Standard allowance: what is it?
Compared to standard company statuses, the micro-enterprise tax system is super simple. When it comes to income tax (IR), self-employed individuals have a special status that allows them to benefit from a standard deduction, also known as a deduction for expenses and charges or a deduction for professional expenses. Basically, self-employed folks don't need to officially declare their profits (online or otherwise) for their business. They just need to enter the annual turnover amount for their company.
Speaking of turnover, it must not exceed the self-employed threshold if you want to benefit from a standard allowance. For self-employed individuals who carry out purchasing and resale activities as well as accommodation services, the annual turnover excluding tax received must not exceed €188,700. For self-employed individuals who carry out liberal activities and commercial and artisanal service provision, the annual turnover excluding tax received must not exceed €77,700.
The allowance for micro-entrepreneurs is therefore a rate that will be directly applied to the declared turnover of their business. It is used to calculate the amount of income tax. The standard allowance replaces personal expenses and simplifies tax calculation at the same time.
Unlike micro-entrepreneurs who directly apply the standard allowance rate to the amount of turnover, traditional companies must necessarily calculate the actual professional expenses and deduct them from the amount of actual turnover. This is particularly the case for a SA, family SCI, SAS, SASU or even a SARL and other forms of company.
Standard allowance for micro-entrepreneurs: what is it for?
The main goal of the standard allowance is to simplify taxation for micro-enterprises. One of the main advantages of the micro-enterprise system is that accounting obligations are kept to a minimum. Micro-entrepreneurs only need to keep a daily logbook for their business, in which they record their income chronologically. They must also keep a purchase register if they are engaged in commercial activity and issue invoices in accordance with standards.
As a result, it's hard for micro-entrepreneurs to figure out their actual profit, unlike a traditional business where it's easy to calculate all the professional expenses. So, you can't deduct professional expenses from your micro-enterprise's turnover. The standard allowance is applied to prevent you, as a micro-entrepreneur, from being unfairly taxed on your company's entire turnover.
To work out your taxable income as a micro-entrepreneur, take that allowance rate away from the turnover you've made as a self-employed person. Then, any other income your household has (property income, wages, etc.) will be added to that to figure out the amount of tax. The family allowance fund (CAF) also uses income tax to work out what benefits you're entitled to (like the employment bonus, RSA). Pôle Emploi (the job centre) also uses your income tax to calculate your unemployment benefit (if you're self-employed and employed at the same time).
Are you putting a lot of effort into growing your business, but the financial results aren't following? Don't worry, there are several solutions to improve your company's profitability.
Review your price offers
Increasing the prices of your products and services may seem absurd at first glance, but it can help improve your company's profitability, provided you do it correctly. Indeed, you can increase the prices of your products and services without scaring away your customers.
To improve your company's financial performance, you can gradually increase your prices. We're not talking about a 30 or 40% increase here, but a small increase that can be easily justified to your customers.
Go for products with high margins
To boost your company's profitability, focus on different products or services. Ditch the products that struggle to sell quickly and highlight products and services that generate a significant margin.
Expand your company's activity.
Your activity may have reached its maximum potential in a given sector of activity. This may be due to a lack of customers or competition from other companies. In this case, to improve your profitability, you must expand your company's activities.
To do this, you must first compare the advantages and disadvantages in terms of budget, market, and competitive intensity for each business sector you are considering. Speaking of sectors, dropshipping is one of the leading online business activities that is very successful with companies.
Written by our editorial expert
June 16, 2023
