Module 19 min906 wordsFree — no account
Flat-rate or actual costs: finding the break-even point
The explanation, in the order it is meant to be read · 25 sections · 854 words · 5 min
Thomas Lefebvre, an IT consultant, collects €92,000 in fees. Under the micro-BNC regime the tax authority deducts a flat 34 %, or €31,280, and taxes him on €60,720. His actual business costs come to €34,000. Before reading on: above what level of costs does the flat rate become a bad deal?
What you will be able to do
- Tell the micro regime's flat-rate allowance apart from the deduction of actual costs.
- Locate the turnover thresholds that keep the micro regime available.
- Compute your own break-even point instead of assuming it.
- Anticipate the accounting duties the actual-costs regime brings with it.
Two ways of computing the same profit
A self-employed person is taxed on profit, not on turnover. Two methods determine it. The micro regime applies a flat percentage meant to stand for business costs. The actual-costs regime subtracts the costs genuinely incurred, one by one, each backed by a receipt.
Definition
Flat-rate allowance — A percentage removed automatically from turnover under the micro regime, in place of any actual cost. It is deemed to cover every business expense: no invoice may be added to it, even where real spending is far higher.
The flat rate is a wager. A business with light costs wins, since it deducts more than it spends. A business with heavy costs loses, and loses silently: nothing on the tax assessment points to the gap.
The thresholds that keep the micro regime open
The micro regime is not open to everyone. It assumes turnover below a ceiling, measured over the previous calendar year or the one before. The ceiling depends on the nature of the activity: selling goods is treated more generously than supplying services.
Key figures
- Micro ceiling — sale of goods
- €203,100 of turnover
- Micro ceiling — services and independent professions
- €83,600 of turnover
- Allowance for independent professions (BNC)
- 34 % of turnover
- Minimum allowance, whatever the turnover
- €305
Three allowance rates coexist: 71 % for the sale of goods, 50 % for services taxed as industrial and commercial profits, 34 % for independent professions. The spread between them says everything: one flat rate is trying to imitate very different cost structures.
The break-even point can be computed
The rule fits in one sentence: the actual-costs regime wins as soon as real costs exceed the flat-rate allowance. The break-even point is therefore the allowance itself, that is, turnover multiplied by the rate applicable to the activity.
The gap in taxable base is not the tax saving. It must still be multiplied by the household's marginal rate, then weighed against social contributions, whose base differs between the two regimes. A modest gap can therefore hide a close decision.
Summary table
| Criterion | Micro regime | Actual-costs regime |
|---|---|---|
| How costs are determined | One flat-rate allowance | Actual costs, each one documented |
| Loss possible | No, never | Yes, where costs exceed receipts |
| Bookkeeping | A record of receipts | Accrual accounting and a full tax return package |
| Depreciation | Not separately deductible | Deductible over the asset's useful life |
| Burden of proof | No document to produce | A receipt required for every expense |
The option, and what it commits you to
Below the ceilings the micro regime applies automatically, so actual costs require an election. Above the ceilings the position reverses and actual costs become compulsory. The election is filed with the tax authority and covers the whole activity, not a chosen category of expenses.
A switch is therefore not judged on a single year. An exceptional year, loaded with investment or refurbishment, can make the actual-costs regime attractive once and expensive afterwards, when spending returns to its usual level.
Social contributions do not share the same base
Tax is only half the question. Under the micro regime, social contributions are computed on turnover collected, by applying a rate. Under actual costs they bear on profit, hence after costs are deducted. The same file can win on one side and lose on the other.
That asymmetry deserves a computation of its own. A business whose costs sit just above the break-even point may gain a little income tax and lose more in contributions, or the reverse. Only running both regimes end to end, on the same figures, settles the question.
What the actual-costs regime adds in obligations
The regime is not a box to tick. It commits the business to heavier bookkeeping, whose cost eats into the expected saving. A switch that saves a few hundred euros of tax but costs as much in accountancy fees saves nothing at all.
- Accrual accounting, rather than a simple record of amounts collected.
- A balance sheet, a profit and loss account and the schedules of the tax return package.
- Retention of the receipts for every cost deducted, for as long as the authority may review.
- A fixed-asset register tracking the items being depreciated.
Mistakes to avoid
- Comparing turnover rather than profit: the two regimes do not tax the same base, and reasoning on turnover says nothing about the result.
- Switching on the sole impression that costs are heavy, without having computed the allowance those costs are meant to beat.
- Forgetting that the tax saving follows from the marginal rate, and is not the gap in taxable base itself.
- Overlooking the cost of bookkeeping, which absorbs a marginal switch entirely.
Educational content, current with the sources cited. It does not replace advice tailored to your situation. These courses are neither certifying nor CPF-eligible: they prepare for no certification registered with the French RNCP or specific register.