Many people who come to France to work or set up a business can easily find themselves lost in the country's byzantine bureaucracy, especially when faced with the complicated structure of tax and social security. Having been both employed and set up my own business, I offer a few survival tips born of practical experience.
Being employed can be relatively simple and the main differences concern your type of employment contract, which can be either long term/indefinite (CDI) or comparatively short term/fixed (CDD), such as for the holiday season or to replace someone on maternity leave. The other choices are between full time (35 hours per week) or part-time (generally less than 20 hours).
When you get your payslip, you will see that there are around 12 or 15 different deductions for unemployment, social security, health and pension, paid partly by you but the major proportion by the employer, effectively adding a further 50% to the salary cost of employing you. The social security payments (known as 'cotisations') apply whether you are retired or already covered by insurance, and have to be regarded part of the cost you pay for the privilege of being employed and working. The burden on the employer is considerable and clearly a disincentive to employing any more staff than are absolutely necessary.
Income tax is payable by the employee annually, using a form that is not dissimilar to the British version. There are the usual 'personal allowances' or bands of tax free income, and certain expenses can be deducted such as travel-to-work costs, even by employees. If you are married, your tax rate is calculated per houshold rather than individually, with tapered reliefs for, for example, a non-working spouse, children of school age, parents who may be dependent and so on.
In terms of social security, benefits are fairly generous in terms of unemployment, sickness, maternity leave etc. If you become unemployed, you need to first register at your local combined job centre (known as a 'pole d'emploi') which will deal both with your benefit payments and helping you find your next job.
Freelancing in France has never been particularly easy until the introduction of the new status of 'auto-entrepreneur' in January 2009. Still in its infancy, the system has been experiencing teething troubles, largely to do with the payment of social security contributions to your designated collection organisation (known as a 'caisse') which can vary according to the type of work you do. For example, most intellectual occupations, or liberal professions such as teaching or consultancy, come under a body known as CIPAV which has been found to be particularly inefficient. Artisans and crafts people have also experienced problems due to opposition by some trade associations, who claimed that the livelihoods of their members would be jeopardised by competition from 'unqualified' auto-entrepreneurs. Legislation requiring proof of competence has as a result been adjusted and comes into effect in January 2010.
Despite all these problems however, the new system had attracted nearly 200,000 registrations by the summer of 2009 and includes those already in jobs, unemployed, retired and those transfering from other tax and social security regimes. Relatively simple by French standards, auto-entrepreneurs pay a fixed percentage of turnover, combining tax and social security contributions, at a rate of 13% for commercial activities (turnover limit of 84,000 euros annually), and around 21% for services and liberal professions, with a turnover limit of 34,000 euros. VAT/TVA can be neither charged nor recovered, and if you exceed the annual turnover limits you are obliged to change to another regime. Note that the percentages charge are on total income invoiced, not on profit after allowable expenses.
The registration process is relatively simple and can be done online, as can any changes in your type of activity, or indeed if you decide to close your business. If however you have high business costs or need to register for VAT (for reasons of cost savings or higher sales margins, for example) then you need to consider one of the alternative regimes, where in some cases you can opt for either a system of fixed percentage of costs or one based on actual deductible costs. For these it is advisable to consult a French accountant.
Questions have been raised as to whether the auto-entrepreneur system can provide a backdoor route into France's social security system, typically in the case of British people moving to France who cannot get social security cover, as they are below the statutory retirement age and not in receipt of a British pension. One of the attractions of the auto-entrepreneur scheme is that tax and social security are only payable on actual (as opposed to notional turnover) which is not the case with some other more burdensome regimes. The question is still being debated and recent statistics seem to indicate that large numbers of auto-entrepreneurs are already in jobs or have a working spouse, or are retired and receiving a pension, and in many cases are simply following a part-time activity that will bring them some additional income at the end of the month.
The auto-entrepreneur scheme is open to everyone including non-French living in France. There is a lively discussion forum and links to other information sites on www.auto-entrepreneur.fr to which I sometimes contribute. The subject has also been debated in English on the www.totalfrance.com and www.livingfrance.com forums, particularly in relation to the social security implications.