Tax and Social Charges for French Businesses Explained

Understanding the essentials when running a business in France

Starting a business in France is an exciting step, whether you’re launching a gîte, working as a freelancer, or opening a shop in your new French town. But before you dive in, it's essential to understand the financial side of things, especially taxes and social charges (called *cotisations sociales* in French). France has a reputation for being paperwork-heavy, but don’t let that scare you. Once you understand the basics, you’ll be far more confident in planning your business and staying compliant.

Here’s what you need to know.

Types of business structures and how they affect tax

Your first step in understanding what you’ll pay is to know how your business will be set up. In France, different business structures come with different tax rules:

Micro-entrepreneur (Auto-entrepreneur)

This is a simplified status perfect for small businesses, freelancers, or those testing the waters. You benefit from:

- Simplified bookkeeping

- Fixed-rate social charges based on turnover

- Optional income tax withholding

The downside? There are turnover limits:

- €77,700 for services

- €188,700 for sales (2024 figures)

If you exceed these, you’ll need to move to a more complex structure.

Entreprise Individuelle (EI) or Société (Company)

These are more traditional business setups (like sole traders or limited companies). They involve more accounting but give you access to more deductions and flexibility. They also come with:

- Professional accounting requirements

- More detailed social contributions

- Income tax or corporation tax depending on your setup

Social Charges (Cotisations Sociales)

In France, social charges fund things like health insurance, pensions, maternity leave, and unemployment benefits. They are *not* optional, and they form a significant part of your outgoings.

For Micro-entrepreneurs:

You pay a percentage of your turnover:

- 12.3% for sales

- 21.2% for services

- 21.1% for liberal professions

These cover most social contributions, including healthcare and retirement. It's simple and predictable — you pay based on what you earn.

For Other Business Types:

You’ll pay contributions based on profits, not turnover, and these cover:

- Health insurance

- Retirement (basic and supplementary)

- Family allowances

- CSG/CRDS (a social tax)

- Contributions to professional training

Depending on your income, the overall percentage can hover around **45% of net profit**, though this varies.

Income Tax or Corporation Tax

Once social charges are sorted, you also need to pay tax on your earnings.

Personal Income Tax (Impôt sur le Revenu)

If your business is a sole proprietorship (including micro-entrepreneur), profits are added to your household income and taxed progressively (from 0% to 45%).

Micro-entrepreneurs can also opt for a simplified system where a small fixed percentage of turnover is paid as income tax alongside social charges which is very handy for budgeting.

Corporate Tax (Impôt sur les Sociétés)

If you’ve set up a company (like an SARL or SAS), you’ll pay corporation tax:

- 15% on profits up to €42,500

- 25% on anything above

Then, if you take dividends or a salary, you’ll be taxed again on that income personally.

Other Business Taxes You Might Encounter

Here are a few more taxes to be aware of:

CFE (Cotisation Foncière des Entreprises)

This is a local business tax based on the location of your business premises. Even if you work from home, you may still owe it (though there are exemptions for micro-entrepreneurs in their first year).

VAT (TVA)

Depending on your turnover and activity, you might need to register for VAT. If you're under certain thresholds, you're exempt, but larger businesses must collect and remit VAT, currently at 20% for most goods and services.

A Note on Accounting and Help

Unless you’re under the micro-entrepreneur regime, it's strongly advised to work with an accountant (expert-comptable), especially as your business grows. They’ll ensure you’re claiming allowable deductions and staying compliant.

You might also qualify for professional training funds through your social charges — something many expats overlook!

In Summary

Running a business in France means being prepared for:

- Social charges, which are significant but cover essential benefits

- Income or corporate tax, depending on your business structure

- Additional taxes like CFE and potentially VAT

- A learning curve, especially in the early months

The good news? Once you're set up, many systems are automated, especially for micro-entrepreneurs. And while the tax load can feel heavy, the return in services (particularly healthcare) is a major plus.