There are two main categories of tax regime: the micro-business regime and the actual tax regime (simplified or normal). This choice is generally made when you set up your business. However, a change may occur during the course of your business, particularly if you have opted for the micro-enterprise regime and your sales lead you to switch to the actual tax regime. The switch to this new regime will bring certain changes to the way you manage your business. It is therefore important that you are fully aware of the advantages and disadvantages of the actual tax regime (simplified or normal) compared with the micro tax and social security regime.
The advantages and disadvantages of the micro-enterprise scheme
The benefits
You can benefit from basic VAT exemption if your sales do not exceed the following thresholds:
- 85,800 for sales of goods, takeaway food, food for on-site consumption and the provision of accommodation.
- 34,400 for services and furnished rentals.
If you exceed the VAT exemption threshold, the exemption continues to apply for the year in which you exceed the limits, and for the following year, provided that your sales do not exceed the increased limits (i.e. €94,300 and €36,500 respectively) and that your sales for the two previous years did not exceed the applicable thresholds. These two conditions are cumulative.
If your taxable income (RFR) does not exceed a certain threshold, you also have the option ofpaying income tax on your professional activityin full discharge.
Social security contributions are lower than under the actual tax system:
- 12. 80% for sales activities.
- 22% for commercial and craft services.
- 22% for self-employed professionals covered by the Social Security system for the self-employed.
- 22. 20% for self-employed professionals covered by CIPAV.
But they are applied to all sales.
Last but not least, your accounting obligations are very light, since they boil down to :
- declare your revenues on a monthly or quarterly basis (this declaration is compulsory even if your sales are zero);
- chronologically fill in a book of receipts collected, with the amount, the customer's identity and the method of payment;
- keep a purchase register (only for the purchase and sale of merchandise, take-away or on-site foodstuffs, and for accommodation services).
Books and registers can be in paper or electronic form. However, in both cases, entries must not be modifiable after registration.
Disadvantages
To qualify for the micro-enterprise scheme, you must not exceed a certain sales figure:
- 176,200 for sales of goods, including those for consumption on the premises, and for the provision of accommodation.
- 72,600 for services.
As soon as you exceed these ceilings for two consecutive years, you automatically switch to the actual tax system, except for self-employed activities, which are subject to the controlled declaration tax system.
You cannot deduct your actual expenses from your sales, but only benefit from a flat-rate deduction that depends on your type of business:
- 71% for sales activities.
- 50% for services (BIC).
- 34% for services (BNC).
If your business does not generate many expenses, this deduction is often more advantageous than deducting the costs actually incurred under the actual tax system.
The advantages and disadvantages of the simplified or standard real estate regime
The benefits
In terms of taxation,you can deduct all expenses incurred in running your business, as well as your compulsory social security contributions. What's more, any losses you incur can be deducted from your overall taxable income if you are subject to income tax (IR), or from future taxable profits if your company is subject to corporation tax (IS).
This deductibility is particularly attractive if your business involves a lot of expenses. Otherwise, the advantage can turn into a disadvantage.
Disadvantages
With the real regime, accounting obligations are more onerous than with the micro-enterprise regime, particularly with the normal real regime.
If you benefit from the simplified actual regime (sales of less than €818,000 for trading activities and the provision of accommodation, or €247,000 for the provision of services, and VAT payable of no more than €15,000), you will be required to keep standard accounts (balance sheet, income statement and annexes).
On the other hand, if your sales exceed the above limits, you will automatically be subject to the normal real income tax regime, which entails more stringent accounting obligations (obligation to record in chronological order all movements affecting your assets, to draw up an inventory at least once a year, to draw up annual accounts with a balance sheet, income statement and appendices, obligation to have a journal and general ledger).