All you need to know about charges for freelancers

More and more people are tempted by the idea of going freelance. And why wouldn’t they? Freelancing offers the freedom to work from wherever you want, determine when and how you work, choose what you do, and even earn a better income than you would get as an employee.

There are plenty of perks to becoming a freelancer, so it’s no wonder that many see it as a way to become a self-employed entrepreneur with less of a financial investment.

However, becoming a freelancer isn’t as simple as having a computer and an internet connection and getting to work. There are many costs and professional charges associated with going freelance, especially if you plan on growing your business and becoming a long-term freelancer. In this article, we’ll go over these costs.

As with the leader of any company, a freelancer has social charges to pay in France. Paying into Social Security is essential because it allows you to benefit from family welfare, maternity leave, and retirement benefits.

How much you contribute depends on your company and legal status.

If you are under the micro-enterprise regime, you need to pay social charges either monthly or once per quarter, depending on your preference.

These charges and contributions are calculated based on your revenue and follow a fixed percentage:

• 12.8% for trade and resale activites;
• 22% for liberal and service rendering activities.

As a freelancer, you’re most likely rendering services, so you’ll owe 22%.

If you’re freelancing through an individual enterprise that is not a micro-enterprise (formerly known as auto-entrepreneur), your social contributions will amount to 44% of your taxable revenue.

As a freelancer, you operate on your own and don’t have any partners. As such, there are two solo company options you can opt for: the Entreprise Unipersonnelle à Responsabilité Limitée or EURL in French (Limited Liability Sole Proprietor Enterprise) and the Société par Actions Simplifiée Unipersonnelle or SASU in French (Simplified Single Shareholder Company).

On average, when you have an EURL, your social charges amount to about 45% of your net income. When you have a SASU, these can increase to 82% of your net income, especially if you belong to the Social security regime as an assimilé salarié.

It’s important to keep in mind that these are average amounts to give you an idea of the charges that go along with these legal statuses. To know the exact amount of charges you’ll need to pay, it’s best to consult an expert, such as a lawyer or a CPA.

As we saw above, social charges are definitely one of the biggest expenses for freelancers, regardless of the legal status you pick.

Luckily, there’s a French program that can help you save by lowering your charges for a year: the Aide aux Créateurs et Repreneurs d’Entreprise. You’ll often hear it referred to by its acronym, ACRE.

Did you just start your business? To be eligible for this program, you need to apply for ACRE within 45 days of creating your business, and make sure you fulfill at least one of the following criteria:

• you receive unemployment benefits;
• you don’t receive unemployment benefits, but have been registered with Pole Emploi (the French Unemployment Agency) for more than 6 months in the past 18 months;
• you receive an Active Solidarity Income (Revenu de Solidarité Active or RSA in French) or a Specific Solidarity Allowance (Allocation de Solidarité Spécifique - ASS in French).
• you’re between 18 and 26 years old;
• you’re under 30 and have a disability certificate;
• you’ve signed a French contract for business creation support called Contrat d'Appui au Projet d'Entreprise or CAPE;
• you’re creating or taking over a company located in a ‘priority neighborhood’ (QPV - which is short for Quartier Prioritaire de la Ville);
• you receive the PreParE childcare subsidy (Prestation Partagée d’Education de l’Enfant or PreParE)
• you’re an independent worker not covered by the micro-social status (which corresponds to the social regime applicable to micro-enterprises).

If you’d like to know more about the ACRE program, check out this article dedicated to the help you can get to start your own company.

As a freelancer, you also need to pay several types of fiscal contributions, such as the income tax but also more specific tax obligations, such as the Corporate Business Tax (CFE in French), and in some cases, Value-Added Tax (VAT).

Freelancers also need to pay income tax. What qualifies as taxable income depends on your status.

If you choose the micro-enterprise regimeYou are automatically subject to the Micro Non-Commercial Profits (Micro Bénéfices Non Commerciaux or micro-BNC in French) tax regime.

