- Category: Social taxes
The Brexit impact
An EURL is basically an SARL (Limited Liability company) for which 100% of the company’s shares are owned by one associate. This sole associate has two options: either he acts as the manager of the company, or he has a third-party exercise these functions. Granted, that second situation is somewhat rare, though.
By default, the EURL is subject to the income tax. However, there are a couple of situations where it is subject to the corporate tax:
- If the sole associate is a “legal person” (it’s not an individual, but an entity representing several people)
- If the sole associate, despite being a “natural person” (an individual) has opted for the corporate tax anyway. In this case, he cannot go back on this choice.
As such, we need to study the social coverage of two people: the sole associate and the manager (if there even is a manager).
- The social coverage of the sole associate of an EURL
- The social coverage of the manager of an EURL
1-The social coverage of the sole associate of an EURL
First of all, it’s worth mentioning that the sole associate cannot have an employment contract. After all, one of the conditions for that to be possible is for a relation of subordination to exist with the employer. But since 100% of the company’s shares are owned by a single individual, the sole associate cannot be in a situation of subordination.
The social regime:
If the sole associate exercises a professional activity within the company, no matter what type of activity this is, they will be subject to the Non-Salaried Worker regime. As such, they contribute to the same fund as:
- Merchants, if the company has a commercial or industrial activity
- Artisans, if the company’s activity is craft
- Liberal Professions, if the company’s activity is a liberal profession
- Even if the sole associate’s remuneration is zero, he will always have to pay minimal contributions for daily compensation in case of sickness/accidents, primary retirement pension and disability or death.
- Pôle Emploi (The French National center of Employment) will not cover unemployment. It’s always possible to go for private insurance, though.
- If the EURL is subject to income tax, then their social contributions are based on the entirety of the profits of the company
- If the EURL is subject to corporate tax, then their social contributions are based on their personal remuneration
Since 2013, if the sole associate, their partner bound by a PACS or their minor children receive dividends, then these are taxed. Indeed, for the segment superior to 10% of equity, bonuses and transfers in the current account, dividends are subject to social contributions.
If the company is subject to income tax, and if the sole associate is under the social regime of the micro-company, then for social contributions, the turnover of the company is subject to the “Micro-Social”.
The tax regime:
As mentioned earlier, by default, the EURL is subject to the income tax.
In this case, remuneration and social advantages are subject to income tax, in whichever category the activity of the company belongs to. As such, it will be in the “Commercial and industrial benefits” category if the activity is commercial or artisanal, and in the “Non-commercial benefits” if the activity is liberal. This remains the case even if the associate has not used those benefits.
The remuneration that the sole associate obtains for his functions as manager is not tax-deductible from the social benefits.
Finally, it is worth noting that an EURL subject to income tax can join a Chartered Accounting Center.
Since 2016, if the sole associate of an EURL is the same person as the manager, then they can benefit from the Micro-company tax system.
2-The social coverage of the manager of an EURL
The social regime:
They’re considered as “associated employees”. Basically, this means the following:
- They benefit from social security coverage, as regular employees do
- However, Pôle Emploi (the National French Employment Center) doesn’t cover them against unemployment. It’s still possible to get insurance from other entities, though
- They also do not benefit from paid leave, notice, compensation for unjust dismissal, or other employee benefits
- If they are ever at odds with the company, they cannot refer to the Conseil des Prud’hommes (the industrial tribunal)
However, it is possible for the manager to have an employment contract, which would allow them into the regular employees’ general social regime. However, for this to happen, a couple of conditions have to be met:
- The employment contract has to refer to real job functions
- They have to be subordinated to the company. As mentioned earlier, this makes it impossible for the sole associate to have an employment contract, even if they have the functions of the manager.
As you can see, these conditions have somewhat arbitrary definitions. As such it’s probably a good idea to consult Pôle Emploi to see if it’s possible before making the employment contract.
The tax regime:
The manager is always subject to income tax under the “wages and salary” category. As such, they can either deduct 10% of his from this amount because of corporate fees, or deduct their real fees (as long as they can prove/justify them). Furthermore, the manager’s remuneration is tax-deductible from the social benefits, as long as its volume makes sense considering the services rendered, and if it is for actual job functions.
Since 2013, if they receive dividends, then these will be taxed under a progressive scale by segments. Furthermore, they are also subject to an additional 12.8% tax as down payment for the income tax. Well, they are sometimes exempted from these 12.8%, though.