Best tax regime for running a B&B business

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Le roi de Prusse
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Best tax regime for running a B&B business

Post by Le roi de Prusse »

Just reading about the differences between the micro-entrepreneur tax status and régime réel and wondered what option B&B owners had decided upon?

I'm aware that there are turnover limits on micro-entrepreneur status which would exclude B&B businesses turning over more than €170,000 but wonder if smaller businesses had found the relative simplicity of micro-entrepreneur tax status outweighed the costs of paying social security contributions and being taxed on turnover rather than profit?

Any insights welcome.
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Ecosse
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Post by Ecosse »

Micro-entreprise is only more cost-effective if you have a high profit item, as they take a flat percentage (I think it's 25%) of your turnover. As a b&b, you would be the opposite: high outgoings, low profit, so to be taxed a flat rate would, at best be crippling, at worst put you out of business. Conversely, Regime reel means you can off-set all your outgoings, including a percentage of your social security (mandatory for both systems) against your tax bill.

To give an example, a realistic turnover in the first couple of years of running a French b&b is in the region of 45k which, once you take take away all the mandatory outgoings (tax, fuel, insurance, subscriptions to listing sites, car, etc.) leaves you with nothing, i.e. you will be living in your savings. If you're on micro-entreprise, despite living off your savings, you will still have to pay the goverment an additional €11,250 in taxes, which will also, as you're not making enough to live on, have to come out of your savings. I am assuming no mortgage, otherwise you can add on another 12k a year at least to the outgoings.

After a couple of years, you may, if you're lucky and your b&b is excellently situated (think: a desirable tourist hot-spot with a winter and summer season) increase that turnover to 75k. Initially, this sounds like a flat profit of 30k, however, you can't forget the €11,250 coming out of your savings already, going straight to the government and reducing that 30k 'profit' to €18,750. As your turnover has increased, the government will take a further 7.5k, leaving you, out of the 30k 'extra', a 'profit' of €11,250. Once the increased overheads are taken into account (extra fuel, car use, breakfast/dinner supplies, etc. and the hugely important and often overlooked issue of wear and tear replacements/renovations), you will likely be back to zero.

On regime reel, that 25% of the turnover, or €18,750, goes into your pocket. It's not a great amount... but at least you will be able to live.
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