You've decided to freelance in France and you've heard about the Micro Entrepreneur and Auto Entrepreneur, and you're not sure if it's the right fit for you. You are keen to find out more before you make your decision. In this article, I'm going to give you an overview of the Micro Entrepreneur regime: how it works, activities excluded from this scheme, visas required, turnover thresholds you need to pay attention to, taxes, as well as its advantages and drawbacks.
Difference between Micro Entrepreneur and Auto Entrepreneur
Before we dive in, you might have heard about auto entrepreneur, micro rntrepreneur - it's the same thing! France likes to make things confusing… It was initially launched in 2009 as auto entrepreneur and later on, the name was changed to micro entrepreneur. We even say Micro Entreprise! The micro entrepreneur is the person, while the micro entreprise is the business.
How does the Micro Entrepreneur work?
The micro entrepreneur is the easiest legal structure to create and manage in France. It's a sole trader, meaning that there is no distinction between you and the business - you are the business. The micro entrepreneur is a pay-as-you-earn system. You will be paying your taxes as and when you are making some sales. Each month or quarter (you decide when you register your business) you will login onto www.autoentrepreneur.urssaf.fr and declare how much sales you've cashed in. Your taxes will be automatically calculated and you will validate for the payment to be taken from your bank account the following month. How easy is that!
The best thing about the micro entrepreneur is that everything is done online. You don't need an accountant and it’s manageable with limited French. Believe me, I've registered hundreds of businesses, many of whom had beginner or school French, and they manage just fine.
Activities excluded from the micro-entrepreneur
Surprise, surprise, France is very regulated… We like to split things up and there are a few activities which unfortunately cannot be registered as a micro entrepreneur.
- Farming activities: tree surgeon as a main activity, growing fruits and vegetables or plants, vineyards.
- Renting professional premises, such as shop outlets or offices.
- Financial markets, accounting, health professionals (mid-wife, dentist, etc.). This isn’t the case for wellness activities.
- Artistic activities: sculptors, writers, painters, authors register with Maison des Artistes and have specific taxes. Artistic workshops or creative workshops can however register as micro entrepreneur.
- B&B if your yearly turnover is below 5,000€ and gites if your yearly turnover is below 23,000€. This would be declared as a non-professional activity called Loueur Meuble Non Professionnel (LMNP). The trick here is to have a higher turnover or add one or two extra services to become a commercial activity (e.g. workshops, theme stays, bike rental, picnic hampers, etc.).
Visa and carte de sejour needed for a Micro Entrepreneur
If you are a European citizen, you can register any type of business in France. Unfortunately, if you are a non-European citizen, you will need a visa or carte de sejour that allows you to register a business in France:
- Carte de Sejour Entrepreneur Profession Libérales for the UK.
- Visa Profession Liberale, which is the easiest one to get for one year (renewable from France).
- Visa Talent is a bit harder to get but lasts for four years and requires 30,000€ investment.
- Visa Vie Privée et Famille, if you are the lucky spouse of a European citizen, or your spouse has a Visa Talent.
- Student Visa if you are at least at the master's level.
Micro Entrepreneur turnover thresholds
I'm going to mention a few taxes and turnover thresholds. Don't worry, I have designed a Micro Entrepreneur Factsheet that you can download. This factsheet summarises the different activities and tax brackets - Download your copy here.
1. Important vocabulary for Micro Entrepreneur
Turnover is called le chiffre d'affaires in French: le chiffre d'affaires, les ventes, or les recettes. It refers to your total sales cashed in with your micro entrepreneur. Whenever we are talking about taxes, we refer to what has been cashed in over the month or quarter. Always avoid using the term “revenue”, especially if you are from the US, as “le revenu” means the income you got out of your business in French. If you do, you are not talking about the same bases for your taxes and you will get your calculations wrong! Always refer to your sales cashed in for a Micro Entrepreneur.
2. Remember to declare when you have no sales
As mentioned earlier the Micro Entrepreneur is a pay-as-you-earn system. This means that you will be only paying taxes whenever you make some sales. If you make no sales, you’ll have no taxes. But you will still have to declare, otherwise, you could get a penalty fee of 46 euros for missing a declaration.
