As much as we would all love to just concentrate on the translation aspect of our business, the administrative side is a necessary evil we should all master.
I think you can all agree with me that doing the accounts, preparing tax returns, and paying all those required social contributions is something that we would all like to have someone else do for us (especially since I always have the sneaking impression that I missed out on some super tip that could seriously reduce what I have to pay).
Over the years living and working in France, I've learned that you need to anticipate what you will earn over the course of the year in order to best figure out how to keep your hard-earned cash, instead of paying it out to the government. By anticipating, you can figure out if you'll be ok, with the small, required expenses, or if that one big assignment you won will push you over the edge by dramatically increasing your contribution payments...unless you do something about it fast.
One important thing you must remember is that as translators in France, the Impôt sur le Revenu (Income Tax) is not your worst enemy, the social contributions are.
Since it's the beginning of the year, it's the perfect time to think about all the LEGAL possibilities you have to reduce your income taxes and your social contributions and maximizing your NET EARNINGS. You basically have 3 options:
1) Deducting your Business Expenses
2) Earning Tax Credits
3) Recuperating VAT
In this article, we'll just concentrate on the expenses.
To start with, I think that no matter what country you live in, the below checklist of business expenses should apply as a general rule. As translators, we do not have much overhead in operating costs to deduct like other professions, which means some of our business expenses are limited. So, read through this list and see if you've missed deducting something important.
Business Expenses Checklist
Professional stuff
□ Clubs & Memberships: you can deduct the membership fee
○ Proz membership
○ ATA, SFT, etc.
○ Centre de Gestion membership – important! Not only you deduct the
membership fee, but if you are not a member you are taxed on 25% more
than what you earned. You have until March to sign up, so Hurry!
□ Subscriptions & Documentation: you can deduct the subscription and
purchase prices, since you need this stuff for reference.
○ Magazines (Translation or anything to do with your specialized domain)
○ Books
○ Visual Thesaurus subscription (example)
□ Training & Certification: the cost to participate is deductible.
If you need training but don't have the money, the FIF-PL will reimburse the cost. In 2008, they have annual budget of 500 Euros per translator.
○ Conferences
○ Classes
○ Training Sessions
Moving Around
□ Transportation: metro, bus, taxi, train, plane
○ You can deduct any of these if they are needed to go to a client or a job
○ If you use your car, this gets more detailed, since you only deduct what is
allowed depending on its horsepower, etc. Basically, this expense is too
complicated to detail here.
□ Food:
○ If you take a client or colleague out to dinner/lunch/drinks you can deduct all
of it; just write the person's name on the back of the receipt
○ If you need to eat and you're away from home because you're working, then
you can deduct the amount that exceeds the cost of eating at home.
As an indication, in 2005, the established cost of eating at home was 4,10
Euros. So, if you buy a sandwich for 5 Euros, you can deduct 0,90 cents. To
avoid abuse, you were allowed a maximum deduction of 11,40 Euros.**
□ Trips:
Probably the best expense you'll have. If you can show any justification that
you do something professional (ex. have a meeting) at your destination, then
you can deduct the transport costs.
- Ex. Once a year I fly to the US from France, where I spend 3 weeks
drinking in English and Anglophone culture (I also visit my parents and go shopping). We all know that it's important to stay up to date in the
evolution of our working languages, but the tax inspectors may not
understand. So, I usually try to find a trade show/ATA meeting / conference, etc. taking place during my visit. This way, I can
deduct my round-trip plane tickets.
At Home/Office
□ Housing
○ Rent is deductible for the % used for your office. A good amount that
wouldn't necessarily be questioned by the tax inspectors is 4m².
□ Materials
○ Computer/ Scanner/Printer/Monitor: for anything higher than 500 euros, you
deduct 1/3 over the next 3 years
○ Software (Trados/Antivirus/etc.)
○ Office furniture
○ Office supplies
○ Business cards, photocopies, stamps, etc.
□ Services: Deductible for the % used professionally
○ Phone (Landline & Mobile phone)
○ Internet
○ Electricity/Gas
Extras
□ Loi Madellin – retirement, prevoyance, health
This law allows us to deduct up to a certain amount of contributions we pay to additional social assistance plans.
My personal favorite is the 'Retraite par Capitalisation'. Contrary to
paying contributions to a prevoyance, you are absolutely sure that you will recover the money you put into the retirement plan, either when you retire, OR if one day you decide to stop working as a translator. Also, you get your money back with a nice interest rate.
○ Important – this is deductible for taxes, but apparently not deductible for your social contributions. So, if you pay 10 Euros to your prevoyance, your income tax is calculated off of (x–10), then your social contributions are just calculated off x.
□ Social contributions: YES, you deduct what you pay in social contributions.
○ URSSAF : Be careful, you only deduct a portion of CSG and none of
CRDS.
○ CIPAV (Retirement)
○ Health Insurance
This list is non-exhaustive. If any of you know of other interesting expenses which should be added to the list, please contact me.
Coming soon: French Tax Credits & VAT: Keeping as much as you can
**Please verify these amounts with the tax administration or your Centre de Gestion, they are re-evaluated every year.
References:
http://www.creastart.com/doc_commerce_artisans/commerce_charges_non_deductibles.html
http://www.fifpl.fr/pages/consulter.php?naf_id=43
http://www.urssaf.fr/profil/independants/index.html
http://www.freelance-info.fr
http://www.impots.gouv.fr
France