An entrepreneur in France has certain tax advantages and benefits from a simpler taxation regime. France imposes a pay-as-you-go system for individuals who act as self-employed entrepreneurs, in contrast to the regime reel status which is the standard tax status for a business in France. While there are some differences that are more convenient for the entrepreneur, at least in terms of social security contributions, the taxation differences need to be observed accordingly before entering into a business arrangement or opening a company in France.
The entrepreneur tax regime
The tax status of the entrepreneur is preferred by those who want to start small business in France because it offers significant advantages: it is simple to manage and social security contributions (cotisations in France) are only payable if the business has actual sales. Opposed to this, investors have the usual tax status, called the regime reel, in which social security contributions are payable based on the profit made and have a minimum mandatory level, irrespective of the profits.
Although it is true that the absence of sales translates into the absence of cotisations, the entrepreneur needs to pay close attention to the fact that immediately after a sale takes place there will be a proportional cotisation payment, irrespective of costs or if a profit is realized.
Comparison to the regime reel
Another advantage of the entrepreneur system is that the cotisation can be based on an estimated profit or loss for a certain year. This is a good thing for investors who are just getting started and it may come as a significant advantage during their first year of business, for example, when profits can be expected to be low. However, if the investor has a larger profit than anticipated, he will have to pay the difference. Under the regime reel, the minimum contribution can never be lower than the minimum amount stipulated by law.
In practice, the net profits paid by those using the regime reel are far greater than for the entrepreneur regime (the latter has a flat rate of up to 23% of their turnover). Investors should consider all of the aspects of the regime when making a choice, like the fact that they can offset certain expenses against income tax but only in the regime reel.
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