3. Activity type and social charge rates
French businesses tend to be classified under 3 categories. This also works for the Micro Entrepreneur and your social charges are actually based on your activity type.
- Activité commerciale. Whether you are buying-to-resell, have a shop, e-commerce, food stall, or gites. Social charges = 12.3% of your sales.
- Activité artisanale. These are manual activities, from the building trade, crafts to hairdressers and beauticians. Social charges = 21.2% of your sales.
- Activité Libérale or Profession Libérale are intellectual-based services, such as coaches, consultants, teachers, and programmers. Social charges = 21.1% of your sales.
As you can see you cannot deduct your expenses before applying the social charges. This is not necessarily a bad thing, as these tax rates were based on the average level of expenses for each activity type.
4. Maximum yearly turnover as a Micro Entrepreneur
The maximum turnover threshold for your first year in business as a micro entrepreneur, is as follows:
- Activité commerciale = 188,700 euros in year 1.
- Activité artisanale = 77,700 euros in year 1.
- Activité Libérale = 77,700 euros in year 1.
Watch out: there is a silly prorate rule called “porata temporis”, which means that this allowance is for a full year. If you started halfway through the year, you would have half this turnover allowance. Going over would mean that you would come out of the micro-entrepreneur regime on 1st January the following year.
Also bear in mind that from your second year in business, you can go way above this turnover threshold for two consecutive years, before having to come out of the Micro Entrepreneur regime. After that, you would switch to “regime réél simplifié on 1st January or you would look at closing your micro entrepreneur and starting a French-incorporated business.
Get the full tables in my Micro Entrepreneur Factsheet.
VAT Threshold as a Micro Entrepreneur
The last turnover threshold that you want to be paying attention to is the VAT threshold. In Europe, we pay VAT - Value Added Taxe called “ Taxe sur la Valeur Ajoutée” in French. It's a tax collected and paid to the Government. When you go above a certain turnover, you have to start collecting VAT and you can also claim VAT back.
VAT Threshold based on the activity
The VAT threshold applied for your first year in business are called “seuil de base”. We are talking a calendar year here. As soon as 1st January arrives, your counter restarts from zero. However, if you did become VAT registered, VAT still applies the following year.
- Activité commerciale = 91,900 euros in year 1.
- Activité artisanale = 36,800 euros in year 1.
- Activité Libérale = 36,800 euros in year 1.
From your second year in business, we give you a bit of a leeway. If your turnover remains below or in between two specific turnover brackets, you can remain non-VAT registered. This is a fairly complex topic, and I would recommend downloading my Micro Entrepreneur Factsheet or watching my YouTube video on the Micro Entrepreneur Overview to make sense of it.
Advantages and drawbacks of the Micro Entrepreneur
The main advantages of the Micro Entrepreneur are:
- It is the easiest French business type to register.
- Easy to manage, no need for an accountant. Y can also look at my course Managed Your Micro Entrepreneur to learn how to create all your own line accounts, and handle your turnover decorations and income tax decorations.
- A fixed percentage of social charges - there are no surprises.
- Taxes match your activity level.
- Gives you time to understand how the French system works.
- All done online, with a little help from Google Translate.
The drawbacks of the Micro Entrepreneur are:
- The limited yearly turnover in year one and the prorata rule.
- As a sole trader you are liable on your personal asset for the debts generated by your business. Your main home is protected and we tend to keep this regime for “safe “ activities, i.e. with a low risk of debts.
- You cannot deduct your expenses. Not a good choice if you have employees, renting premises, have a lot of stock to buy or for products with a low margin.
- You cannot have a business partner. If you have an associate, looking into a French-incorporated business. The only person who could work with you as a micro entrepreneur is your spouse or civil union partner.
More information about the Micro Entrepreneur
Download a copy of my Micro Entrepreneur Factsheet to get a summary, as well as detailed tables of the tax rates based on your activity.
Watch my YouTube video on the Micro Entrepreneur Overview, where I give more information on VAT, income tax and how to know if it’s a good fit.