You have two options:

• You pay Income tax. In that case, your taxable income corresponds to your business’ revenue, from which tax authorities will apply a 34% standard deduction (abattement forfaitaire).
• You’ve chosen to make a regular estimated tax payment (versement libératoire). In other words, you pay a fixed percentage of your income tax at the same time as your social charges. An additional 2.2% (for liberal activites and services) will be deducted for taxes either monthly, or quarterly.Opting to pay this fixed percentage monthly isn’t necessarily worth it for everyone, because unlike the regular tax scheme, you’re taxed from the first Euro earned. It’s best to consider this option only if you’re planning on having significant turnover.

If you incorporated as a company (SASU or EURL)

As a freelancer, you’re likely rendering services for companies, or perhaps less commonly, individuals. Your profits fall under the Non-Commercial Profits (Bénéfices Non Commerciaux or BNC in French) category, and so you belong to the controlled declaration regime (régime de la déclaration contrôlée). Your taxable basis is therefore not your business revenue, but your net profits.

Like any French worker, whether self-employed or employed by a company, you’ll need to file a tax return for your earnings. You’ll want to fill out the 2042-C-Pro form, which you can download from the French tax authority’s website (in French). Need assistance figuring out this form? This guide on how to file your French taxes as a freelancer should definitely help.

In some cases, particularly if you’ve opted for a SASU status, you might also have to pay Corporate tax (Impôts des Sociétés). Don’t hesitate to consult with a tax professional to learn more and know what your tax obligations are.

The Corporate Business Tax or Cotisation Foncière des Entreprises (CFE for short in French) is a company real-estate contribution owed by all companies, regardless of their size or business field. This tax is calculated based on the rental value of the real estate assets your business possesses (land, premises…)

In practice, every business owes this tax, even freelancers working from home and who don’t have an office to go to. The CFE is paid out yearly in December.

You can be exempted from paying this tax in some circumstances, particularly if your annual revenue is lower than €5,000 before tax, and during your first year in business. However, this exemption isn’t automatically applied. You must write to the French Corporate Tax Office (Service des Impôts des Entreprises) and request it yourself before December 31 of the year you create your business.

VAT (TVA in French) is an additional tax that applies to all consumer spending.

As a freelancer, you are not directly liable for VAT, but you do need to collect it on behalf of the State.

In theory, thefore, VAT is not really a cost. In practice, however, VAT will affect your rates, as you’ll need to add a fixed percentage to your prices corresponding to VAT. If you’re rendering services to individuals, this will significantly increase the price you’ll be quoting them as they cannot get VAT back (unlike professionals).

The average VAT rate is 20%. This rate changes based on the nature of the product sold or service rendered. It’s best to check under which VAT percentage you fall before sending out quotes.

It’s also good to be aware that you can benefit from a VAT exemption, if your revenue before tax is less than:

• €91,900 for trade and accommodation activities;
• €36,900 for services and liberal activities (which should be your case).

In France, the Contribution à la Formation Professionnelle (Contribution to Vocational Training) is a training levvy imposed on all companies, including self-employed workers. You pay this tax at the same time as your social charges. This contribution gives you the right to training.

Having the right to get more vocational training is a must for freelancers, who need to keep growing their skillsets to stay on top and stand out in highly competitive markets.

This contribution amounts to:

• 0.1% of revenue for commercial activities,
• 0.2% of revenue for liberal activities (which applies to most freelancers)
• 0.3% of revenue for artisanal activities.

As we saw before, as a freelancer, you pay social charges, which allows you to benefit from Social Security in France.

However, your Social Security coverage is less comprehensive than that of employees. So it’s a good idea to get extra coverage to protect yourself against any possible issues that might arise.

There are two vital types of complementary insurance to look out for: health insurance and income protection.

Health insurance, also called complementary health coverage (mutuelle in French), helps you pay for certain health costs (such as hospitalizations, GP sessions, specialized doctors, and so on) that are not covered by Social Security.

Income protection is here to protect your freelancer’s income if you’re sick or get into an accident. It’s therefore a very useful form of insurance to have when freelancing: if you find yourself sick and unable to work, then it’s your whole business that comes to a standstill. You can’t fulfill your commitments or earn money.

You might be wondering why you can’t just rely on the protection offered by the French Social Security system.

Unfortunately, Social Security benefits aren’t enough on their own for freelancers, particularly if you’re just starting out. You can’t get sick leave allowance during your first year of activity. This allowance only becomes available from the second year of activity on, and even then, it’ll cover only a small portion of your income.

