Auto-entrepreneur status

This article explains the basics of the auto-entrepreneur status for people who want to work as freelancers in France.

Whereas starting a business in the U.S. can be as easy as putting a sign on your door and make money right away, this is not how things work in France. By French law, you need to setup a working entity before you can earn any amount of money.

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What is an auto-entrepreneur in France?

People who want to work as freelancers in France can choose the auto-entrepreneur status because it is, by far, the easiest way to start a business. Registering and running an auto-entreprise is much easier than setting up a French company.

Micro-entrepreneur vs auto-entrepreneur

Let’s start with some definitions. Historically, auto-entrepreneurs and micro-entrepreneurs were different statuses for self-employed. They merged into one single status in 2016 and people now use the terms auto-entrepreneurs and micro-entrepreneurs interchangeably.

People working as auto-entrepreneurs are called Entrepreneurs Individuels (EI) and their business is called micro-entreprise.

Legal, social and fiscal aspects

The micro-entrepreneur status covers three aspects.

• legal status – Auto-entrepreneurs are setup as Individual Entrepreneur (EI). Their personal assets are protected and can’t be seized.
• social model – Micro-entrepreneurs pay social charges and get some social benefits.
• fiscal model – Micro-entrepreneurs follow specific fiscal regulations for filing and paying taxes.

Advantages of the auto-entrepreneur status

The micro-entrepreneur schema is a very simplified way of setting up and running a business.

• registering a micro-entreprise online is free and easy.
• micro-entreprises are not liable for VAT under a specific threshold: €37,500 for services and €85,000 for commercial activities.
• accounting paperwork is minimal.
• tax wise, a standard rate is applied to the gross revenue to calculate the taxable income.

You can setup an auto-entreprise even if you are already employed, retired or if you are a student.

Who can work as an auto-entrepreneur?

You need to have a valid titre de séjour (residence permit) with the right to work as a non-employee in France in order to register a micro-entreprise.

Which visa do you need to work as an auto-entrepreneur in France?

The micro-entrepreneur status is compatible with a VLT-TS Entrepreneur Profession libérale visa. You will need to prepare a business plan and provide supporting documents to get this visa.

What kind of business can you do as a micro-entrepreneur?

The auto-entrepreneur status is open to commercial activities, trade and liberal activities.

Commercial activities include purchase and resale of goods, provision of services in the hotel industry and other similar areas. Trade activities include manufacturing, processing, or repair of products in a non-industrial manner. Liberal activities include consulting, coaching, writing and translation.

Check out which activities are allowed in this article from Bercy entreprises.

Auto-entrepreneur social schema

Paying social charges

Part of an auto-entrepreneur’s obligations is to declare and pay charges sociales. You can chose to pay monthly or every three months. Urssaf is the French government entity in charge of collecting social charges.

If you didn’t make any money on a period, you still have to declare your gross income as zero but you won’t have any social charges to pay.

CSG and CRDS are taxes which are part of social charges. You can report the amount of CSG (9.2%) and CRDS (0.5%) you’ve paid to Urssaf when you declare to the IRS the French taxes you’ve already paid. Read more on that subject in Taxes for Americans in France.

Health insurance

Anyone working in France immediately qualifies to enter the French healthcare system. If you create a micro-entreprise, you don’t have to wait three months nor file a separate application. Creating an auto-entreprise automatically starts your enrollment into the French healthcare system.

Auto-entrepreneur fiscal schema

There are 2 ways to fiscally setup an auto-enterprise.

1- File taxes for your micro-entreprise at tax season

You can file your taxes around May for your micro-entreprise along with your other revenues if you have any. A fixed amount (abattement) gets automatically deducted from your gross revenue to determine your taxable income. Les impots calculate the taxes you owe based on this taxable revenue.

2- Versement forfaitaire libératoire (VFL)

You can pay your taxes at the same time you pay your charges sociales, every month or every three months. Your taxes are calculated as a fixed percentage of your gross revenue. That percentage depends on the nature of your micro-entreprise activities.

One of the downfall of this method is for auto-entrepreneurs who don’t make enough money to be liable for taxes in France. With Versement forfaitaire libératoire, you pay taxes on the first Euro you make.

