Would you fancy working remotely as a Freelancer from France and you are put off by the legal and tax complications?
One thing is true: if you wish to work as a Freelancer from France, you need to regularize your Tax and Social Security situation with the French authorities.
Do not get discouraged!
Take a look a this guide to find more about the legal shape your Freelance Business can take in France and how to be compliant with the French Tax and Social Security system
What is a Travailleur Indépendant – Profession Libérale (Freelancer)?
The Travailleur Indépendant (or : Travailleur Non Salarié – TNS) in France has a legal and social status different from the Travailleur Salarié.
This is especially because the Travailleur Indépendant works autonomously without being under the direct authority of an employer.
As a Travailleur Indépendant, you enjoy the freedom to organize your work schedule in an autonomous way, your sole contractual obligation being the delivery of your work to your client on time and with the expected qualities.
When you offer intellectual services to your clients, you qualify as a Professionnel Libéral, which is a subset of the Travailleur Indépendant category.
In this guide, we deal exclusively with the options available to Freelancers offering independent intellectual services as Contractors of their Clients such as Designers, Consultants, IT and Marketing Specialists, etc.
LEGAL STRUCTURES AND TAX ASPECTS
In order to carry out your activity as a Freelance in France – Professionnel Libéral – you may generally choose between two options:
OPTION 1 – SOLE-PROPRIETORSHIP (Entreprise Individuelle)
EI stands for Entreprise Individuelle and is the simplest way to register your business.
If you choose to create an Individual Firm (EI), there will be no legal distinction between you and your firm.
However, it is worth pointing out that for EI – Sole-proprietorships created as of May 15th 2022, the entrepreneur’s debts liability is limited to its professional assets, with the consequence that your personal property is protected in case of default of your business.
As to the Tax aspects, as an EI your business profits (BNC – Bénéfices Non Commerciaux) will be taxed in your own hands (IR – Impôt sur le Revenu) after having been declared in your annual tax return, unless your EI opts for French Corporate Tax (IS – Impôt sur les Sociétés)
Under the IR Tax regime, your Freelance Business will naturally function under the Auto-Entrepreneur regime (Micro-Entreprise – BNC) as long as your annual turnover is under 77.700 € (2024 threshold).
The Micro-enterprise – Micro-BNC regime means in particular that you benefit from a 34% fixed tax-base deduction for business costs and that you will not need any bookkeeping as there are no accounting requirements.
If you go beyond that threshold for 2 consecutive years, you will automatically be subject to the Régime Réel Tax regime, which means that you will have to keep your accounting books and draw up your Freelance Business financial statements, with the possibility to deduct your professional expenses from your taxable income.
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OPTION 2 – COMPANY (Société)
EURL or SASU?
If you choose to create a company of which you will be the only partner, you may use an EURL Limited Company (Entreprise Unipersonnelle à Responsabilité Limitée) or a SASU Limited Company (Société par Actions Simplifiée à associé Unique)
Unlike the Sole-Proprietorship, if you use a Company:
- Your business profits will be generated in the name of your Company, which is a separate entity from yourself and will have its own financial statements;
- Your private property will be distinct from the Company’s assets, which means that you will never be liable for the company’s debts.
From a Tax point of view:
- if you choose the EURL Limited Company, your Freelance Business profits will be taxed “by default” in your hands (Impôt sur le revenu – IR) unless you opt for the Corporate Tax (Impôt sur les Sociétés – IS – 25% / 15% on the first net taxable 42,500 €);
- conversely, if you choose the SASU Limited Company, your business profits will be subject to Corporate Tax (IS) by default. However, you may opt for having your SASU Limited Company’s profits subject to Personal Income Tax (IR) during the first 5 years of activity. In this hypothesis, the income generated through your SASU Freelance Company will be taxed in your hands (IR) and your will take your own remuneration out of the Company’s profits.
In case you choose to have your EURL subject to Corporate Tax or you prefer to have your SASU to stay with its default Corporate Tax regime, you can take out money from your company through a Remuneration/Salary and/or Dividends.
For more information about these company types, their main differences and more details about their tax regimes, please see our dedicated blog article.
Our next article will delve into the specifics of tax regimes in France, providing a more detailed information to prospective French freelancers.
And don’t miss to follow our LinkedIn page AClegal at https://www.linkedin.com/company/aclegal-international-tax-and-business-law/
The opinion expressed in this article is for informational purposes only.
This article does not constitute legal advice.
In addition, it is important to remind that each client’s tax issue is different because each client’s personal situation is different.
Should you have a similar tax issue, please contact us for an initial discussion of your case.
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