TLDR: Tax calculation for a micro-entrepreneur in France is based on a flat-rate deduction applied to turnover, with varying percentages depending on the type of activity. You can opt for the versement libératoire (flat-rate tax payment) for income tax or apply the progressive IR tax scale. Those who choose versement libératoire are excluded from prélèvement à la source (PAYE).
Flat-Rate Deduction
Tax calculation for a micro-entrepreneur is based on a flat-rate deduction applied to declared turnover. The deduction percentages vary depending on the type of activity. This deduction reduces the taxable amount on which taxes will be calculated.
Option for Versement Libératoire
You can opt for the versement libératoire of income tax, allowing you to pay a flat-rate tax without waiting for the annual tax return. This option excludes you from prélèvement à la source. If you waive the versement libératoire, you will be subject to IR advance payments starting the year after the waiver.
Progressive IR Tax Scale
If you do not opt for versement libératoire, you will be subject to the progressive income tax (impôt sur le revenu, IR) scale. This means income tax will be calculated based on progressive tax brackets, with rates increasing as taxable income rises.
Deadlines and Notifications
Waiving the micro-entrepreneur regime and versement libératoire must be communicated by September 30 of the previous year to take effect the following year. This deadline is crucial to avoid remaining under the micro regime in the next year.
Exclusion from Prélèvement à la Source
Those who opt for versement libératoire are excluded from prélèvement à la source. This means no tax will be withheld at source on your income; instead, you will pay taxes in a flat-rate manner.
Tax Calculation
Tax is calculated directly on turnover after applying the flat-rate deduction. This method simplifies tax calculation, making it more predictable and manageable for micro-entrepreneurs.
Waiving the Micro-Entrepreneur Regime
If you decide to waive the micro-entrepreneur regime, you must notify by September 30 of the previous year. This waiver will subject you to IR advance payments starting the year after the waiver.