TLDR: A freelancer does not pay CFE during their first year of business. Taxation begins the year following the one in which the first revenue or turnover was generated.
Automatic First-Year Exemption
All freelancers and sole proprietors who start a business with revenue or turnover are considered "new businesses" for CFE purposes. The year of creation—that is, the first year in which income is recorded—is not subject to CFE payment. This rule applies to all tax regimes, including micro-entrepreneurs.
When CFE Payment Begins
The first CFE assessment occurs the year after the business is created. If a freelancer starts their activity and generates their first turnover in the same year, they do not pay CFE for that first year. The first payment will be due the following year, based on the assets owned as of December 31 of the year of creation.
What to Do in the First Year
Even though CFE is not due in the first year, the freelancer must still declare the start of their business to the French tax authorities. This declaration registers the existence of the business and allows the administration to calculate the CFE due from the following year. Failure to declare may result in penalties or the loss of any optional exemptions.
Taxable Base and CFE Calculation
The taxable base for calculating CFE in the first two years only considers assets subject to taxe foncière that the taxpayer owned at the end of the first year of activity. This means CFE is calculated based on the assets held as of December 31 of the year of creation.
Optional Exemptions
Optional exemptions can be requested from the year following creation. These exemptions are not automatic and require an explicit declaration. The freelancer must submit the exemption request in form 1447-C-SD (CERFA 14187).
Penalties for Failure to Declare
Failure to declare the start of the business may result in penalties or the loss of optional exemptions. It is important to comply with reporting obligations to avoid issues with the tax authorities.