The tax allowance is a system that simplifies the calculation of income tax for micro-entrepreneurs. Depending on the nature of the business, a flat-rate allowance of 71%, 50% or 34% is applied to sales, to take account of professional expenses. How does the deduction work, and what is the rate for a micro-entrepreneur selling applications on the App Store?
How does tax relief work for a micro-entrepreneur?
Micro-entrepreneurs operate under the legal status of sole proprietorships. Consequently, unlike companies, they are not liable for corporation tax, but for income tax, in the same way as private individuals.
The calculation of a micro-entrepreneur's income tax is based on 3 elements:
- Flat-rate allowance
- The progressive scale applicable to income
- The family quotient
Flat-rate allowance
The flat-rate allowance compensates for the fact that a micro-entrepreneur cannot deduct expenses from sales.
These expenses may include, for example, travel or meal expenses, the purchase of raw materials or products for resale in the case of a commercial activity, telephone bills, office supplies or advertising costs.
The tax allowance is therefore used to deduct these professional expenses from sales, in the form of a lump sum. The rate is calculated according to the activity carried out by the micro-entrepreneur.
There are 3 rates:
- A flat-rate allowance of 71% of sales for commercial activities and the provision of accommodation;
- A rate of 50% of sales for services;
- A rate of 34% for liberal professions and other non-commercial profits.
The rate is automatically calculated when you file your tax return. The flat-rate allowance cannot be less than 305 euros.
The progressive scale applicable to income
Another factor in calculating income tax is the progressive scale, which takes account of the micro-entrepreneur's income. In concrete terms, the higher the income, the higher the tax.
In 2021, the thresholds for the 5 tax brackets were as follows:
- From €0 to €10,225: no tax payable
- From €10,226 to €26,070: 11% tax rate
- From €26,071 to €74,545: 30% tax rate
- From €74,546 to €160,336: 41% tax rate
- Above €160,336: 45% tax rate
The family quotient
Finally, tax calculation is based on a 3rd and last element: the family quotient, which divides taxable income into shares according to household composition.
A single, widowed or divorced person with no children is taxed on the basis of one family quota share. A married or civil union couple with no children receives 2 shares. A child is equal to 0.5 part for up to 2 children per household, and 1 part for 3 or more children.
What is the discount rate for app sales on the App Store?
A micro-entrepreneur developing applications can benefit from a flat-rate allowance of either 50% or 34%, depending on how the applications are used and what they are intended for.
Thus, if the applications are developed at the request of a customer, this is a liberal profession, to which a 34% tax allowance applies. On the other hand, if the micro-entrepreneur commercializes his applications by issuing operating licenses, the tax allowance rate is the same as for the provision of services: it will therefore correspond to 50% of sales.
A micro-entrepreneur who sells an application via the App Store is considered to be providing a service, and benefits from a flat-rate allowance of 50%.
You can also carry out these two activities simultaneously. In this case, he will have to determine and declare a principal activity and a secondary activity.
As a reminder, micro-entrepreneurs can carry out a variety of activities:
- Commercial: sale of foodstuffs or goods, industrial activities, certain services such as the provision of accommodation;
- Artisanal: artisanal activities are listed in a decree and include certain services, such as those provided by hairdressers;
- Liberal: a distinction is made between unregulated liberal professions and regulated liberal professions, whose title is protected;
- Agriculture: livestock breeding, crop production, product processing and marketing.
If in doubt, you can find out the APE code of your business by consulting the INSEE database.