Up-date 1st Oct 2 pm: The Labor Minister Muriel Pénicaud announced that the decree will not be published on 1st October... So more debate before a final decision is made!
In January 2019, the French Government extended a social charges exoneration called ACCRE to all new businesses. So far restricted to the unemployed creating a business - hence the name Aide aux Chômeurs Créateurs et Repreneurs d’Entreprises, it was applied to all new businesses and renamed ACRE - Aide aux Créateurs et Repreneurs d’Entreprises.
The Government is now back-tracking its decision with the new Loi de Finance 2020, by limiting ACRE for auto-entrepreneurs. From 1st October 2019, micro-entrepreneurs social charges exoneration will be significantly reduced.
Social charges exoneration ACRE for micro entrepreneurs before 1/10/19
- 1st year 25% of normal social charges rates. For instance 3.2% for trade and 5.5% for profession liberale.
- 2nd year 50% of normal rates.
- 3rd year 75% of normal rates.
Social charges reduction ACRE for new micro entrepreneurs form 1st October 2019
- 1st year 50% of normal social charges rates for 9 months.
- 2nd year normal rates.
From 2020, the exoneration for micro entrepreneurs will only last for one year.
Why is the Government reducing ACRE for micro entrepreneurs ?
The exoneration launched in Jan 2019 is costing more than planned. This is not surprising as more than 70% of new businesses are now created under the micro entrepreneur scheme. The number of micro entreprises created in 2018 has for instance increased by 28%. There are also some strong lobbying from bodies such as a Chambre de Metiers, stating that micro entrepreneurs represent unfair competition for other entrepreneurs, as their social contributions are lower for too long and as some entrepreneurs don’t declare their whole activity. Micro entrepreneurs indeed benefit from a 3-year exoneration against one year for other entrepreneurs.
By reducing the social charges exoneration only for micro entrepreneurs, the Government is making 220€ million savings by 2020 and 610 million savings by 2022. It is also trying to push new entrepreneurs to consider other legal structures such as entreprise individuelle or incorporated businesses, as these will still benefit from the current exoneration rates année blanche.
It is understandable that the Government is making some savings, but why extend the exoneration to everyone to cancel it only 10 months later. The difference in social charges rates/exoneration between different legal structures, will also only make it more confusing for new entrepreneurs to make a choice. Having to talk to an expert will be more important to have a clear understanding of projected taxes.
New social charges rates ACRE for micro entrepreneurs creating after 1st October 2019
Based on this Loi de Finance, new micro entrepreneurs registering their business from 1st October will benefit from the following social charges exoneration rates:
- Trade, gites: 6.4% of their turnover for 9 months, instead of 3.2% for now. Then 12.8% from the second year.
- Services (profession liberales and artisans): 11% instead for 9 months instead of 5.5% for now. Then 22.2% from their second year.
- Full description of rates from Federation des Auto Entrepreneurs FEDAE.
What happens to existing micro-entrepreneurs with ACRE?
You have created your micro entreprise in 2019 and are therefore currently benefiting from lower social charges. Will you be impacted by the new rates? Well, I’m afraid that you will as the law is retroactive from 1st October 2019. Meaning that all taxes collected from 1st October will fall under the new rule, but not quite the same rates as new entrepreneurs…
Rates applicable for existing micro entrepreneurs benefit from ACRE based on the draft law Loi de Finance 2020:
- Trade, gites: 3.2% of their turnover for 9 months, then 9.6% for the last trimester of the year. Then 11.6% for the next 9 months, then back to 12.8%.
- Services (profession liberales and artisans): 5.5% of their turnover for 9 months, then 16.5% for the last trimester of the year. Then 19.8% for the next 9 months, then back to 22.2%.
- Full description of rates from Federation des Auto Entrepreneurs FEDAE
What should you do?
My advice is to always save the full social charges rates not to have any bad surprises. If you are already in business with ACRE, it is very likely that this month’s turnover declarations will be postponed to allow URSSAF to up-date their system with the new rates.