Where does your monthly net income come from and how is it calculated ?
Whether you're a self-employed individual or a company (in which case you have the status of self-employed manager), your tax return is not finalized until around 6 months after the end of the year. That's a long time before you know how much tax you actually have to pay ⏳! In the meantime, you want to start earning money.
How do you define your remuneration ? We answer in 3 steps !
1. Estimate your income and expenses
How much do you receive each month from the hospital or practice where you work ? How much is billed monthly to the firm for which you provide architectural services ? What are your monthly travel expenses ?
To help you make these estimates, a forecasting guide has been developed. Each category of income and expenditure is analyzed with the help of BILLY. In addition to the forecasts relating to your self-employed activity, other factors may affect your situation: dependent children, childcare costs, alimony paid or received, donations, property rent, other income... Once again, BILLY is there to ensure that nothing is left to chance!
The purpose of forecasting ? Anticipate your taxes and social security contributions as accurately as possible. That way, you can avoid unpleasant surprises.
2. Anticipate taxes as far as possible
The French government favors quarterly tax prepayment. This is known as withholding tax (compulsory quarterly) on the remuneration paid by a company to its director. And advance tax payment (not compulsory) on the income of self-employed individuals or companies. The same principle applies to social security contributions ! You anticipate quarterly payments (except for company social security contributions, which are annual). The table below details these elements:
| Individual | Company | Manager |
Tax base | Income | Income | Remuneration |
Type of tax | Personal Income Tax (see SPF website) | Corporation Tax (see SPF website) | IPP(see SPF website) |
Tax advance | Advance tax payment | Advance tax payment* (see SPF website) | Withholding tax** on professional income |
Social security contributions | For self-employed** | For company** | For self-employed** |
(*) not compulsory (**) compulsory
For both taxes and social security contributions, all payments must be made during the current year (by December 20 and December 31 respectively for taxes and social security contributions). Failure to do so will result in tax surcharges.
3. Define your net income
My remuneration as a self-employed individual
Self-employed remuneration is not a business expense. The term "remuneration" is not the most correct one. In fact, the net amount in your pocket does not come from an established remuneration. It corresponds to the self-employed person's "profit net of tax", i.e. his or her result (income - expenses) minus social security contributions and personal income tax. This balance is your net worth.
How can you anticipate this amount and pay yourself a monthly salary ? Based on your forecasts and with the help of your BILLY accountant, you can estimate the amount you can pay yourself each month into your private account!
My company remuneration
If you run a company, you have a structure that acts as a "buffer" between you and your business : the aim is to leave a profit (i.e. not take all your income as remuneration). In the future, this income can be distributed to you in the form of a dividend, which is more advantageous from a tax point of view than remuneration. You'll find more details in the Remuneration article.