Your operating costs, also known as professional costs, can include:

• Coworking expenses

Many freelancers like to work in coworking spaces: they feel less alone, can network with like-minded professionals, and often feel more productive. However, that comes with a price tag. On average, expect to pay between €200 and €300 a month for an unassigned spot in a shared office space.

• Expenses linked to office supplies and other equipment

The type of supplies and equipment you require will vary depending on your field of activity. Usually, a self-employed worker requires at least a good computer. Depending on your specialization, you may also require other equipment, such as a camera or a microphone.

• Tools and software

As a solo entrepreneur, you probably use different tools on a daily basis to organize your activity and make managing your business easier. Many of these tools aren’t free.

If you’re wondering which tools to use as a freelancer, our curated selection of the best tools for freelancers should give you some ideas.

• A business account

Any independent worker earning over €10k in revenue for two consecutive years must open a business account.

The cost of such an account varies greatly from one place to another. Online business accounts, like the one offered by Qonto, are usually better suited to freelance activities. They offer clear and transparent pricing, with no hidden costs.

With Qonto, you also benefit from tools built to simplify your financial and administrative management, such as digitized receipts.

• An accountant

If you chose to freelance under the micro-entrepreneur regime, your accounting obligations are greatly reduced. In fact, you probably won’t require the assistance of an accountant to file your declarations.

However, if you incorporated as a company, your accounting obligations are more complex. In that case, it’s a good idea to enlist the help of an accounting professional to make sure your bookkeeping is up to standard.

• Commission rates charged by freelancing platforms

Using a freelance platform is a great way to find new assignments, which is why many freelancers use them.

That being said, these platforms charge a fixed percentage each time they help you find a new client. On average, this commission is around 10% of what you’ll charge your client. That’s no small amount, and an expense you’ll definitely notice.

• Training costs

As a freelancer, you know that it is essential to continue training regularly to grow your skills, expand your offering of services and stay competitive in a rapidly evolving market.

We mentioned before that you have a right to vocational training through the training contribution you pay (the Contribution à la Formation Professionnelle or CFP in French). However, not all training organizations are accredited for CFP, so it also frequently happens that the cost of the courses you wish to take falls on you.

Getting professional insurance might not be the first thing to cross your mind as a freelancer. That being said, it’s highly recommended to have at least professional liability insurance (called Responsabilité Civile Professionelle or RC pro in French). This covers damage caused to a third party in the course of your business activities. Some companies will require you to provide them with this insurance before they can use your services.

Now that you have a better picture of the charges you’ll need to pay, the million-dollar question is, how do you set your rates? That’s always a tricky question, and knowing how much you’ll be paying in professional costs is one of the many aspects to juggle.

It’s best to keep in mind that your revenue doesn’t correspond to the income you take home or your daily rate. If your daily rate is €500, that doesn’t mean you’ll have a €500 salary show up in your personal account for every day you've worked. This is because there are many professional expenses to take into account. So, if you’re looking to become a long-term, successful, and profitable freelancer, do include those professional expenses in the rates you set.

Would you like more advice on how to carefully determine your freelancing rates? This article on how to set your daily rate is exactly what you need.

Unfortunately, there’s no set answer to this question. Considering the costs and charges to pay is definitely a big part of choosing your legal status as a freelancer. However, which status will suit you best also depends on your project, field of activity and the growth you plan for your business.

At first glance, a micro-enterprise can seem like the best bet, as it incurs lower social charges than companies do.

But there are drawbacks to a micro-entreprise, too, such as the fact you cannot deduct your operating costs from your taxable revenue, and the fact there’s an income ceiling you can’t go over. This option might not be the best one for you, particularly if you know you’ll have many expenses.

All in all, choosing the legal status that suits you best is not something to take lightly. So before you start your business, we recommend that you do research, or even enlist the help of an expert to find the legal status that’ll best suit your business needs. Also, to help you make this choice, here’s a comprehensive article we wrote on the different possible legal statuses for freelancers.

Are you on the hunt for a business account made for your freelancing activity? Try Qonto, the 100% online finance management solution that energizes freelancers.