Because freelancers are not our employees and we don't pay taxes on payouts, they must declare any income received through Mellow by themselves.
To carry on tax accounting in France for your Mellow income, you need:
Tax status (regime réel or micro-entrepreneur)
Tax residency in France
Residents pay French taxes on worldwide income, while non-residents of France are taxed on income earned from French sources only.
You are considered a French tax resident if:
France is your main place of residence or home.
Your main occupation is in France.
Your most substantial assets are in France.
Registration for business taxation purposes
To earn income in France, freelancers are required to set up as a sole trader (entreprise individuelle) at their French place of residence. For that, you need to be a French/EU citizen, or have a residence permit along with a work permit.
Setting up as a sole trader:
Fill in the online application on the official website.
Provide a document confirming you're staying in France legally and/or your address of registration in the country.
Based on the chosen type of business activity, your application is sent to the relevant center for business formalities (CFE – centre de formalités des entreprises):
Organizations for the Collection of Social Security and Family Benefit Contributions (URSSAF) – for the self-employed;
Chambers of Commerce and Industry (CCI) – for those engaged in commercial activity (trading);
Chambers of Trades and Crafts (CMA) – for trade (artisanal) and professional activities;
Once your application is processed, you receive confirmation of being registered as a sole trader.
Following registration, sole traders receive:
SIREN – business registration number used by state and other administrative institutions (a unique nine-digit ID);
SIRET – identifier of establishments (consists of SIREN + a five-digit number).
APE/NAF code – business sector identification code (consists of 4 digits and 1 letter).
In France, sole traders can choose between two tax statuses: régime réel or micro-entrepreneur.
Régime réel
Regime réel – Impôt sur le Revenu (IR) – for sole traders imposes no caps on annual income, with tax and social security contributions payable on your actual net profits (the difference between your sales and eligible business costs). Under the réel status, you are liable for the following taxes:
1. Income tax (Impôt sur le Revenu), which is calculated based on marital status, number of children/dependants, and other factors. The tax base is calculated for the entire household using the following multipliers (shares in tax household): parent – 1, child – 0.5, single parent – 2 (sample calculations). The tax rate is calculated according to a progressive scale (the table shows the rates for the 2021 reporting year; subject to the parliament's approval, in 2023 the caps for the 2022 reporting year's incomes are expected to be increased by 5.4%):
Income tax bracket, € | Tax rate |
Up to 10,225 | 0% |
10,226–26,070 | 11% |
26,071–74,545 | 30% |
74,546–160,336 | 41% |
160,337 and above* | 45%** |
* There are no caps on annual income
** There is an additional +3% tax on the part of the income exceeding €250,000 for a single person and €500,000 for a married couple, and +4% on the part of the income exceeding €500,000 for a single person and €1,000,000 for a married couple.
You can make a preliminary calculation of the tax in the online calculator.
Income tax returns are filed annually in April of the year following the reporting year, with the method dependent on the area of residence: auto-declaration, online declaration, or paper form (more on the tax returns). The tax must be paid by September 15 of the following year (after the year of income).
2. Value-added tax (taxe sur la valeur ajoutée or TVA) is levied at a rate of 20% if annual income exceeds €34,400 for services rendered (€36,500 for the first year of a new business). The obligation arises from the first day of the month in which the limit was exceeded. Key points:
You can pay VAT without exceeding the turnover limit – in the future, you'll be able to get a VAT refund.
To pay VAT, it is first necessary to inform the tax service via the appropriate form.
For clients based in Europe, the European Declaration of Services (déclaration européenne de services – DES) must be filed.
The declaration is submitted on a monthly or quarterly basis between the 1st and the 19th of the month following the reporting period, and VAT is paid in the same period.
VAT is paid online, the amount can be calculated in an online calculator.
3. Social security contributions (charges sociales / cotisations sociales) under the réel regime are calculated as a fixed percentage of net profit (income less expenses related to sole trader activities):
Type of activity | Until October 1, 2022 | From October 1, 2022 |
Purchase and sale of goods
| 12.8% | 12.3%
|
Services
| 22% | 21.2% |
Professional activities | 22% | 21.1% |
For the purposes of calculating the contributions, tax authorities gather online information about sole trader activities. Notifications of the contribution amount are sent out twice: in December (advance payments) and October (total amount with any adjustments).
