Self-employed workers in France: new proposals on VAT thresholds

Self-employed commercial workers in France may soon see the VAT exempt threshold level reduced by more than 50%, affecting tens of thousands across the country.

Plans included in the budget of former Prime Minister François Bayrou, according to French business media Les Echos sources, would see the threshold at which self-employed workers (or micro-entrepreneurs) lose exemption for VAT standardised at €37,500. 

The only exception would be construction workers, where VAT levels would start from €25,000. 

While €37,500 is the current VAT threshold for many self-employed workers, it is currently significantly higher for retailers and commercial micro-entrepreneurs, who currently benefit from an exemption threshold of €85,000 before needing to account for VAT.

Earlier this year, Mr Bayrou announced a plan to reduce this to €25,000 across the board for all self-employed workers, looking to generate around €400 million per year of extra tax revenue. 

Widespread backlash against the move saw MPs reject the proposition – however it seems Mr Bayrou was looking to pass a watered-down version as part of the 2026 budget before he was ousted by a vote of confidence earlier this month.

It is currently unclear if new Prime Minister Sébastien Lecornu will keep the proposals in his version of the budget, set to be put forward to MPs and Senators this autumn. 

If he does keep the measure, it is likely to cause similar levels of upheaval as at the start of the year, and may be blocked by MPs across the political spectrum.

Lower VAT threshold could force thousands of businesses to close

Currently, the €37,500 threshold is in place for service-based self-employed workers such as artisans, professionals, tradespeople etc with ‘commerçants’ benefitting from the higher level of €85,000. 

Commerçants include those who re-sell items for profit, those with wholesale services in specific sectors (hotel, fast food, transportation, entertainment, security, and IT), as well as those who rent items and services. 

“Tens of thousands of businesses, particularly in rural areas, rely on this economic model,” said general delegate of the Syndicat des indépendants (a union supporting self-employed workers) Jean-Guilhem Darré to Capital.

“Knowing that they currently earn between €900 and €1,200 per month on average, they will disappear if this becomes a reality.” 

As an example, a commerçant with a €40,000 in turnover is currently exempt, but if the VAT threshold is dropped to €37,500 they would be impacted. 

The self-employed worker would need to account for €8,000 in VAT (at the standard rate of 20%), as once the threshold is reached, all sales become eligible for VAT, not just those above the threshold limit. 

Those required to account for VAT would need to add the VAT charge, currently 20%, to their quotes / invoices, unlike those with a turnover under the threshold.

The amount of VAT charged then has to be passed on to the government.

In turn, the firm is able to recuperate VAT applied by its suppliers on the firm’s purchases from them. However, the whole process involves significantly more complex records and accounting and usually requires an accountant.

Certain self-employed workers will also be affected by plans to bring in electronic billing, which is set to cost an estimated €600 per year.