France - tax rules for freelancers
Published on 2020-01-22 by Marek Siarkiewicz.
In this article, we discuss the legal and tax environment of France from the perspective of a remote employee. The latter is understood as a co-worker who is not bound by an employment contract and might have many principals at the same time. Some important questions that we answer are:
- are freelancers obliged by the law to register a business?
- are they obliged to pay social charges?
- how often should income be reported and what are the tax rates?
- finally, is it a competitive system comparing it to the rest of Europe?
How many Frenchmen work remotely?
Freelancing is not particularly popular among the French, given the large population of the country (67 million). There are less than 0.2 remote employees registered on freelancer portals per 1,000 people, which is less than in Romania or Serbia
Read more: In which countries is freelancing the most popular?
Freelancer is required to register a business
Any service for a professional activity must be invoiced. That means that a freelancer (French tax resident) who works for a company must give an invoice to his client.
Invoices must include SIRET number (Système d'Identification du Répertoire des Établissements). To obtain it, the freelancer must register either a company or sole proprietorship.
There is no other way to obtain the number. Therefore, an individual cannot issue an invoice and a freelancer must register a sole proprietorship to work for a company.
What if I have a foreign client?The rules are exactly the same when a French freelancer works for a foreign company.
The income tax for remote work. Since the regulations do not allow any other form of freelancing than opening a business, let's now have a look at all the charges and taxes.
Social contributions in France
Social contributions in France are calculated on turnover. Every sole trader must pay social security contributions to the fund called URSSAF - Union de Recouvrement des cotisations de Sécurité Sociale et d'Allocations Familiales. The contributions are proportional to the income received.
The value of contributions is formally calculated as 22% from 66% of turnover.
€ 66% turnover: € 1320
pension contributions: 22% from € 1,320 = € 290.40
A remote employee pays contributions monthly or quarterly (one can choose the frequency). In the respect of social contributions, the French system is similar to the Bulgarian one.
Read more: Bulgaria – freelancers’ tax obligations
Tax schemes to choose from
Freelancers have different types of taxation to choose from. Let's take a look at them.
a) "Impôt sur les revenu", or taxation of family income
In this approach, all freelancer’s revenues are added, including those from any full-time employment.
The tax rates are progressive and dependant on income (2020):
Up to € 10,064: 0%;
From EUR 10 064 to EUR 25 659: 11%;
From € 25,659 to € 73,369: 30%;
From € 73 369 to € 157 806: 41%;
Over 157 806 €: 45%.
b) The "Versement libératoire" – a low tax on turnover
It is an advantageous scheme for sole proprietors. In this option, the tax rate is only 2.2%, and it is calculated on 66% of turnover. However, certain conditions must be met.
Firstly, the maximum income is € 70,000. Secondly, the income in the next year of operation cannot exceed a certain amount, depending on many factors, such as family income, number of children, etc.
Like in the case of pension contributions, here the entrepreneur can choose the frequency of settlements (monthly or quarterly).
Is the French tax system competitive?
French tax schemes for freelancers have their advantages. These certainly include the fact that, apart from property tax, there are no other flat fees unbound to the turnover.
The biggest plus is probably a high tax-free allowance (€ 10,064) or a very low tax (2.2%) if you don't earn more than € 70,000 a year.
The disadvantages include the fact that pension contributions are compulsory. In our opinion, any system that forces an entrepreneur to pay pension contributions is contrary to the idea of entrepreneurship.
Fortunately, the social burden for the self-employed French is not very severe. First of all, contributions are calculated on turnover, so with zero revenues we won't pay anything. Secondly, it’s not as expensive as it could have been - the effective rate is around 14.5% on income, and therefore much less than on the employment contract.
In summary, French tax law for self-employed employees is neither particularly favorable nor extremely dissuasive. It is somewhere in the middle, ranking lower than Great Britain or Germany, but above e.g. Romania, where the system basically forces freelancers to open limited liability companies.
Read more: Taxes of freelancers in Romania
Are you eager to know more?
There’s more to find out. Particularly about:
- the only legal way to avoid registering a company by a freelancer, or
- how costly is the compulsory property tax.
Do you need to hire a French freelancer?
Do you have a remote worker from France or are you pondering how to legally hire one? Consider Useme - with us the whole HR process is completely non-engaging and thus simple and trouble-free for both sides.
Propose your remote co-worker to issue an invoice as an individual or use our API to account a whole team of Freelancers. Useme will take care of the formalities, payment security, transaction history, file storage and more.
Any questions? Contact us at firstname.lastname@example.org.