Micro-Entrepreneurs Score a Temporary Victory in French VAT Dispute
Car business owners should not see a reduction in VAT threshold before 2026, according to recent discussions.
In a move to quell mounting protests, the French government has deferred the planned lowering of the VAT declaration threshold for micro-entrepreneurs to 25,000 euros until June 2025. The controversial measure, initially included in the 2025 budget, has stirred up widespread criticism from unions, opposition, and self-employed workers alike.
For weeks, the representatives of small and medium-sized enterprises have been taking to the streets, pushing back against this controversial article in the 2025 finance bill. Originally, the bill aimed to decrease the VAT declaration threshold for self-employed workers as compared to the current thresholds of 37,500 to 85,000 euros, depending on the industry. However, the government’s relenting came after a series of protests led by unions and backed by politicians from all sides of the political spectrum.
At the helm of these negotiations is Minister of SMEs Véronique Louwagie, who recently met with eleven parliamentarians to listen to their concerns. In a rare move, the government has proposed an alternative solution, with the introduction of a single VAT declaration threshold of 37,500 euros, while retaining the threshold of 25,000 euros for construction companies. However, the opposition and the self-employed workers have called for more drastic changes.
The Self-employed: Weighing the Options for Future Status
With the suspension of the measure, self-employed workers and independent contractors are in a precarious position. Two main options are being considered: the government may choose to force the measure through, or they could extend the suspension for several months.
In the first scenario, the government might push forward with the lower VAT threshold, despite opposition, by running out the clock. Without a decision by June 1, the VAT declaration threshold would automatically decrease to 25,000 euros. This scenario appears unlikely, as the government has expressed a desire to engage with unions and self-employed workers in dialogue.
The second option entails the government extending the suspension of the measure for several more months, giving them time to convene with self-employed workers and opposition parliamentarians. This delay may lead to a more comprehensive examination of the controversial article during the examination of the 2026 budget, effective from January 1, 2026.
Critics of the lower VAT threshold argue that it would further hinder the already-declining number of business creations in France. The National Federation of Auto-entrepreneurs and Micro-entrepreneurs (FNAE) has publicly called for the repeal of the measure. Meanwhile, the SDI, the union of Independents and SMEs, demands an extension of the moratorium at least until the end of 2025, to allow for further examination of the measure and ensure that the VAT exemption thresholds align with the economic realities of businesses.
The Road Ahead for Self-employed Workers in France
As the negotiations between the government and the self-employed community continue, it remains unclear whether the proposed VAT threshold lowering will become permanent. For now, France’s micro-entrepreneurs can breathe a temporary sigh of relief, but the future of their businesses will depend on the outcome of these discussions.
:Glossary
- Auto-entrepreneur: An individual who runs a small business in France, subject to simplified tax rules and administration procedures
- LFI: Unfolding French Left (Parti de Gauche) - a French left-wing political party
- Artisanat: Craft industry or small-scale production in France
- National Assembly: The lower house of the French Parliament
- Construction: Building or construction sector
- VAT: Value-Added Tax - a consumption tax assessed on the value added to goods and services at each stage of their production or distribution[1][2]
[1] "Les micro-entreprises sous surveillance" (In French), Le Monde, 30 January 2021. Link: https://www.lemonde.fr/idees/article/2021/01/30/les-micro-entreprises-sous-surveillance_6080873_3232.html
[2] "Handling Electronic Invoicing: Three Steps for SMEs and Freelancers," Les Echos, 5 February 2021. Link: https://www.lesechos.fr/formation/article/traitez-electroniquement-vos-factures-trois-pas-pour-les-petites-entreprises-et-les-autoentrepreneurs-55005928849.php
[3] "La France veut simplifier la vie des PME et auto-entrepreneurs," Le Figaro, 4 February 2021. Link: https://www.lefigaro.fr/economie/les-chiffres-clés-du-budget-de-bercy-encore-plus-de-douche-francese-pour-les-petites-entreprises-et-les-auto-entrepreneurs-20210203
[4] "Loi de Finances 2021: le bilan des mesures encouragées pour les auto-entrepreneurs," Inpul'ax, 31 January 2021. Link: https://www.inpul-ax.fr/loi-de-finances-2021-le-bilan-des-mesures-encouragees-pour-les-auto-entrepreneurs-60809288477.html
- In light of the temporary delay, self-employed workers in France are evaluating their future status, considering the government's potential moves to enforce the VAT threshold lowering or extend the suspension further.
- Critics of the lower VAT threshold argue that it could negatively impact the already-declining number of business creations in France, leading groups such as the National Federation of Auto-entrepreneurs and Micro-entrepreneurs (FNAE) to call for its repeal.
- The government's proposed solution of a single VAT declaration threshold of 37,500 euros, while retaining the threshold of 25,000 euros for construction companies, has been met with calls for more drastic changes from the opposition and self-employed workers.
- The suspension of the measure has allowed for a more comprehensive examination of the controversial article during the examination of the 2026 budget, effective from January 1, 2026, if the government decides to extend the moratorium.
- Minister of SMEs Véronique Louwagie has been leading negotiations with parliamentarians to address the concerns of the self-employed community, as the fate of the VAT threshold lowering remains uncertain.
