Simplified regime, normal regime – how do they differ? Can a sole proprietorship use the simplified regime? What are the conditions and obligations for businesses under the simplified tax regime? In this article, we’ll answer the most frequently asked questions about the simplified regime, explaining its primary features.

What’s in this article?

• What is the simplified tax regime?
  
• Who can use the simplified tax regime, and what are the conditions?
  
• What are the obligations under the simplified tax regime?
  
• What are the differences between the normal regime and simplified regime?
  

What is the simplified tax regime?

The simplified tax regime applies to industrial and commercial profits (BIC, bénéfices industriels et commerciaux) generated by a business and to value-added tax (VAT).

Simplified VAT regime

Typically, a business follows the same system for taxing profits and VAT. However, this isn’t always the case. The simplified regime is optional: a microbusiness subject to the micro-tax regime for the taxation of profits can opt for the simplified regime for VAT. On the other hand, a business that is automatically subject to the simplified regime for the taxation of profits can choose to switch to the normal regime for the taxation of VAT only (this is the régime mini-réel). To learn about the various VAT regimes in effect, including the basic VAT exemption, refer to our related articles.

Who can use the simplified tax regime, and what are the conditions?

The simplified tax regime applies automatically to businesses subject to income tax (IR) and corporate income tax (IS) that meet certain turnover and VAT criteria.

Thresholds for the simplified tax regime

To qualify for the simplified income tax regime, sales excluding tax (CAHT, chiffre d’affaires hors taxes) must be between:

• €77,700 and €254,000 for businesses providing services
  
• €188,700 and €840,000 for businesses engaged in commercial and accommodation activities
  

Businesses operating under the simplified tax regime can also use the simplified VAT regime if their annual sales are between:

• €36,800 and €254,000 for services and liberal professions included in BNC and BIC
  
• €91,900 and €840,000 for commercial and accommodation activities
  

Additionally, the amount of VAT collected annually must be less than €15,000.

Thresholds for the simplified regime have been set by the tax authorities for 2023 to 2025. In principle, these are adjusted every three years. To learn more about the adjustment of thresholds, refer to the French government article.

What are the obligations under the simplified tax regime?

Businesses using the simplified tax regime are subject to certain accounting and reporting requirements. They must do all the following:

• Maintain a record of income and expenses for the previous three months.
  
• Record receivables and payables at the end of the year.
  
• Submit a simplified balance sheet, simplified income statement, and simplified notes to the tax authorities.
  

The simplified balance sheet is filled out using tables 2033-A to 2033-G. If a business is subject to IR, it must attach the balance sheet to form no. 2031 to declare its results. If the business is subject to IS, the balance sheet must be attached to form no. 2065.

Note that income tax returns (form nos. 2031 and 2065) must be filed no later than the second business day after 1 May if the fiscal year ends 31 December. Alternatively, businesses with a different end of the fiscal year must file their income tax returns within three months of the year-end.

You can simplify your tax compliance with an automated tool such as Stripe Tax, which streamlines the calculation, preparation, and submission of your VAT returns. Stripe also provides detailed reports on your transactions and income for the year.

What are the differences between the normal regime and simplified regime?

Under the simplified regime, accounting and administrative obligations are easier to complete. Businesses file a simplified balance sheet instead of a full balance sheet and use standard accounting instead of detailed accounting.

For VAT, businesses under the simplified regime file an annual VAT return using form no. 3517-CA1, along with two VAT instalments. One instalment is paid in July and the other in December.

Businesses under the normal VAT regime must file a monthly VAT return using form no. 3310-CA3, or quarterly if the annual VAT due is less than €4,000. As a result, businesses under the normal regime face stricter obligations.

For more details on VAT returns and VAT instalments, check out our articles.