What is the difference between the Regime Simplifié and the Regime Micro-Entreprise?
Regime des Micro-Entreprises
Whenever total income for the year is less than 70.000 Euros, unless the taxpayer opts for an alternative method of calculation, the tax office will apply the "Regime des Micro-Entreprises", whereby for a UK resident tax at 37.20% will be applied to 50% of income. Representing 20% income tax rate and 17.20% social charges rate.
The obvious disadvantage with this route is that losses cannot arise. If there is a mortgage on the property and if depreciation is available, actual expenses for furnished holiday letting are likely to exceed 50% of income, especially in the early years.
If turnover is expected to be more than £3,000 per annum and if a mortgage is in place, this is the usual method we adopt for our clients.
Compulsory when turnover exceeds 70.000 Euros, or applicable by option, the regime requires simplified accounts to be drawn up and presented each year, with tax being assessed against actual income and expenditure incurred.
Losses can therefore arise to be carried forward, (for a maximum of 10 years), as well as excess depreciation which can be set against future profits indefinitely.
As a result an altogether more tax efficient approach can be maintained.