Advance contribution payments can be made online in the URSSAF system either monthly (on the 5th or 20th of the month) or every 3 months (on February 5, May 5, August 5 and November 5).
Micro-entrepreneur
The micro-entrepreneur (originally auto-entrepreneur) tax status for sole traders carries the following conditions:
Annual turnover limit of €72,600 for consultation/commercial/artisanal (professions libérales) services, or €176,200 for the buying and selling of merchandise.
Taxes and social security contributions payable for the turnover collected (excluding expenses).
Under the réel status, you are liable for the following taxes:
1. A micro-entrepreneur has the choice of paying the income tax (Impôt sur le Revenu) under either the basic (régime de base) or special (micro-fiscal) regime:
Régime de base is the default option, which sees you liable for income tax on a progressive basis (similar to the réel status), and grants a fixed cost allowance against sales based on the type of business activity (not less than €305):
71% – commercial sales;
50% – services;
34% – professional activities (for example, accountant, architect, lawyer).
Let's say your service-based business generates €25,000 in sales for the year, and it has an allowance for costs against this figure of 50% – equivalent to €12,500. This means you'll be liable for income tax on €12,500.
In terms of your income tax return, you simply declare your turnover, and an automatic abatement is applied by the tax authority to determine your taxable income and payable tax.
If you opt for the special (micro-fiscal) tax regime, you will be subject to a fixed percentage charge for income tax (le versement libératoire or prélèvement libératoire), which depends on the type of activity:
1% – commercial activities;
1.7% – service activities;
2.2% – professional activities (professions libérales).
You can only opt for micro-fiscal if your total income in the reference period (current year minus two years) does not exceed a maximum sum that is set annually. For example, to apply the regime in 2022, a single person (= one quotient part of the household) has to have earned no more than €25,710 in 2020.
Preparing a tax return is similar to the réel process: make sure you enter your turnover figure in the section Auto-entrepreneur ayant opté pour le versement libératoire de l'impôt sur le revenu.
2. Value-added tax (taxe sur la valeur ajoutée or TVA) is paid in much the same manner as under the réel status. However, if a sole trader exceeds a turnover threshold for VAT, they keep the status, but in the first year they will need to charge VAT for all sales in excess of the VAT threshold, while in their second and subsequent years all sales will need to have VAT applied to them. Keep in mind that registering VAT entails additional accounting and reporting.
3. The social security charges system for micro-entrepreneurs (charges sociales / cotisations sociales) is called micro-social. Under micro-social, you pay a fixed-percentage social security contribution based on your business activity, at the same rates as in réel, but only on your cash receipts (excluding expenses).
You can make a preliminary calculation of the contributions in the online calculator.
You need to file monthly or quarterly turnover reports to properly calculate the amount of the contributions. Such reports are filed online.
Things to know about the micro-entrepreneur status:
To set up as a micro-entrepreneur, you need to fill out an online application here and attach a residence permit or passport.
A micro-entrepreneur is not required to keep any books of accounting, other than a daybook giving details of income and in certain cases expenses.
Freelancers fill in the tax return (No. 2042-C PRO) in the sections corresponding to their activity.
List of activities that are excluded from the micro-entreprise scheme:
Activities related to the Agricultural Social Mutuality Fund (MSA).
Certain liberal professions not covered by the CIPAV pension fund (notary, lawyer insurance agent, etc.).
Activities relating to VAT on real estate.
Artistic activities falling under the remit of La Maison des Artistes or AGESSA.
Activities of a company's majority manager (gérant majoritaire ou en collège de gérance).
Cumulation with an activity already registered under the micro-entrepreneur regime.
IMPORTANT! Mellow does not have the option to choose a tax status for freelancers based in France, but you can fill in your tax ID in your account.
Additional info
Freelancers who render services to a company on a permanent basis may run the risk of getting their services agreement converted into an employment contract (can only be done through court).
Regardless of the selected regime, a sole trader must keep a book of income and expenses (livre de recettes).
If annual turnover exceeds €10,000, a sole trader is obliged to open a dedicated business account.
Income received via Mellow is declared based on certificates and invoices, and as per the offer agreement.
The French Tax Code is available here.
If you have any questions, get in touch via the chat in your Mellow account, or email [email protected].