Micro-entrepreneur: what happens if sales and VAT exemption thresholds are exceeded?

Micro-business constraints

When you choose this status for your business, you need to take into account the ceilings that must not be exceeded to continue to benefit from the basic VAT exemption. In addition, there is a second sales ceiling that must be respected to avoid automatically switching to sole proprietorship status. These two ceilings are independent of each other, and while the consequences are immediate for exceeding the VAT exemption limit, they are delayed for the loss of micro-tax status.

You exceed the authorized limit for VAT-free invoicing

The ceiling for this benefit depends on the type of business you're in. In the year you set up your micro-enterprise business, this ceiling is calculated on a pro rata temporis basis. If you exceed it, you will be required to invoice VAT from January 1 of the following year.

Commercial activity

Three factors come into play:

• The basic VAT exemption threshold of €85,800.
• The higher threshold of €94,300.
• The VAT tolerance period when your sales are between €85,800 (exemption threshold) and €94,300 (increased threshold).

As long as your sales remain below €85,800, you are automatically exempt from basic VAT, and your invoices must bear the words "TVA non applicable, art. 293 B du CGI" ("VAT not applicable, art. 293 B of the CGI").

The first year in which your sales fall within the tolerance zone, i.e. between €85,800 and €94,300, you continue to benefit from VAT exemption. If, the following year, your sales fall below the authorized threshold, you are once again entitled to full exemption. On the other hand, if your sales fall within the tolerance zone for the second year running, you lose your right to basic VAT exemption as of January 1 of the following year.

Finally, as soon as you exceed the higher threshold, i.e. €94,300, you immediately lose your right to VAT exemption, from the 1st day of the month in which you exceeded the threshold. In practical terms, this means that you will have to send your customers rectifying invoices, including the VAT amount, from the beginning of the month in which the threshold was exceeded. To avoid this kind of inconvenience, it's important to keep your sales figures up to date on a monthly basis, before anticipating such an overrun.

Crafts and self-employment

The principle is exactly the same as for commercial activities, but the ceilings are different. The figures to bear in mind are as follows:

• The threshold for basic VAT exemption is €34,400.
• The higher threshold of €36,500
• The VAT tolerance period when your sales are between €34,400 (exemption threshold) and €36,500 (increased threshold).

Mixed activity

If you carry out two activities (sales + services), the exemption threshold and the increased threshold are calculated as follows:

• The basic VAT exemption system is applied when sales of services do not exceed the €34,400 ceiling.
• Total sales must not exceed the threshold for commercial activity, i.e. €85,800.

You exceed the authorized ceiling to continue to benefit from the micro-enterprise tax regime

As long as your annual sales do not exceed the following authorized ceilings for the previous year (N-1) or the year before last (N-2), you can benefit from the micro-enterprise tax system.

• 176,200 for sales of merchandise, catering (takeaway or eat-in) and accommodation services;
• 72,600 for services and liberal professions;

For companies that have been in business for less than a year, sales are calculated on a pro rata temporis basis.

You exceed the authorized ceiling for the first year

Depending on your activity, if you exceed the ceiling of €176,200 or €72,600, you retain the benefit of the micro-enterprise tax regime for the following year.

You exceed the authorized ceiling for two consecutive years

In this case, you will lose the benefit of the micro-tax regime on the January 1st following the 2 years you exceed the limit, and will be subject to the tax and social security regime for sole proprietorships, with the following consequences:

• If you operate a commercial or craft business, you will be taxed under the simplified real income tax system, or, if you wish, under the normal real income tax system by option.
• If you are a self-employed professional, you are subject to the controlled declaration tax regime.
• You can no longer benefit from the flat-rate income tax payment from December 31 of the 2nd year of the excess.
• You can no longer keep light accounts, but must produce accounting books, a balance sheet and annual financial statements.