If you read the last post, you will know that a lot of freelancers find France’s micro-entreprise rules a convenient way to simplify their tax reporting and other administration obligations. But whether you are using the micro-entreprise régime or you have a more formal structure, you can’t do business in France without understanding how the nation categorises its businesses.

Let’s start with the three main types of business in France: professional service businesses (usually referred to as “professional libérale”), commercial and artisanal business (commerciale et artisanal), and agriculture. If you are involved in an agriculture business, you probably already know it (your tax category will be the BA). But the difference between a professional libérale business and a commerical or artisanal business can be confusing for those of us from the U.S.

 What kind of business do I have?

As a broad rule of thumb, if your business is providing services rather than a product, you are probably a professional libérale. You might be part of a regulated profession, one in which you need a special license to practice. Or you might be a translator, a designer of logos, a handwriting coach, or any number of other service professionals who make the world run. If you are not sure about the regulations that apply to your business, the government agency INPI provides a guide on its website (note the tiny flag icon in the top-right for English-language translation): https://www.inpi.fr/annuaire-activites-professions-reglementees.

On the other hand, if your business involves making a product or reselling a product, you are likely part of the commerical and/or artisanal business category. For the purposes of most French administration and taxes, commercial and artisanal businesses get lumped together. But an artisan in France does have some unique qualifications, and there are specific requirements you have to meet to be called an “artisan.” You can find out more on that from the Chambres de Métiers et de l’Artisanat here.

 What about real estate?

There is one particularly confusing area of business in all of this, and that involves real estate. In France, just about anything connected to real estate beyond the lawyers and the notaires is considered a commercial business activity. So, if you are buying, selling, listing or managing real estate, your business is taxed under a scheme for industrial and commercial business, the BIC (Bénéfices industriels et commerciaux). The same applies if you are simply renting out a space you own. Within the BIC rules, though, France has some special tax breaks for short-term rentals. These breaks are increasingly controversial and may not last. But for the moment, the “discounts” on taxable revenus that I note below are different depending on whether you rent a property furnished or unfurnished and depending on how that rental is classified.

Why does it matter?

You will find that just about any administrative paperwork you do in France will ask you name the category (or categories) into which your business activity falls. The answer determines all sorts of things but most importantly for our purposes here, it determine your tax structure.

Let’s look back at the micro-entreprise tax rules, for instance. If you are a commercial or artisanal business, you fall into the Bénéfices industriels et Commerciaux régime. For the year 2023, your business can pull in up to €188,700 in sales and still qualify for a simplified tax reporting scheme. That means that instead of traditional bookkeeping where you take itemized deductions, etc… France will simply discount the first 50% of your sales and only tax you on the rest. If you are reselling, rather than producing the goods, this figure goes up to 71%.

Now let’s instead assume that you have a professional libérale business. In this case, the maximum you can earn in fees and still used the simplified reporting is €77,700. And you only get to discount the first 34% of your revenues. If you think about, this will make sense for most small service businesses, which tend to require less expensive supplies and equipment.

And remember when I said that real estate rental is slightly different? The room you rent out to tourists can qualify for the larger 71% BIC discount if you are renting out part of your home (chambre d’hôte) or a room classified for tourists.

If you are over the relevant turnover limits in any of these cases, you will have to use the régime réel normal d’imposition, which is basically the traditional form of bookkeeping used in the U.S. in which you itemize your actual business expenses to calculate taxable profits. You might want to choose that option if, for instance, your expenses are paricularly high. The rules around doing that depend, again, on your business categorization. The French Public Services website provides more information on all of this with a very handy English-language option: https://entreprendre.service-public.fr/vosdroits/F23267.

How else are businesses categorized?

This article has gone into the baseline categories for tax purposes in France. But there are few other ways in which you will need to identify what sort of business you have. If you go through the process of formalizing your business structure. You will have choose among a selection of entity types. France has its own equivalents for U.S. c-corporations, LLC’s, partnerships, etc… So, you wil see acronyms like the SARL, SAS, EURL and more while setting up your company.

And speaking of setting up your company, you will have to be specific about what that company will do. Whereas U.S. business registration generally allows some sort of vague statement about “doing business,” France needs you to pick the appropriate APE or NAF code for what you are going to do (confusingly, these two acronyms refer to exactly the same list). Beyond helping the economic ministry keep statistics on its businesses, these codes tell you exactly what regulations apply to your activity when it comes to human resources issues, regulatory permissions and more. 

We hope this very brief overview of business categories in France gives you a starting point. If you have questions or comments, let us know below!