From Simplicity to Structure: Transitioning from Micro to Standard Tax Regime

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Making the leap from the micro-entrepreneur system to a standard tax regime marks a major shift in how a business is managed. While this transition introduces new accounting and fiscal obligations, it also opens the door to greater expense deductions and potentially more favorable tax outcomes. Entrepreneurs must carefully evaluate their business’s profile and financial goals before making this change.

In this article, we will explore:

  • Why business owners may shift to a standard regime

  • The necessary steps to change regimes

  • The implications of the switch

I. Why Shift from the Micro Regime?

Although the micro regime offers simplified management, certain circumstances may prompt—or require—a move to a more structured tax system.

Exceeding Turnover Limits

Once the annual turnover surpasses €77,700 (services) or €188,700 (sales) for two consecutive years, the business is automatically reclassified starting January 1 of the following year:

  • As a simplified or standard real tax regime for commercial or craft activities (classified under BIC)

  • Under the controlled declaration regime for liberal professions (classified under BNC)

If only one year exceeds the threshold, the micro regime remains applicable for that year and the next.

Operating Costs Exceed Flat-Rate Deduction

Under the micro regime, taxable income is calculated after applying a flat-rate deduction to gross revenue—34% for service providers, 50% for trade and crafts, and 71% for sales. However, when actual expenses surpass these deduction rates, switching to a standard regime may reduce taxable income more effectively by allowing full deduction of real costs.

Transition to a Corporate Structure

The micro-entrepreneur status is limited to sole proprietorships. To involve partners or external investors, creating a company structure is essential. This transformation entails:

  • Changing the applicable tax regime (potentially moving from income tax to corporate tax)

  • Adapting the social contribution system based on the new status (self-employed or assimilated employee)

  • Deregistering the sole proprietorship and transferring business assets to the newly formed company

This move is especially relevant for businesses entering a growth or fundraising phase.

Need for Detailed Financial Oversight

Some entrepreneurs prefer more precise financial monitoring. Adopting a standard accounting system (profit and loss statement, balance sheet, depreciation schedules) enables detailed analysis and informed decision-making. Although optional under the micro regime, full accounting becomes mandatory under the standard regime.

II. How to Change Your Tax Regime

At Business Registration

The micro regime is applied automatically if the entrepreneur qualifies. However, a different tax regime can be chosen via the one-stop registration process. If a mistake occurs, there is a three-month window to notify the relevant tax office and revoke the initial choice.

During Business Operation

Businesses under the micro-BIC regime can opt into the real tax regime—either simplified or standard—when submitting their annual income tax return, typically due in late May. This decision must be clearly indicated during the filing process.

III. What Happens After Leaving the Micro Regime?

Tax and Accounting Impacts

Once the business shifts to a standard regime, taxation is based on actual profit, and full accounting is required. The entrepreneur must prepare income statements and balance sheets, allowing actual expenses and asset depreciation to be deducted from revenue.

If fixed assets were purchased under the micro regime, they must be recorded at their initial value minus hypothetical depreciation that would have applied under the standard regime.

Additional deductions such as provisions for losses or asset impairment also become available—benefits not permitted under the micro system.

Businesses subject to income tax may also consider joining a recognized management association or employing a certified accountant to ensure compliance.

Social Contribution Changes

Under the micro regime, contributions are a fixed percentage of turnover. In the standard regime, they are based on actual income and calculated under general rules for self-employed individuals. Provisional contributions are determined:

  • Using income from the previous year (N-1), or

  • On a flat-rate basis for businesses less than two years old

VAT Obligations

If the VAT exemption threshold is exceeded, the business becomes liable for VAT from the date of excess. From this point on, VAT collected on sales must be reported, and input VAT on expenses can be deducted.

This VAT application may also occur while still under the micro regime, depending on revenue levels.