Update on 30th November
Frederic Lefebvre, new Minister for SMEs, has today announced at the National Assembly that CFE will be cancelled for auto entrepreneurs with NO turnover. The 70 000 auto entrepreneurs with no turnover declared having received a CFE bill will be exonerated. Those having already paid their bill will be reimbursed. The pressure is still on, notably from the FEDAE, to change the law and set up a CFE based according to the auto entrepreneurs turnover. No statements have been made on this issue yet.
The last couple of weeks have seen an increasing negative buzz growing about the CFE (former Taxe Professionnelle) for auto-entrepreneurs. Many threads and blog entries have been published on French and English forums about the CFE for auto-entrepreneurs. The Federation Des Auto Entrepreneurs (FEDAE) has also decided to lodge a formal complaint to the Government and is trying to change the law, so auto-entrepreneurs with no turnover would not pay the CFE.
What is CET and CFE?
As a reminded, the Taxe Professionnelle, a local tax paid by businesses to local authorities, was axed on 1st January 2010 and replaced by Contribution Economique Territoriale (CET). The CET tax is divided bewteen: Cotisation sur la Valeur Ajoutée des Entreprises (CVAE), a contribution based on your business’ added value (only paid by larger businesses with a turnover over 152 500€) and Cotisation Financière des Entreprises (CFE), a taxed based on your office, workshop, equipement and the town you live in. Auto entrepreneurs are only liable to CFE in their second year in business, if they have not otped for the income tax paid at source (impot liberatoire). And this is where the confusing situation starts.
Auto-entrepreneurs who did not opt for the income tax paid at source or impot liberatoire ARE liable to CFE from their second year in business. In this respect the way the government communicated on Auto-Entrepeneur with no sales = no taxes was misleading. Unless you opted for impot liberatoire or income tax paid at source, the CFE is due. Most people do not realise that the Auto-entrepreneur is a full blown business and therefore is liable to extra taxes such as CFE.
For new auto-entrepreneurs, it is worth to comparing 2 options:
- How much income tax you would pay, if you opted for the income tax paid at source (an extra 1% to 2.2%)
- How much CFE would you pay in your area (just ask the Impots)
If the CFE is higher than the income tax, it is worth opting for the income tax at source. If the CFE is lower, you are better of not opting and paying this tax.
Gregoire Leclerc, President of the Federation Des Auto Entrepreneurs (FEDAE) has written an open letter to Frederic Lefebvre, new Minister for small businesses. In this letter, he asks to cancel the CFE for businesses with no turnover in 2009 and 2010. He also requests for the 1st year exoneration to be implemented as it should (many auto entrepreneurs received a bill, while they should benefit from an exoneration in year one). Finally he asks for the CFE to be indexed on the auto-entrepeneurs’ turnover.