Every worker is responsible for a certain number of social and fiscal expenses. In the case of the employee, the handling of these expenses is greatly simplified since the employer handles most of the calculations and declarations. Social charges are deducted from the pay slip while tax charges are validated at the time of the tax return. As to the self-employed person, he or she must carry out the calculations on his or her own and not forget anything, on pain of being at a disadvantage or worse, breaking the law. All self-employed persons do not have an identical withholding rate. Artisans, tradesmen, liberal professions and micro-entrepreneurs have different liabilities. The calculation of the expenses of a self-employed person may therefore vary according to his or her status and business activity.
What is a self-employed person?
A self-employed person is a natural person of full age enjoying his or her rights and exercising a well-defined and legally registered economic activity.
Several legal statuses are available and each self-employed person is assigned a unique number to identify him or her.
He or she does not depend on any hierarchical authority and has the opportunity to organize his or her work as he or she wishes. Self-employed status can be applied to many activities, ranging from agriculture to crafts and commerce, and of course to all professions linked to digital expertise, documentation, communications and even journalism.
Be careful not to confuse the self-employed person and the micro-entrepreneur as is commonly the case. A self-employed person may choose one of several social statuses, including micro-entrepreneur, and choose between several legal structures, which the micro-entrepreneur cannot do.
The self-employed person may opt for a sole proprietorship (French acronym EI), micro-enterprise or for the creation of a company (French acronyms EURL, EIRL, SARL). The choice of status depends primarily on the activity and must be adapted.
Social expenses of the self-employed person
Each worker pays a percentage of his or her turnover to finance social benefits. These include in particular sickness or maternity, daily allowances, basic and supplementary pensions, pensions, unemployment or even professional training.
Up to 2019, self-employed persons were affiliated to the RSI (French acronym for Social System for Self-Employed Persons). Soon, all self-employed persons will depend on the general social security system and will be affiliated with a CPAM or a CGSS (for the DOM, which is the French acronym for overseas departments). The transition will take place for a period of up to 1 January 2020. The artisans and merchants will be attached to the CPAM of their home while the liberal professions will be affiliated to the fund of the liberal professions.
The social charges of self-employed persons concern the following domains:
- Health and maternity insurance,
- Daily allowances paid in case of a long illness,
- Risks of disability and death,
- Basic and supplementary pension,
- Family allowances,
- CSG-CRDS for the financing of social security,
- Professional training.
Their recovery is ensured by the Urssaf (French acronym for the Unions for the collection of Social Security contributions and family allowances) and the CGSS, which is the French acronym for General Social Security Funds (for overseas departments or DOM).
All self-employed persons have the following contributions in common: sickness/maternity, family allowances, CSG-CRDS and professional training. Artisans and tradesmen also contribute to daily allowances, disability-death coverage, basic and supplementary pensions.
The liberal professions pay most of their social security contributions to Urssaf, but contribute to a professional section for retirement and disability-death insurance. There are ten such structures (“dental surgeons and midwives”, “doctors”, “nurses, physiotherapists, chiropodists, orthophonists and orthoptists”, “veterinarians”, “general insurance agents”, “Chartered Accountants and auditors”, “judicial officers, public officers and judicial companies”, “pharmacists”, “architects, persons accredited in architecture, engineers, technicians, surveyors, experts, consultants, Consultants …” and “Notaries” ) and federated by the CNAVPL (French acronym for the National Old Age Insurance Fund for the Liberal Professions) or the CNBF (French acronym for the National Fund for the French Bar), for lawyers.
The contribution for training is made through the Contribution to Professional Training (French acronym CFP) and provides total or partial support for training courses.
It should be noted that the self-employed person does not contribute to unemployment insurance. Nonetheless, it is always possible to enter into an unemployment insurance contract with a private organisation.
The rate of calculation of social contributions for the self-employed person is based upon the professional income used in income tax calculation and the function of the tax system of the company, which itself depends on the legal structure chosen. Artisans-traders and liberal professions may thus have different rates based upon specific calculation bases and have their own collection organisations.
Tax liabilities for the self-employed person
The self-employed person is subject to income tax. Depending on his or her activities, he or she may be subject to VAT or not (some activities may be subject and some may not). The calculation of the tax liability of the self-employed person is based on profits and varies according to whether the business activities depend on the BA (French acronym for Agricultural Profits), the BIC (French acronym for Industrial and Commercial Profits) or the BNC (French acronym for Non-Commercial Profits).
The calculation of the tax liability is based on the annual earnings, obtained by withdrawing all deductible expenses (catering, entertainment, depreciation, deductible rents, equipment, transport, etc.) from the annual turnover excluding tax.
If the annual turnover remains below a certain threshold (236 000 euros in 2019), the self-employed person depends on the actual simplified system. Beyond that, it involves the actual system. In that case, additional accounting obligations are added to existing ones (closing, completion of annual accounts, keeping of a daily journal).
To taxation on income is added the Business Real Estate Contribution (French acronym CFE). This involves a local tax collected by the municipality in which the company is established. It is calculated according to the rental value of the premises occupied by the company for its operation. It is payable once a year. Notices are usually sent during the month of November for an expected settlement no later than 15 December. If the rental value is very low (as in the very common case of a self-employed person who uses a single part of his or her home for professional activity), a lump sum is due. Companies are exempt from CFE the year of their creation.
The case of the micro-enterprise
The case of the micro-entrepreneur is a bit unusual in that it benefits from a simplified system for calculating its mandatory contributions. The calculation is based on gross turnover. The payment of expenses takes place every month or every quarter after the declaration of the corresponding turnover. If he or she does not realize any turnover, the micro-entrepreneur will not have to pay any contribution.
The rate applied for calculation differs depending on whether it is an activity involving the providing of services or a liberal profession or else an activity involving purchase / sale, for the sale of products to be consumed in on-licensed premises or providing accommodation services.
In order to benefit from this simplified system, the micro-entrepreneur must realize a limited annual turnover. The threshold is fixed at 70,000 euros excluding taxes for an activity providing commercial, craft or liberal services, or rental of furnished living quarters. It is 170 000 euros excluding taxes for a purchase / sale activity, manufacturing products from raw materials, sale of food to be consumed or accommodation services.
To conclude on the expenses of the self-employed person
The status of the self-employed person has a certain number of advantages in comparison to that of an employee, offering more freedom in particular in the organisation of the work. Nonetheless, the self-employed person will have to manage by him or herself the calculation and payments of the social and fiscal obligations while the employer is in charge of that for the employee.
A comprehensive management tool such as Nutcache allows the self-employed person to track his or her business activity more easily, and thus to calculate expenses in order to declare them afterwards. Do not hesitate to take advantage of a 14-day trial period to evaluate the complete solution.