WHAT TAX REGIME TO CHOOSE FOR AN INDIVIDUAL ENTREPRENEUR
The two main tax systems applicable to an individual enterprise are micro and real systems. It is pointed out that the micro-scheme does not apply to companies, which is why our article is limited to the case of individual companies.
The tax systems involved:
- As regards the non-commercial profits (BNC) applicable to the liberal professions, the two regimes concerned are the micro BNC and the declaration controlled (real). In order to benefit from the "micro", the turnover achieved by the professional during the previous year must not exceed € 33,200 excluding taxes.
- Industrial and commercial revenues have the choice between the tax regime "MICRO BIC" and that of the real (simplified or normal). The annual turnover limit for "MICRO BIC" is € 82,800 for companies selling goods or providing housing and € 33,200 for service providers or tenants in a furnished dwelling.
Agricultural incomes also have the choice between the "MICRO BA" and the real simplified or normal. For the "MICRO BA" scheme, the annual average of receipts over the last three years should not exceed € 82,800.
It should be noted that the "micro" system is prohibited to certain persons who are mainly:
- For the "Micro BNC":
Persons who cannot benefit from the VAT exemption,
Taxpayers who trade in securities,
People who engage in commercial and non-commercial activity at the same time and who opt for a real regime on commercial profits,
People who receive "BNC" from abroad.
- For the “Micro BIC”:
The equipment rental companies,
Trading on the stock market,
Real estate agents, property dealers and developers.
The advantages of the "MICRO" tax system:
The most obvious advantage of this system is its simplicity:
- At the accounting level, operators must only keep a chronological log of receipts and a register of purchases only in the case of activity of sale of goods or supply of housing,
- In terms of taxes, only the amount of turnover should be indicated on the income tax return. The tax administration determines the taxable income by applying a flat-rate reduction to this figure of:
. 34% for “MICRO BNC”,
. 71% for “MICRO BIC” in case of selling goods or providing housing,
. 50% for “MICRO BIC” in case of providing services,
. 87% for “MICRO BA”
It may be noted that this system is particularly interesting if the amount of expenditure actually incurred by the business is less than the flat-rate reduction.
The self-employed have the possibility of paying a lump-sum disbursement of income tax at the rate of:
- 1% or 1.7% for "MICRO BIC" depending on whether they participate in a sales activity of products or services,
- 2.2% for the "MICRO BNC".
"Auto-entrepreneurs" may also choose to pay social contributions in proportion to the turnover.
The last two options mentioned above are not applicable in the case of "MICRO BA".
The advantages of the real tax system:
It is obvious that the operator must opt for the real if he finds that his costs are higher than the amount of the standard deduction applied automatically in the "MICRO" system. In addition, in the event of a loss, he may deduct the amount of such loss from his other incomes or incomes from subsequent years.
The possibility of opting for VAT when subject to the “réel” BIC or BNC regime (an option for VAT is possible under the "MICRO BA" scheme) is an obvious advantage for entrepreneurs who make significant investments or those who must invoice the price of their products or services for a tax-free amount under the "MICRO" regime.
It is important to note that the choice of a tax system is never final and that (except in exceptional cases) it is possible to change it at the beginning of the year provided that an option is formulated with the tax department of the company before the first of February. Before making such a decision, the operator must speak with his accountant.
The choice of the tax regime "MICRO" requires, as indicated above, the exercise of an activity in the form of a sole proprietorship which does not guarantee the patrimony of the operator in the event of bankruptcy.
To avoid this, it is possible for the creator of business to constitute an "EIRL". We of course offer a consulting service to make this choice with English-speaking accountants.