Micro-Entrepreneur Taxation: What You Need to Know

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Verified on January 1, 2025 – Directorate of Legal and Administrative Information (Prime Minister’s Office)

What is the Tax System for Micro-Entrepreneurs?

Micro-entrepreneurs are automatically subject to the micro-BNC (Non-Commercial Profits) tax system under personal income tax. However, they can opt for the standard taxation system if preferred.

Under the micro-BNC system, tax is deducted at source unless the entrepreneur chooses the flat-rate payment option, which allows for a combined payment of taxes and social contributions to Urssaf. Eligibility depends on the previous year’s taxable income, with thresholds varying based on household size.

Controlled Declaration System

Entrepreneurs opting for the controlled declaration system must apply before the second business day following May 1 and submit their tax returns by this deadline. An additional 15 days is granted for online submissions.

Micro-entrepreneurs must declare their turnover to Urssaf using the Supplementary Declaration for Non-Salaried Income and provide a BNC tax return.

What Taxes Apply to Micro-Entrepreneurs?

Micro-entrepreneurs may be liable for various taxes, including:

  • Value-Added Tax (VAT)
  • Business Property Contribution (CFE)

VAT

VAT obligations depend on revenue levels:

  • Exempt from VAT: Businesses with annual revenue below €37,500 (services) or €85,000 (commerce and accommodation).
  • Simplified VAT Regime: Businesses with annual revenue between €37,500 and €254,000 (services) or €85,000 and €840,000 (commerce and accommodation), with VAT under €15,000 per year.
  • Standard VAT Regime: VAT must be declared and paid monthly through an electronic system.

CFE (Business Property Contribution)

  • Exempt in the first year
  • Reduced in the second year
  • Possible permanent or temporary exemptions based on location and activity

CFE applies if the entrepreneur:

  1. Earns more than €5,000 annually
  2. Runs a non-salaried professional activity regularly

A CFE initial declaration must be submitted by December 31 of the business’s first year.

Tax Benefits for Micro-Entrepreneurs

Micro-entrepreneurs may qualify for tax reductions or credits based on:

  • Business location (e.g., priority urban areas)
  • Activity type (e.g., tax credits for craft industries)
  • Employee hiring (e.g., tax relief for employment and sustainability initiatives)
  • Specific actions (e.g., tax credits for innovation, research, and donations)

Certain exemptions, such as temporary CFE exemption, may also apply when starting a business.

Key Tax Terms

Understanding taxation requires familiarity with essential terms, such as:

  • Tax deduction: A reduction in taxable income
  • Tax exemption: Full or partial relief from tax obligations
  • Turnover: Total revenue from sales or services
  • Controlled declaration: A taxation system for businesses exceeding €77,700 in annual revenue
  • Standard and simplified tax regimes: Different levels of tax obligations based on revenue thresholds
  • VAT exemption: A scheme where businesses do not charge VAT on sales