First time contracting in France

[nothingtoulouse]

Generally you pay your tax where you work. There is a myth that you can work in a country for 6 months without registering or paying tax. This can only be done if the client (not your company) is from your home country. i.e. if your client was in Croatia and needed you to help out on a French project you could do this. This is clearly not the case and your income is therefore considered to be French income.

The myth revolves around residency, i.e. you only pay tax if you're resident. The fact is non-residents also pay tax. Many contractors have been caught by this, they work in a country for 4 or 5 months and think they don't have to pay tax; this can turn out be a very costly mistake.

So register in France and pay your taxes locally.

Thanks.

This was helpful, for me matter of French residence in EU documents was not explained good enough. So apparently its not just 6 Months -1 day and take your money and pay TAX back home.

Regarding A1 in Croatia it's supšrisngly easy, we have rare cases of posting workers and If your LTD pays tax and social for 2 Months in Croatia they will issue A1 for you( your worker within LTD) , I heard in other EU countries this is much harder to get. So we are lucky we can get this so easy.

And whats not clear for me here is a border between social and TAX. So let say I obtain A1 in CRO and I dont need to pay social for up to 24m in France (that would be great) but what with TAX then ?

Do I invoice in that case from French freelance-status from day 1 and I use only CRO LDT for social?
That would be OK but looks as strange setup...

[Sue B]

The model you propose is actually a circular reference that is difficult to resolve and i can only go into so much detail here without knowing all of the circumstances.

As you describe, it is important to separate tax and social security as they are governed by different rules

Social Security - you can only pay social security in one country at a time (non-voluntary contributions). By default this is where you work, so France. You then look to see if you can be exempted from the French social scheme, which can only be done with an A1 Certificate. A1's are valid for two years initially, and then can be extended on a yearly basis a further 3 times. After a total of 5 years you would have to have exceptional reasons to get a further extension, but it is possible.

Tax - You can be dual resident for tax on the same income. This is why we have the double taxation agreements. They do not provide for any exemptions or remove any tax liabilities, but they do decide the order of taxation when you are taxable in two countries. The 183 day rule is merely part of the DTA which set out the circumstances in which you would not be required to pay french tax first.

The scope of application for the 183 day rule is narrow but it certainly does not apply when a) you are delivering your services to a client who has a permanent establishment in France and b) if you use a Limited company. This is because under the Permanent Establishment rules, a Ltd Company (personal Service Company) is deemed to have a place of management in France, which in term, is classed as a permanent establishment. The 183 day rule therefore cannot apply.

Finally, the DTA does not account for mismatched income. So if you are paying French Income tax, then you need to declare the income in Croatia as employed earnings (not dividends) if you want the full Foreign Tax credit to apply against your Croatian tax liability.

[Sue B]

Do I invoice in that case from French freelance-status from day 1 and I use only CRO LDT for social?
That would be OK but looks as strange setup...

Sorry just further to this, no, because a french freelancer would not have an employer and therefore not have a valid A1, so it would be french tax and french social security.

[nothingtoulouse]

Sorry just further to this, no, because a french freelancer would not have an employer and therefore not have a valid A1, so it would be French tax and French social security.

Thanks ! You are helping more than all the accountants I have called these days. So now for me looks that only way is to stay registered in France and accept less net or negotiate rate increase, everything else is a headache.

Still I have a question about VAT, here it goes...

If I stay, I will be registered as freelancer in France ( E.I) I am by default inside of VAT and I need to collect my VAT expenses each Month. So I am expecting to invoice somebody in France. I beleive I need to make invoice with daily rate 600 + 20% VAT, thats 720e. Correct?

But my UK agency work with UK payroll agency, but end client is French company so I have following scenarios, at least to my understanding :

1. Ideally, I invoice end client (French company) directly with my rate and plus VAT
- problem is here that my UK recruiting agency is not happy with that, still negotiating. Do you agree this is best way?

2. As this UK recruiting agency insist using UK payroll agency there are two sub-scenarios but I don't know the result:

a. If payroll have office in France (still checking where VAT of payroll agency is registered) then I
assume I must have an invoice with rate plus VAT? 600+120. Right or?
b. If they want me to invoice this towards UK office then I think VAT does not be specified on invoice
according to EU regulations , but who pays then VAT in France for service produced in France and
invoiced to UK payroll. Me? This looks strange to me. How to calim for VAT return each Month if I am
not paying it. And as self employed person in VAT system I think I should.

.

Thanks!!!

[Sue B]

Hi again,

Well now, that question is one for a French Accountant, I am not familiar with the VAT there. I would have thought that if the UK Agency has a French branch and it is all done through there it would become a lot more straightforward.

In fact really it would have to be, because, if you are going to be invoicing the UK agency, I would wonder what VAT you would be invoicing for, UK or French? Cannot be UK VAT because point of supply is France. Cannot be French VAT because for a UK Agency its out of scope, and HMRC will disallow their VAT input......

[nothingtoulouse]

I think only normal option is to invoice from my French self-employed status to French Branch of Agency.

As I have big expenses each month (flat, plain cca 2000e) only way to reclaim French VAT is to have VAT on the invoice as well., otherwise if all of my invoices without VAT are towards UK Agency ( UK VAT) then I dont have basis for French VAT claim....

[Sue B]

I think only normal option is to invoice from my French self-employed status to French Branch of Agency.

As I have big expenses each month (flat, plain cca 2000e) only way to reclaim French VAT is to have VAT on the invoice as well., otherwise if all of my invoices without VAT are towards UK Agency ( UK VAT) then I dont have basis for French VAT claim....

Just make sure you do all this properly with a French Accountant. You definitely don't want to get any of this wrong. If you do not have a French accountant, send me a direct message and I will pass you the details of ours.

KR

[nothingtoulouse]

Just make sure you do all this properly with a French Accountant. You definitely don't want to get any of this wrong. If you do not have a French accountant, send me a direct message and I will pass you the details of ours.

KR

Thanks. Check your inbox. BR/Ivan