French tax and social charges for freelancers
Thread poster: Samuel Woodward
Samuel Woodward
Samuel Woodward  Identity Verified
France
Local time: 19:37
French to English
Dec 17, 2012

Hello,

I apologise in advance for this lengthy post!I have been employed as an in-house translator for a French agency for a few years now, and from time to time I hear the call of the wild and wonder about going it alone. Now is one such time.

At present, I translate between 500k and 600k words per year, and my 'take-home' pay after employee deductions works out to a fairly low monthly salary, but at least it's guaranteed and I enjoy the usual rights of any employee.... See more
Hello,

I apologise in advance for this lengthy post!I have been employed as an in-house translator for a French agency for a few years now, and from time to time I hear the call of the wild and wonder about going it alone. Now is one such time.

At present, I translate between 500k and 600k words per year, and my 'take-home' pay after employee deductions works out to a fairly low monthly salary, but at least it's guaranteed and I enjoy the usual rights of any employee.

If I went freelance, I am fairly sure my employer, with whom I get on very well, would send me a considerable bulk of the work I currently do, as he has become reliant on the quality of my work. I am also very familiar with his clients' preferences and expectations. The arrangement may suit him, from a practical perspective. For this reason, I suspect my freelance turnover, even in year 1, would rule out the 'auto-entrepreneur' option.

I have been discouraged from going freelance in the past by advice from other translators that, in addition to the arduous paperwork, billing and accounting, you effectively have to pay 50 percent of your turnover to the French state in taxes and social contributions. For me, this would largely negate the financial advantage of being independent.

However, lately I have been playing around with some online simulators (like this one, for example: http://www.experts-comptables.fr/csoec/Simulateur-EIRL/Simulateur-EIRL) and it seems to me that with a turnover of between 32,000 and 40,000 euros per year, the total social charges and income tax burden works out to something broadly in the region of between 8,000 and 11,00 euros, or a rate of around 25%.

This figure is so different from what I have been led to believe, that I feel I must be missing something very obvious.

Can any France-based freelancers explain what that might be? I'd also be interested to hear your thoughts on the best status to adopt: EIRL or EURL, for example.
Collapse


 
Andrea Jarmuschewski
Andrea Jarmuschewski  Identity Verified
France
Local time: 19:37
Member (2007)
French to German
+ ...
Better in the French forum? Dec 18, 2012

This is an interesting question and one I can't answer, as I have been "Entreprise individuelle au réel" since the beginning of 2012 only (after being auto-entrepreneur for 3 years).
You might get more answers in the French forum (were the French language is de rigueur).

I can only say what my expert-comptable told me: that I'd be well advised to put aside 30 % of my turnover every month.


 
Irene McClure
Irene McClure
Local time: 19:37
French to English
+ ...
Charges Dec 18, 2012

Hi HeLLz - the 50% rate is bandied around quite freely but I think it can lead to misunderstandings and makes it sound absolutely unworkable to be freelance in France! In reality, it's not that complicated (at least in my experience).

If you work as a freelancer outside the AE scheme, social charges are paid not on your total income, but on the part that is left once you have deducted all your business expenses. That is the big difference between réel and AE.

Say you r
... See more
Hi HeLLz - the 50% rate is bandied around quite freely but I think it can lead to misunderstandings and makes it sound absolutely unworkable to be freelance in France! In reality, it's not that complicated (at least in my experience).

If you work as a freelancer outside the AE scheme, social charges are paid not on your total income, but on the part that is left once you have deducted all your business expenses. That is the big difference between réel and AE.

Say you receive 40,000 euros from your clients, from that you deduct your expenses (rent, heating, electricity, hardware, software, memberships, training, books, paper, etc.). The amount that is left once all these deductions have been taken off is what you pay the famous 50% on. (I think it is a little less than 50% actually, but not far off.)

In comparison to the autoentrepreneur scheme, the end result is likely to be approximately the same - around 25% or a little less. The only difference is there is no ceiling to bear in mind, and that you have to keep a record of your expenses to justify your deductions. You are also liable for VAT which you have to add to your bills but which conversely you can have reimbursed on your expenses.

I'm personally making the transition from AE to réel at the moment and am taking the advice of my accountant who assures me that in percentage terms, there isn't much to choose between the two, it's just a slightly more onerous way of getting there.

I hope this helps make the decision less daunting!

Good luck with whatever you decide!

Irene
Collapse


 
Samuel Woodward
Samuel Woodward  Identity Verified
France
Local time: 19:37
French to English
TOPIC STARTER
Thanks Dec 18, 2012

Hmm. Food for thought, there. One post says 30%, the other closer to 50. That's a heck of a range. I suppose it just goes to show how ridiculously opaque the French system is. Drives me nuts!

 
Irene McClure
Irene McClure
Local time: 19:37
French to English
+ ...
25-30% Dec 18, 2012

Not sure how you came to that conclusion?

I think both Andrea and myself are saying the same thing - Andrea's accountant suggests setting aside 30% for social charges while mine says around 25% - not so far off!

What I was trying to explain was that it is certainly NOT 50% of your income which will go on social charges, but only 50% of what you have left once you deduct all your business expenses.

To try to make it clearer, imagine a client pays you 100 eur
... See more
Not sure how you came to that conclusion?

