Have you been considering the idea of getting into freelancing, but you’ve got some questions about what sort of administrative demands could be expected of you?
You’re in the right place. We’ve put together a complete guide to help direct your approach.
Which legal status should you choose? When and how do you pay your social charges? Which taxes apply to you? Do you need an accountant? What are the key administrative deadlines for 2022?
We’ll dive into the details of each of these questions so you can hit the ground running.
I. Which legal status should you choose as a freelancer?
Contrary to popular belief, freelancing isn’t a legal status in and of itself. It just refers to a person independently operating in a professional capacity.
Basically, a freelancer is a professional who offers their services to several companies.
However, as an independent contractor, you are required to choose a legal status for your activity, whether it’s as a sole proprietorship or as a company.
Starting out, sole proprietorship (auto-entrepreneur) status under the scope of the micro-enterprise plan is the most favorable of the options out there.
This status brings several benefits:
- the rate for social charges is reasonable;
- the accounting requirements are quite simple;
- creating a micro-enterprise is very easy: you can do it online in less than 15 minutes.
In order to benefit from the micro-entreprise status, you must conduct your business alone and be below the annual revenue ceiling.
The 2022 thresholds for micro-enterprises are:
- €176,200 for commercial activity;
- €72,600 for services and liberal activities.
These standards are periodically revisited and raised, leaving you ample room to test your project’s potential.
💡 Good to know : these thresholds remain valid through 2023. They will be reevaluated in 2024.
Know that if you ever decide to associate, or surpass the thresholds, you’ll have to update your legal status to reflect the new setup (e.g. a SARL or SAS).
Opt for an umbrella company to handle your admin
If you don’t want to waste time sorting out paperwork, then you may want to enlist the help of an umbrella company.
This arrangement places you somewhere between salaried work and entrepreneurship.
Concretely, this means that you hold a contract with your umbrella company. That way you have the peace of mind of being a salaried worker but with the freedom of a freelancer. You’re responsible for sourcing your clients and setting your rates.
What the umbrella company does is take on the administrative tasks for your business (producing quotes and invoices, sending reminders to clients) and provide you with a paystub.
For this service, they take a commission on your invoices.
II. How do you set up a micro-enterprise as a freelancer?
Good news: It’s relatively easy to set up a micro-enterprise.
You can do it online at Guichet-entreprises.fr.
All you have to do is fill out a form declaring the launch of your business (déclaration de début d’activité) and provide three supporting documents:
- proof of identification;
- proof of domiciliation (i.e. a proof of address less than three months old if you operate from your home);
- a sworn statement of non condemnation, to show that you are in good standing with the law.
🚨 Important : what constitutes a proper declaration of activity differs according to the type of activity performed.
- If you are a liberal worker (which is the case for most freelancers), you need to fill out the Cerfa P0 PL form.
- If you do artisanal or commercial work, then the Cerfa P0 CMB form is right for you.
Once you’ll have provided the required documents, you’re all set. The guichet des entreprises (a federal platform created to assist business owners in legal formalities) will handle the rest: they’ll be the ones to pass your file onto the URSSAF (or whichever center for business formalities is most relevant).
You’ll receive your SIRET and SIREN numbers (to identify your business) and APE code (to categorize your field of work) in the mail. Then you can officially start working freelance.🎉
III. What social charges do you have to pay as a freelancer?
Being a micro-enterprise has its perks: you benefit from the micro-social regime.
This means that you pay your social charges at the same time that you declare your revenue.
A set rate is applied to your revenue to calculate your social contributions. This of course varies according to the nature of your business.
The 2022 rates are:
- 12.8% of pre-tax earnings for commercial activity;
- 22% of pre-tax earnings for services and liberal activity.
Paying your social charges allows you to pay into the national social security net (Sécurité Sociale) and be eligible for family allowances, basic and supplemental retirement plans, parental leave, etc.
IV. What are the taxation requirements for freelancers?
Tax-wise, your micro-enterprise status allows you to handle your finances via the micro-fiscal regime.
That means you have two options when it comes to paying your income tax:
Option 1: pay your income tax based on your yearly earnings, after an abatement to the effect of:
- 71% of earnings for commercial activity;
- 50% of earnings for services;
- 34% of earnings for liberal activity.
Let’s use an example to better illustrate how this is calculated.
Marie is a freelance developer. Her 2021 earnings were €30,000. According to tax law, her work is classified as liberal and therefore is entitled to a 34% tax abatement. This means that she will only be taxed on €19,800 of her earnings (i.e. €30,000-34%).
Option 2: opt to withhold your taxes
Tax withholding, or ‘versement libératoire’ can be an attractive option for freelancers with a micro-enterprise. It allows you to pay your taxes while you declare your income.
In practice this means that the moment you declare your income, you’ll pay an additional tax on top of your social charges, namely:
- 1% for commercial activity;
- 1.7% for services;
- 2.2% for liberal activity.
This percentage equates to your overall income tax rate.
In the end, tax withholding is the more favorable option of the two. However, in order to elect this method of tax payment for 2022, your adjusted gross income (revenu fiscal de référence) for 2020 must not exceed:
- €25,710 for an individual,
- €51,420 for joint filers.
The Value Added Tax (VAT)
The VAT is applied to all consumer spending. As a freelancer, you must also include this in your invoices.
That said, if your business is just starting out, you are exempt from having to pay your VAT. To qualify for this exemption, your annual income must not exceed:
- €85,800 for commercial activity;
- €34,400 for services and liberal activity.
The Cotisation Foncière des Entreprises (CFE) Tax.
The CFE (a corporate property tax) is a tax based on the value of any and all of the real estate associated with a business (e.g. a storage space). All businesses are subject to this tax, including freelancers who work from home.
Keep in mind that you can qualify for an exemption if it’s your first year of operation or if your earnings do not exceed €5,000 per year.
This property tax is due every year around December.
V. How do you stay on top of invoicing as a freelancer?
After every mission, you need to send your client an invoice for services rendered. This document serves as proof of payment in the event of an audit, so be sure to store it securely.
Careful, your invoice must include certain key elements, such as:
- the word ‘invoice’;
- the date and invoice number;
- the legal name of your company, with its address, your SIRET number and your legal status;
- your client’s legal name and address;
- the pre-tax (HT) price and the price including VAT (TTC);
- relevant VAT information, like the applicable rate, the amount it comes out to, as well as your intracommunity VAT number (if you are required to collect VAT);
- the terms of payment (remember to include your RIB if you wish to be paid via a transfer);
- any late payment penalties.
Good to know: you can also send your clients a quote for your services. It’s not required if you’re operating on a B2B basis (unless the company asks you to), but it can help scope out the mission and establish a fair price.
VI. Your 2022 administrative calendar
As a freelancer, you have to keep certain key dates top of mind.
Here’s a list of the most important ones to jot down in your calendar.
- You can choose to declare your income on either a monthly or trimestrial basis, meaning on 31 January 2002, 30 April 2022, 31 July 2022, and 31 October 2022.
- Paying social charges and withholding tax happens at the same time, so again this occurs on a monthly basis or on the dates indicated above.
- Income tax can be levied every month if you decide to withhold your taxes.
- The CFE must be paid between 1 November and 15 December.
- VAT payment varies according to the regime you elected. With a normal regime, VAT payment happens at the same time as your income declaration. In the case of a simplified regime, it happens twice a year: once in July 2022 and again in December 2022.
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