Profession Liberale, Part 4: VAT (or TVA)

This is the latest in an ongoing series about my transition to a citizenship path.  You can find part 1 here, part 2 here and part 3 here.  

Most people who find out that I’m self-employed in France assume I am under the auto-entrepreneur regime, but I avoided that for a number of reasons, not least of which was the income ceiling of 33,100 euros.  You simply aren’t allowed to earn above this amount without reclassification of your status.  There is talk that President Macron may change this, but that remains to be seen.

That number of 33,100 is also quite close to 33,200 euros, which is the limit for a non-VAT tax return for my regime, profession liberale.

What is VAT?

VAT stands for Value Added Tax.  In French it is TVA (taxe sur la valeur ajoutee).  It is, generally speaking, a 20% consumption tax that is added onto all goods and services bought or sold inside the EU.  But this means that if you don’t live in the EU, you don’t have to pay it…unless you do.  Let me explain.

Let’s say you are here as a tourist but you don’t really spend that much money on souvenirs, etc.  You probably won’t take the time (or have spent enough to qualify) to fill out the paperwork to get a VAT refund before you go home.  Some stores have the software and capability to process you on the spot so that you don’t have to pay the VAT at all, but there needs to be a minimum purchase amount.  Through VAT, most people end up paying extra taxes into Europe without enjoying any of the privileges or benefits of being a European taxpayer, the same way that Europeans visiting the US pay sales taxes whenever they visit America without reaping any benefits (that said, there are two states – Louisiana and Texas, that do offer refunds to foreign visitors, and of course the states like New Hampshire, Alaska, etc. that don’t have sales tax).

If you’re here on a long-term stay visa or other equivalent, you are ineligible for a VAT refund because you are a fiscal resident here.

Then there’s my French business and my non-French clients.  If I bill less than 33,200 euros in any given year, I don’t owe VAT and neither do my clients.  But if I bill more than 33,200 euros to my clients in any given year, I have to change my tax return from a non-VAT return to a VAT return, which means that I have to pay my accountants more (they have to do paperwork) and then I have to turn around and assess a 20% tax on all of my clients (they will now be required to pay), some of which are headquartered outside of Europe and may not know what VAT is – and I’m uncertain as to the deductibility of it for them from their tax returns.  In any event, though I don’t technically have an income ceiling as the auto-entrepreneur status does, there’s a “soft ceiling” here that will cause me to make administrative and business changes, none of which makes me any more money…

Auditing Agency

I also have to pay about 300 euros a year to belong to an agency for profession liberale adherents that “audits” my returns.  By being a member of this organization (in my case, France Gestion), my total taxable income is lowered by 20%.  They will tell you that you don’t have to belong to one of these agencies – but do the math – 300 euros is a small price to pay to reduce your taxable income by 20%.  But, it is “one more thing” you have to do in order to have a small business.

The Citizenship Narrative

Some years from now when I put together my citizenship dossier for the prefecure, I will not be able to simply show them a set of tax returns which show business income that has mysteriously stopped growing at 33,200€.  I know that in a couple years, I will need to move to a VAT return and find a way to bring my clients along with these charges (or eat the loss myself).  The reason for this is the French want to see that you are not just integrated into French life, but are growing and have a vision for the future, and they will smell a rat if they see your business rapidly grew to a certain level and then stopped.

Obviously, this one business isn’t the only way to earn income, and I could easily start other businesses or create other streams of income and avoid some paperwork…but it would only come at the cost of even more paperwork.

Again, I’m here because I love this country and so many things about it.  But I’m not here because France makes it easy for me to create businesses and jobs, things which I can do fairly well.  Indeed, as you’ve seen in numerous articles I’ve written here, the French administration doesn’t make it easy.  I do know that if Macron removes some of these constraints people like me will help grow the economy faster, just by being ourselves.

Photo by Sanwal Deen on Unsplash

Profession Liberale, Part 3: Delays, no taxes, but money back

This is the latest in an ongoing series about my transition to a citizenship path.  You can find part 1 here, and part 2 here.

It had been 14 months since the glorious granting of my Profession Liberale visa and the beginning of long-term stability here in my beloved France.  I was at the prefecture with all my paperwork which, for the renewal of my provisional one year visa, was focused on proving two things (in addition to all the “usual” stuff you need for a renewal):

  1. That I was current on all my social charges and
  2. That my new French business was generating enough revenue to justify a renewal

However, the appointment was cut short as the supervisor deplored my lack of a declaration from the Ministry of Finance that I had, indeed, filed my taxes (the copy I had provided of my filed return was deemed insufficient).  “Come back in 3 months,” she said with the usual “not my problem” tone of voice.  Well, that was in July, and a few weeks ago, as I was getting ready for the rescheduled appointment, I realized what the issue was.

My new French business accountants had a mandate from me to also file my personal return, but they had done so incorrectly, and as such my French personal accountant had to amend and resubmit it.  My first year in business in France was very modest and I had no taxes to pay, therefore the letter due to come to me saying I owed 0€ (which is the letter I needed for the prefecture) was at the bottom of the priority list for the Ministry of Finance.

In lieu of this document I had to obtain a signed, dated, and stamped attestation from the Ministry of Finance that yes, I was a law-abiding citizen who had filed my tax return.  My friend and mentor Jean Taquet told me that people have an actual fear about going to the Ministry of Finance, but not being possessed of such a fear (skydiving = scary, tax people ≠ scary), I went to 13 rue de la Banque on a weekday afternoon, and after a few minutes in line and a verification of my identity, cross-checked with my fiscal number from my previous tax returns, I got two copies of the document I needed for my appointment.

Since the appointment had been delayed an additional three months, I was also expected to update everything from the last (failed) appointment: attestations from URSSAF and RSI that I was a good boy, as well as my business bank account statements and most recent invoices to my clients.

Speaking of which, as a consequence of the modest first year of revenues, I got a refund from URSSAF.  That’s right, I had earned less than the estimated base year, which is what I had paid against, and since the French base your current year’s charges on the previous year’s earnings, which they now had in their possession, I got money back as I had already overpaid in 2017 against their estimates.  I almost fell out of my chair when I saw the line item in my online banking account with the money which had come back to me out of nowhere.

But the biggest surprise of all came at the appointment itself, which I will tell you more about in a future article.

Photo by Murray Campbell on Unsplash