French Bill To Benefit Entrepreneurs
Friday, February 26, 2010
The French National Assembly has adopted a bill providing for the creation of
a new legal structure in France, a sole proprietorship company with limited responsibility
(enterprise individuelle à responsabilité limitée –
EIRL), designed to protect individual entrepreneurs, and to provide significant
The adoption of the text heralds good news for the 1.5 million individual entrepreneurs
in France, as it not only marks an end to fiscal injustice, but also ensures
that personal assets are protected in the case of liquidation.
Individual entrepreneurs who adopt the status of the EIRL will be able to opt
either to become subject to income tax (l’impôt sur le revenu) or
to become liable to pay corporate tax (l’impôt sur les sociétés),
thus removing the distinction between the fiscal treatment of individual entrepreneurs
For entrepreneurs registered as an EIRL, and liable to pay income tax, profits
realized will be taxed according to the nature of the business activity. Social contributions will be due on total
For EIRL entrepreneurs subject to corporate tax, realized profits of less than
EUR38,120 will be taxed at a reduced rate of 15%, and profits in excess of this
threshold figure will be taxed at the standard corporate tax rate of 33.33%. Regarding social contributions,
these will be levied on the entrepreneur’s remuneration. Profits paid
to the entrepreneur will be taxed separately under the dividends regime.
Establishing the EIRL status is one of the government’s key priorities
to encourage entrepreneurship. Under the new legal structure,
individual entrepreneurs will be able to decide upon the exact level of risk
that they wish to take on their own assets, without the need to form a company.
Welcoming the decision, the Secretary of State for Trade, Crafts and SMEs,
Hervé Novelli, announced that the new legal structure will afford the
same level of protection to individual entrepreneurs as to company directors.
Due to be examined by the French Senate from April 6, the government aims to
implement the new measure from January 1, 2011. Given that the measure is thought
to lead to a shortfall in revenue for the government estimated at between EUR50m
and EUR60m, Hervé Novelli has pledged to evaluate the cost of this initiative
at the end of a year.