Business property taxes

Auto-entrepreneurs who earn over €5,000 a year in gross revenue are subject to an extra property tax called Cotisation foncière des entreprises (CFE).

Micro-entrepreneurs pay CFE even when they’re working from their home and when they’ve already payed property taxes on their property. The amount of CFE is calculated based on their gross income 2 years before as well as the urban district (commune) where they live. For auto-entrepreneurs who don’t work from their home, CFE is based on the rental value of the place used for business 2 years prior the current year.

Auto-entreprise activities: BNC and BIC

When you create a micro-entreprise, you have to declare one or more activities. The auto-entrepreneur status doesn’t give you the right to work as a freelancer doing anything you want. Auto-entrepreneurs have to declare each activity separately when they setup their micro-entreprise. It is possible to add more activities later.

The auto-entrepreneur fiscal model divides business activities into two categories:

• bénéfices non commerciaux (BNC) – trading businesses
• bénéfices commerciaux (BIC) – services

Which activity is considered BNC and which one is considered BIC can be tricky to determine. Read this article from Bercy Entreprises to understand the subtleties of BIC and BNC.

How much do you really make as an auto-entrepreneur?

Taxes and social charges for auto-entrepreneurs are calculated on gross revenue. The rate of social charges to pay is based on the micro-entreprise activity. As an example, a programming activity belongs to the BNC category and 23.1% is applied to the gross revenue to determine the amount of social charges.

Let’s suppose that you earn €3,500 in gross revenue for one given month and that your activity is non commercial (BNC). After paying social charges, you have €2,684.5 left.

When comes tax time, a standard deduction (abattement fiscal) is applied to your gross income to calculate your taxable income. In this scenario, your taxable income for the year is €27,720.

After the standard deduction, €27,720 is the amount that Les impots will use to calculate your French taxes. Considering that you’ve already paid €9,702 (12 * €808.5) in charges sociales for the year, your deducted expenses have been estimated to €14,280 – €9,702 = €4,578.

This amount is obviously not enough if you rent an office space or if you have many business expenses.

Use Urssaf’s simulator to estimate your net income based on your gross revenue.

Auto-entrepreneur obligations

Besides declaring and paying social charges every month or every three months, the auto-entrepreneur status has only a few obligations.

Bank account

After 2 years of earnings more than €10,000 a year, you must use a bank account dedicated to your business, distinct from your personal account.

Accounting

By law, auto-entrepreneurs have to keep the details of their earnings in case of a fiscal audit. Using an Excel file is fine as long as the sums you received are kept in chronological order on the date you received the money.

Invoices

There are some writings that you must put on your invoices, such as your Siren # for instance (registration ID for your business).

Limitations of the auto-entrepreneur status

Gross revenue threshold

The micro-entrepreneur status can only be used if your annual gross revenue is less than:

• €188,700 for commercial activities
• €77,700 for services

No VAT

Not being liable for VAT is an advantage because it simplifies your auto-entreprise management. However, when you need to buy goods for your auto-entreprise, you can’t deduct VAT from your purchased items.

No business expense deductions

You can’t deduct business expenses from your gross revenue.

Limited social benefits

The auto-entrepreneur social coverage is very minimal compare to French employees. Even though micro-entrepreneurs pay social charges, they don’t qualify for unemployment benefits, get very little when they’re sick (unless they subscribe to private insurance) and their retirement pensions aren’t great.

What happens when you go past the earning limit?

You can go over the threshold (€188,700 for commercial activities and €77,700 for services) for two consecutive years before you have to switch to the entreprise individuelle status.

Is the auto-entrepreneur status for you?

The micro-entrepreneur status may not be the best choice for you if your business model requires lots of expenses because:

• You can’t deduct business expenses from your taxable income.
• Charges sociales are calculated on your gross income, not on the profit you made.

In conclusion, the auto-entrepreneur status is particularly suited to activities with low management cost as it’s an easy and quick way to start a business in France. My next article will explain in details how to register and run an auto-entreprise in France. In the meantime, how about you learn how to write numbers in French?

sources
https://entreprendre.service-public.fr/vosdroits/F37353
https://entreprendre.service-public.fr/vosdroits/F23267