Proposed changes to the auto-entrepreneur and entreprise individuelle in 2014

By Valérie Aston on 2 January 2014 · Viewed 10304 times · Questions

This article summarises the findings of the Grandguillaume report on the proposed changes to the auto-entrepreneur regime in France. The report recommends that the entreprise individuelle business type should be redeveloped.

MP Laurent Grandguillaume conducted a broad consultation on the entreprise individuelle, and presented his final report to the Government (Fleur Pellerin minister for SMEs) on 17th December. His report advises to simplify and harmonise the existing entreprise individuelle status by creating two separate tax and social security regimes:

  1. A fixed rate model (forfaitaire) based on the auto-entrepreneur.
  2. A regime based on net profit (bénéfice réel) for the growing businesses.

The auto-entrepreneur reform announced in June 2013 by Sylvia Pinel (minister for crafts, trade and tourism) seemed to satisfy no one. It caused uproar amongst artisans and the Chambre de Métiers, as well as auto-entrepreneurs with backing from the Poussins movement.

The uncertainty about the future of auto-entrepreneurs also started to weigh negatively on business registrations (down 10.7%  for auto entrepreneurs July/Sept 2013, down 2.3% for entreprise individuelle and up 0.3% for limited companies - forme sociétaire).

The government therefore decided to commission a review under the auspices of Laurent Granguillaume, MP for Côte d’Or. His committee has been meeting on a weekly basis since 10 October. In an interim report submitted to Matignon in mid November, Mr Grandguillaume outlined the idea of standardisation and simplification of the various fiscal and social regimes for entreprise individuelle, based on the auto-entrepreneur model.

The auto-entrepreneur model to be extended

Mr Grandguillaume suggests creating a unique legal status entreprise individuelle, benefiting from a simplified tax and social regime similar to the auto-entrepreneur. For now, entreprise individuelle can operate under five different tax regimes:

  1. Micro-entreprise
  2. Bénéfice réel simplifié
  3. Bénéfice réel
  4. Auto-entreprise with microfiscal or impôt libératoire
  5. EIRL (sole trader with limited liability when the entrepreneur dedicates a portion of his estate to his professional activity, in order to limit its liability, without having to create a limited company).

Auto-entrepreneurs benefit from a micro-social system, allowing them to pay their social charges taxes based on a flat rate, i.e. a fixed percentage of their turnover varying depending on the nature of the activity. This payment only takes place when sales have been made (meaning no turnover = no social charges). This model is very different from other entreprises individuelles, who pay their social charges called appel de cotisation on a quarterly basis as provisions - regardless of the amount of their revenue. Under this system, social charges are paid even if there are no sales and no revenue.

Outcome of the Grandguillaume report

The Grandguillaume committee therefore suggests giving entrepreneurs under the entreprise individuelle status, a free choice between two fiscal and social systems:

  1. A system where you are taxed on your turnover. A flat-rate scheme for the calculation of fiscal and social charges contributions based on actual turnover and settled in a single payment (prélévement libératoire unique). 
  2. A system where you are taxed on profit. A régime réel enabling the deduction of expenses, depreciation of equipment and being taxed on profits - not on sales. Social security contributions would be calculated on the basis of revenue and prepaid as quarterly allowances.

The transition from one regime to another would be on a voluntary basis.

The committee is continuing its work in January to assess how its findings could be implemented. The move of thousands small businesses to a regime similar to the auto-entrepreneur would mean a short-term loss of 70 millions euros to the social bodies (RSI, URSSAF for the loss of cotisations currently paid up-front).

Other implications of this report:

  • Talks about limiting the auto-entrepreneur to 2 or 3 years would be dropped.
  • Lower turnover limits mentioned by Sylvia Pinel last June would be dropped (19,000 euros for services and 47,500 euros for trade).
  • Issues around access to health cover, pension, daily sickness indemnities and maternity leave given to entrepreneurs with low turnover would be reviewed. Fleur Pellerin mentioned on BFM TV a lower rate of social charges for entreprise individuelle under reel simplifié, with the possibility to opt in for extra payment in order to be entitled to these rights (indemnity, pension).
  • Increased availability of advice to auto-entrepreneurs when the turnover limits are reached - to help them further develop their business.

Here's a video report where Fleur Pellerin talks about the Grandguillaume report on BFM TV (18/12/13).

Valerie Lemiere: Start Business in France

About the author: Valérie Aston

I've been helping people who want to start or already have a small business set up in France since 2009. After graduating from a Master of Business Administration (MBA) degree, I worked as a senior marketing consultant in the UK and France for various International companies. I worked as a conseillère en création d'entreprises (senior business advisor) for BGE here in France and run this independent business on a daily basis.