TLDR: Taxes and social contributions are mandatory levies with different purposes. Social contributions fund social benefits and are deductible, while income tax is a fiscal levy without direct consideration. For micro-entrepreneurs, mandatory contributions reduce the taxable base for income tax.
Differences in nature and purpose
Taxes and social contributions follow different logics. Social contributions finance social protection, covering risks such as illness, maternity, disability, old age, and family. They are calculated as a percentage of professional income, and payment is mandatory to access social security rights. Income tax is a general tax that funds state resources without offering direct consideration to the taxpayer. For micro-entrepreneurs, income tax applies to income net of deductible contributions.
Obligations for micro-entrepreneurs
Micro-entrepreneurs must declare and pay both income tax and mandatory social contributions. Contributions must be documented to be deducted: proof of payment must be retained, as only amounts actually paid during the accounting period can be deducted. This applies to both basic and supplementary contributions, provided they are required by legal schemes.
Limits and conditions of deductibility
Not all contributions paid by micro-entrepreneurs are deductible. Deduction is reserved exclusively for contributions that are mandatory by law, covering basic social risks and, in some cases, supplementary contributions imposed by conventional schemes. Voluntary contributions and payments to non-mandatory pension funds are excluded.
Interaction between contributions and income tax
The deduction of contributions is subject to their mandatory nature and actual payment during the relevant accounting period. For micro-entrepreneurs under the micro-tax regime, deduction occurs automatically through a flat-rate allowance, while under the real regime, each item must be justified in the tax return.
Practical examples
Mandatory contributions, such as those for illness, old age, and disability, are deductible if paid to legal schemes. Voluntary contributions, such as private insurance policies, are not deductible. Deductibility is governed by Article 154 bis of the French General Tax Code (CGI), which sets the criteria for non-salaried workers, including micro-entrepreneurs.
Required documentation
To deduct contributions, proof of payment must be retained. Only amounts actually paid during the accounting period can be deducted. This applies to both basic and supplementary contributions, provided they are required by legal schemes.
Applicable tax regimes
Micro-entrepreneurs can choose between the micro-tax regime and the real regime. Under the micro-tax regime, the deduction of contributions occurs automatically through a flat-rate allowance. Under the real regime, each item must be justified in the tax return to deduct the contributions paid.