THE MICRO COMPANY (UPDATE) – MICRO-ENTREPRISE (ACTUALISATION)
We wish, through this article, to update and complete our previous article published on our website in 2018 who concerns very small businesses subject to income tax.
CONDITIONS OF ACCESS TO THE MICRO-COMPANIES REGIME
1. Registration with an administration
When creating a sole proprietorship or an "E.I.R.L.", the creator must register with:
- “Greffe du Tribunal de Commerce” if he carries on a commercial activity,
- “Chambre des Métiers” if he carries a craft activity,
- “Centre de Formalités de l’URSSAF” for liberal professions,
- « Mutualité Sociale Agricole » (M.S.A.) if he is farmer.
2. The legal structure
Only sole proprietorships and "E.I.R.L" subject to income tax as well as "E.U.R.L." whose manager is the sole partner can benefit from the "MICRO" plan. Thus, all companies (with the exception of the E.I.R.L. mentioned above) are excluded.
3. Excluded activities
The following activities are excluded from the "MICRO" scheme:
- Rental activities of equipment or durable consumer goods,
- Stock market operations,
- Associations and nonprofit activities,
- Real Estate Broker and Real Estate Agents.
4. Turnover limits
Annual turnover must not exceed the following limits for 2020 year:
- € 176 200 H.T. (without VAT) for the activities of selling goods or providing housing,
- € 72 500 H.T. (without VAT) for service providers and the liberal professions,
- € 85 800 H.T. (without VAT - average turnover over three years) for farmers.
5. Transition from a MICRO scheme to a real scheme
The taxpayer subject to the Micro Enterprise tax regime can opt for a real regime. The main reasons are:
- The operator wishes to have a partner and therefore modify the legal structure of the company;
- The activity has changed;
- The actual charges are greater than the standard abatement.
In these cases, the operator must inform his "Service des Impôts des Entreprises" of his option for a new tax regime before February 1st so that it is valid from January 1st of the same year.
On the other hand, as soon as the turnover of the company exceeds the thresholds, the transition to a real plan becomes compulsory under the following conditions:
- As soon as the company's turnover exceeds the thresholds for two consecutive years, the transition to a real scheme becomes compulsory from the following year;
- When the turnover of a company subject to the real regime falls below the limits of the micro regime, the real scheme remains applicable during the whole year during which the turnover fell below the threshold;
- In case of business creation, if the operator does not opt for a real scheme, the micro regime is automatically applied for the year of creation and the following year.
It should also be added that the Finance Law for 2020 has provided for a device to neutralize the effects of the change in tax regime for agricultural profits and non-commercial profits. This new process makes it possible to avoid either double taxation or absence of taxation on receivables at the time of the change of regime.
FUNCTIONING OF THE TAX SYSTEM OF THE MICRO ENTERPRISE
1. Simplified formalities
Companies placed under this regime should only keep a journal with daily details of their receipts. Those engaged in the sale of goods must also keep a register detailing their purchases.
The entrepreneur only indicates the amount of his annual turnover in the appropriate frame of his general income tax return (model N°2042). His taxable profit and the amount of his tax will be determined by the tax office of his domicile.
In some cases, the entrepreneur may opt for a lump sum payment of his income tax. If this option is made, the tax will be paid monthly or quarterly at the rate of:
- 1% of turnover for the activities of selling goods or providing housing,
- 1.7% of turnover for service providers,
- 2.2% of turnover for non-commercial income holders (B.N.C).
This option is not applicable to farm incomes.
2. Determination of taxable profit
The micro entrepreneur is exempt from the filing of a professional declaration of result for the purposes of Bénéfices Industriels et Commerciaux (B.I.C.), Bénéfices Non Commerciaux (B.N.C.) or Bénéfices Agricoles (B.A.). As we wrote above, he only shows the amount of his turnover on his annual tax return.
The net taxable profit is determined by the tax administration which applies a deduction on the amount declared. This abatment, which includes all operating expenses, amounts to:
- 71% of turnover for the sale of goods or supply of housing,
- 50% of turnover for service delivery activities,
- 34% of turnover for the liberal professions,
- 87% of the average turnover of the last 3 years for agricultural profits.
Companies subject to the "MICRO" tax regime cannot deduct deficits.
3. VAT franchise (VAT exemption)
Companies taxed under the "MICRO" scheme automatically benefit from the VAT exemption scheme. Thus, the company does not charge VAT to its customers, but it cannot recover the VAT it pays to its suppliers on its purchases, expenses and investments. This regime can be penalizing for activities requiring expensive equipment.
The company must display on its invoices the following statement:" TVA NON APPLICABLE ARTICLE 293B DU C.G.I.”.
The thresholds of turnover allowing to benefit from the franchise are of:
- € 85 800 before tax (realized the year before) for the activities of sale or supply of housing or € 94 300 in the previous calendar year, when the turnover for the penultimate year (year n-2) was less than € 85 800.
- € 34 400 before tax (realized the year before) for the activities of service delivery and liberal professions or € 36 500 in the previous calendar year, when the turnover for the penultimate year (year n-2) was less than € 34 400.
Farmers are in principle subject to VAT under the flat-rate reimbursement scheme. But they may be subject to the simplified VAT system (where the amount of turnover calculated over two consecutive years exceeds € 46,000) or on option. In addition, the flat-rate reimbursement scheme is not applicable for certain agricultural professions.
When the turnover of the business exceeds the thresholds above, the "MICRO" regime remains applicable as long as the company has not reached the thresholds of maximum turnover for the application of the "MICRO".
4. Contribution on value added (C.V.A.E.)
Companies subject to the "MICRO" regime whose turnover is between € 152 500 and € 176 200 are subject to the "C.V.A.E.".
The amount of their added value for the calculation of "C.V.A.E." is set at 80% of the difference between the amount of the receipts and the purchases made during the tax year.
It should be noted that these companies must declare their added value but are liable for the "C.V.A.E." only when their turnover exceeds € 500 000.
FUNCTIONING OF THE "MICRO SOCIAL" REGIME
Since 2016, this scheme automatically applies to all entrepreneurs subject to the tax regime of the "MICRO" company.
This plan takes into account the following contributions:
- Maternity health insurance,
- Retirement insurance,
- Invalidity death,
- Family allowances (allocations familiales),
- C.S.G. and C.R.D.S.
The entrepreneur must declare his turnover on the website www.lautoentrepreneur.fr each quarter or month according to his option.
Contributions are paid on a lump sum basis as a percentage of turnover which is:
- 12.8% for the activities of sale or supply of housing;
- 22% for service or liberal activities;
- 6% for rentals of furnished tourist accommodation
At these rates is added the contribution to training at the rate of 0.1 to 0.3% depending on the activity.
This scheme does not exist for agricultural activities which in any case continue to contribute on the basis of the net profit determined by the "MICRO B.A." method.
The Micro tax system brings significant advantages, the main one being the simplicity of the system.
But we must draw your attention to the fact that in addition to the disadvantages that we have mentioned in this article, the operators subjected to a micro regime cannot benefit most of the time from certain fiscal advantages such as the tax exemptions for the creation of business in certain geographic areas.
You can contact us when making your choice for a tax regime.