I think both Andrea and myself are saying the same thing - Andrea's accountant suggests setting aside 30% for social charges while mine says around 25% - not so far off!

What I was trying to explain was that it is certainly NOT 50% of your income which will go on social charges, but only 50% of what you have left once you deduct all your business expenses.

To try to make it clearer, imagine a client pays you 100 euros for a job. If you are in the AE system, you will simply pay around 22% of this in social charges, so you are left with 78 euros in your pocket. In the réel system, of the 100 euros you might deduct 50 euros in business expenses (how much it 'cost' you to do the translation). You are then taxed on the remaining 50 euros at 50% (so you pay 25 euros in social charges), leaving you with 75 euros in your pocket.

It's a rough example but, hope it illustrates that no matter what system you choose, you end up with roughly the same amount in your pocket at the end of the day.

It's taken me a while to understand it, but now that I do, I don't really think it's that complicated or opaque ...
Collapse


 
Samuel Woodward
Samuel Woodward  Identity Verified
France
Local time: 19:37
French to English
TOPIC STARTER
Depends on your expenses Dec 18, 2012

Irene McClure wrote:

What I was trying to explain was that it is certainly NOT 50% of your income which will go on social charges, but only 50% of what you have left once you deduct all your business expenses.



Ah, sorry I see what you mean! I should have explained: my situation is a bit unusual, in that my partner is a church minister. We are 'rent free' and our heating bill is also paid. So my expenses would presumably be limited to a PC, software and telecoms bills and membership fees, which I imagine wouldn't be more than a couple of thousand euros a year. For a notional CA of 40,000 p/a, than would mean social charges of around 19k, which is very nearly 50% after all.


 
Andrea Jarmuschewski
Andrea Jarmuschewski  Identity Verified
France
Local time: 19:37
Member (2007)
French to German
+ ...
Accountant Dec 18, 2012

It might be interesting for you to discuss this with an accountant.
As Irene pointed out, the (more or less) 50% are applied to your profits, not your turnover. The different social charges and taxes that you pay during the year are also deducted from your turnover, not only your other expenses like software, hardware, phone, memberships, continued education, etc.
Heating bill and rent for your office space are very small factors anyway (if you do not rent a separate work space).


 
Samuel Woodward
Samuel Woodward  Identity Verified
France
Local time: 19:37
French to English
TOPIC STARTER
Strange system Dec 18, 2012

Andrea Jarmuschewski wrote:

It might be interesting for you to discuss this with an accountant.
As Irene pointed out, the (more or less) 50% are applied to your profits, not your turnover. The different social charges and taxes that you pay during the year are also deducted from your turnover, not only your other expenses like software, hardware, phone, memberships, continued education, etc.
Heating bill and rent for your office space are very small factors anyway (if you do not rent a separate work space).


I have to admit, I was confused about this:

"La base de calcul des cotisations sociales est égale au résultat avant charges, moins les charges et cotisations sociales obligatoires (à l'exception de la CSG non déductible)."

Which seems to imply that to calculate the cotisations, you have to first deduct the cotisations from your turnover. Of course, they mean the cotisations you paid corresponding to the previous period, not the one you're declaring.

I still can't quite believe a country as advanced as France has managed to end up with a tax and welfare system that is so mind-boggling complicated. Is it deliberate, do you think?


 
Rebecca Davis
Rebecca Davis  Identity Verified
United Kingdom
Local time: 18:37
French to English
+ ...
One idea Dec 19, 2012

Have you thought of setting up as an EURL/SARL?
Although the accounting side of it is more complicated (you will probably need an accountant), you will only pay social charges on the salary that you pay yourself, and can take any cash left at the end of the year as dividends (you still pay social charges on those, but it's nowhere near as bad...)
I have several friends who have done this, and it seems to work well for them.
Also, depending on the area of France you are planning
... See more
Have you thought of setting up as an EURL/SARL?
Although the accounting side of it is more complicated (you will probably need an accountant), you will only pay social charges on the salary that you pay yourself, and can take any cash left at the end of the year as dividends (you still pay social charges on those, but it's nowhere near as bad...)
I have several friends who have done this, and it seems to work well for them.
Also, depending on the area of France you are planning to set up in, you may be exempt from income tax for a period of up to six years, so investigate that too...
Collapse


 
Paweł Hamerski
Paweł Hamerski
Poland
Local time: 19:37
English to Polish
+ ...
Surely you must have tax/business advisors there Dec 29, 2012

they are paid to settle such issues.

 


To report site rules violations or get help, contact a site moderator:


You can also contact site staff by submitting a support request »

French tax and social charges for freelancers







Protemos translation business management system
Create your account in minutes, and start working! 3-month trial for agencies, and free for freelancers!

The system lets you keep client/vendor database, with contacts and rates, manage projects and assign jobs to vendors, issue invoices, track payments, store and manage project files, generate business reports on turnover profit per client/manager etc.

More info »
TM-Town
Manage your TMs and Terms ... and boost your translation business

Are you ready for something fresh in the industry? TM-Town is a unique new site for you -- the freelance translator -- to store, manage and share translation memories (TMs) and glossaries...and potentially meet new clients on the basis of your prior work.

More info »