle subject to VAT under the flat-rate reimbursement scheme. But they may be subject to the simplified VAT system (where the amount of turnover calculated over two consecutive years exceeds € 46,000) or on option. In addition, the flat-rate reimbursement scheme is not applicable for certain agricultural professions.
When the turnover of the business exceeds the thresholds above, the “Micro” regime remains applicable as long as the company has not reached the thresholds of maximum turnover for the application of the “Micro”.
Contribution on value added (C.V.A.E.)
Companies subject to the “Micro” regime whose turnover is over € 152 500 are subject to the “C.V.A.E.”.
The amount of their added value for the calculation of “C.V.A.E.” is set at 80% of the difference between the amount of the receipts and the purchases made during the tax year.
However, these companies must declare their added value but are liable for the “C.V.A.E.” only when their turnover exceeds € 500 000.
It should be noted that the finance law for 2023 decided on the gradual abolition of the “C.V.A.E.” over two years. Thus, the “C.V.A.E.” rate will be reduced by 50% in 2023 and it will be abolished in 2024. From this date, micro entrepreneurs will no longer have to file a “C.V.A.E.” form.
III – Functioning of the “Micro social” regime
Since 2016, this scheme automatically applies to all entrepreneurs subject to the tax regime of the “Micro” company.
This plan takes into account the following contributions:
- Maternity health insurance;
- Retirement insurance;
- Invalidity death;
- Family allowances (allocations familiales);
- C.S.G. and C.R.D.S.
The entrepreneur must declare his turnover on the website www.autoentrepreneur.urssaf.fr each quarter or month according to his option.
Contributions are paid on a lump sum basis as a percentage of turnover which is:
- 12.30 % for the activities of sale or supply of housing;
- 21.20 % for service or liberal activities;
- 6 % for rentals of furnished tourist accommodation.
At these rates is added the contribution to training at the rate of 0.1 to 0.3% depending on the activity.
This scheme does not exist for agricultural activities which in any case continue to contribute on the basis of the net profit determined by the “Micro B.A.” method.
IV – CONCLUSION
The Micro tax system brings significant advantages, the main one being the simplicity of the system.
But we must draw your attention to the fact that in addition to the disadvantages that we have mentioned in this article, the operators subjected to a micro regime cannot benefit most of the time from certain fiscal advantages such as the tax exemptions for the creation of business in certain geographic areas.
You can contact us when making your choice for a tax regime.
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