The legal structure chosen to operate as a PHV (“VTC”) driver will have an impact on taxation, social security contributions as well as on the functioning of the operations. To help you choose the structure which best suits your situation, here is some information on the main entities available and how they can translate in terms of income:
Sole trader (‘Entreprise individuelle’
The formalities involved in setting up a sole proprietorship (EI) are simple due to the fact that no articles of association or share capital have to be drawn up. A sole trader does not have a legal personality distinct from that of the entrepreneur. The sole trader is subject to income tax, but can opt for corporation tax. The amount and calculation of social security contributions vary according to income - in the absence of income, there will still be minimum contributions to pay in order to continue to benefit from social protection. Further information here ↗
Micro-business (‘Micro-entreprise’) Like sole traders, micro-businesses do not require any articles of association or share capital. The formalities involved in setting up a micro-business are also less costly than those for limited companies. Micro-enterprises do not have a legal personality separate from that of the entrepreneur. The micro-entrepreneur's profits are subject to income tax. Tax obligations are simplified under this system. Actual costs (fuel, vehicle maintenance, insurance, etc.) cannot be deducted, but a flat-rate deduction of 50% is available for professional expenses. Social security contributions come as a percentage of turnover (21.2%). A special feature of micro-enterprises is that they are not subject to VAT. There is, however, a turnover threshold of €77,700 that must not be exceeded, the risk being of becoming subject to a real tax regime. Further information here ↗
Limited companies (‘Sociétés de capitaux’) such as SAS, SASU, SARL..., in particular SASU and EURL
Companies, such as the société par actions simplifiée (simplified joint-stock companies) (SAS) and the société à responsabilité limitée (limited liability companies) (SARL), enable a clear separation between the assets dedicated to the business and the personal assets of the owner - they have a separate legal personality. With no limits on turnover, they are better suited, for example, to the need to hire personnel. Companies are also better suited to full-time activities which involve a certain level of income, as their set-up and running costs are higher.
Among the various types of companies available, the SAS or Société par Actions Unipersonnelle (SASU) is frequently used by VTC drivers. Although they also require the drafting of articles of association, the functioning of an SAS is less regulated than that of an SARL. The profits of the SAS are subject to corporate income tax. SASU employed directors are subject to the general social security system, and pay social security contributions, generally ranging from 65% to 80% of gross salary. Dividends received by the sole shareholder of a SASU are not subject to social security contributions, but only to social security deductions at the rate of 17.20%.
Another common choice is the SARL, or EURL (entreprise unipersonnelle à responsabilité limitée) when there is only one partner. The manager of an EURL is affiliated to the regime for non-salaried workers, which generally involves lower social security contributions than for an SAS, but often offers less social protection. By default, an EURL is subject to income tax, although it is possible to opt for corporate income tax. Dividends paid to the sole shareholder of an EURL are subject to social security contributions for the fraction exceeding 10% of the company's share capital, additional paid-in capital and sums paid into the partner's current account. Further information here ↗
In summary, criteria such as whether you wish to operate as an individual or hire employees (as a fleet manager might do), the desired level of activity, or whether you wish to benefit from a more or less administratively regulated business form, among others, are to take into account when choosing the legal structure. In particular, it is a good idea to assess your projected turnover, future business expenses and social security needs. As this presentation is provided on a purely informative basis only. The content is provided without any warranties, either express or implied, regarding its accuracy and completeness, and it is not intended to be a substitute for professional advice. It is always advisable to engage with a certified accountant or a consulting firm for ad hoc advice tailored to your specific situation.
