The new year is a great time to start a new business. Many first time entrepreneurs in France start with an auto entrepreneur (also called micro entrepreneur) in order to test their market and to understand the French system. Here are my four tips to help you make a success of your auto-entrepreneur in 2020.
Tip 1 - Keep a track of your auto entrepreneur turnover
Keep a track of your turnover at the end of each month and bear in mind the pro rata rule. This is not an issue if you register on 1st January, but it will impact you if you create your business later in the year. The maximum turnover for an auto entrepreneur is 70,000 euros for services and 170,000 euros for trade. However, if you register along the year, the tax office will recalculate your turnover, based on a pro rata basis, i.e based on the actual number of days you are in business. Meaning that if you register later in year, your maximum yearly turnover is lower than the official 70KE and 170KE.
For instance, someone registering on 1st January 2020 as a marketing consultant has a maximum yearly turnover of 70,000 euros. This same consultant registering on 1st June 2020 will have a maximum turnover of (70,000*213 days)/365 = 40,849 euros. This person would come out of the micro entrepreneur regime in 2021 if his/her turnover went above 40,849 euros, for having gone over the maximum turnover threshold.
This rule is pretty silly, but can easily force you to come out of the micro entrepreneur regime, while it may be a very good regime for you. So, it is key to track your turnover and know the maximum that you can invoice in order not to come out of the regime. Please note that the pro-rata rule only applies for your first year in business.
==> Keep control of the decision to stay or to leave the auto-entrepreneur regime when you want, by keeping a track of your turnover.
Tip 2 - Save enough for your social charges with or without ACRE
All new French businesses created in 2019 benefited from a social charges exoneration called ACRE, with a 75% reductions on their social charges for their first year. This meant for instance 3.2% of social charges for trade and gites instead of 12.8% and 5.5% for services instead of 22%. There has already been an attempt by the Government in October to reduce this exoneration, but it has been postponed to 1st January 2020 without confirming the new rates.
For now, it is thought that ACRE will be limited to 1 year (compared to 3 years) and that the exoneration would be limited to 50%: i.e. 6.4% for gite and trade and 11% for services. Some mention reinstating specific criteria such as limiting the exoneration to people under 26 years old, being unemployment or benefiting from the minimum reinsertion income RSA.
It is, therefore, safer to save the full rates of social charges until a final announcement is made. Knowing that Loi de Finance is voted by 31 December and applicable from 1st January 2020, we should know soon... As a reminder, trading activities such as shops, e-commerce and gites will pay 12.8% of their turnover, while services will be paying 22%.
==> Save the full social charges rates until an announcement is made on ACRE in January.
Tip 3 - Anticipate when your auto entrepreneur becomes TVA registered
There are two turnover thresholds to keep an eye on. We have already talked about checking your turnover for the pro-rata rule. But the other threshold to keep an eye for is the TVA limit. Although the maximum yearly turnover for an auto entrepreneur is 70,000 euros for services and 170,000 euros for trade, you will have gone over the European TVA threshold if you reach these levels.
Auto-entrepreneurs providing services have to charge TVA from 33,200 euros and trading activities from 82,800 euros. This means having to request a TVA number from the tax office and charging TVA to your customers from the first euro above these thresholds.
It is, therefore, best to keep an eye on your turnover and plan the move to TVA at least one month before going over the threshold. This will give you time to get your TVA number, add the legal mentions on your invoices and see an accountant to understand how to make your future TVA declarations on your own or with an accountant.
==> Plan your move to become TVA registered one month ahead.
Tip 4: Learn to manage your auto entrepreneur's admin
France is well known for its red tape, so you might feel slightly overwhelmed to start with, especially as your French may not enable you to grasp the subtlety of French administration. The good news is that a micro entreprise is easy to manage. It is more a question of knowing what you should be doing and who are the key bodies you should be dealing with.
I will be releasing soon an online course on “How to manage your micro entrepreneur set up paperwork” to get you started. You can subscribe here to be informed when the online course is released. I will also release extra training to help you manage your micro entreprise in 2020, to help you gain confidence and control of your French business.