How to advertise your small business income

How to advertise your small business income

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The Small Business System is a legal situation with fewer restrictions, allowing small business owners to get started more easily. Under this system, the formalities for setting up a company as well as paying social security and income tax contributions are simplified. However, it is still necessary for small business owners to declare their income.

Turnover thresholds that cannot be crossed

Attention, to take advantage of micro-entrepreneur status, there are maximum turnover thresholds that should not be exceeded. For 2021, the thresholds were as follows:

  • 176,200 euros for companies whose main activity is the sale of goods, objects and food supplies for their transportation or eating on site, or the supply of accommodation (hotels, bed and breakfasts, country dwellings, furnished with tourists, etc.),
  • €72,600 for all other providers falling under Industrial and Commercial Profits (BIC) as well as liberal professionals falling under Non-commercial Profits (BNC).

Note that if you create your business during the year, the calculation of the limits will be adjusted in proportion to the time in which you are in business. If your annual income is above these limits, it is necessary to change your legal status.

Declaration of income of a small business subject to the common law system

This is the system that is applied automatically. As a small contractor, you are exempt from preparing a professional declaration of profit (BNC or BIC). However, you must still indicate the amount of your sales (BIC), or receipts (BNC), on your supplemental income statement. This information must be specified in the “Professional Industrial and Commercial Income/Micro BIC Scheme” or “Professional Non-Commercial Income/Micro BNC Scheme” section.

The official website of the Ministry of Economy indicates that your taxable earnings are determined after you have applied to your turnover in lieu of a fixed allowance for professional expenses on the following points:

  • 71% of sales are for resale, purchase or housing supply activities,
  • 50% of the turnover of other activities within the scope of the BICs,
  • 34% of the trading volume is for BNC.

Once your occupational income is determined, it is subject to the progressive scale of income tax, with all other income your family taking in is taxed.

Declare small business income subject to the voluntary scheme (lump sum payment)

There is a second scheme called Income Tax Discharge Payment. Some small businesses are allowed to pay their taxes while collecting their sales, and pay social fees at the same time.

This scheme is available to small business owners who meet the following condition: The reference tax income for year N-2 must not exceed a certain threshold for a share of the family’s earnings. Thus, for 2020, you must take into account the reference tax income amount for 2018 (which appears on your 2019 tax notice). It must not exceed €27,519 per person (one share of the household quotient), and you must multiply this amount by the number of shares corresponding to your household’s tax status.

The official website of the Ministry of Economy states that “This option allows you to pay a percentage of the turnover corresponding to the amount of tax on Revenues “. This ratio is determined according to the following criteria:

  • 1% for companies selling or providing housing,
  • 1.7% for companies that provide services,
  • 2.2% for non-commercial dividend holders.

In addition to these rates, it is necessary to add flat rate payments in the reimbursement of social fees. Please note that each year you must still complete Supplemental Income Tax Return No. 2042-C Pro, in the “Entrepreneurs Who Have Chosen Withholding Income Tax” category. Rest assured, income that has already undergone double discharge payments will not be taxed, but will still be taken into account when calculating the reference tax income.

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