Have you been a self-employed nurse for more than 5 years? Why should setting up a company enable you to raise €50,000 tax-free?
I have been a self-employed nurse for over 5 years. What are the advantages of setting up a liberal practice company (SEL) for nurses? What legal and tax schemes are there to optimize the tax position of nurses?
We will present the usual tax regime for self-employed nurses in the form of a sole proprietorship, for which we will determine the tax and social security charges on €50,000 of income to be apprehended (1.). We will then present the tax advantages of setting up a liberal practice company (SEL) for nurses, which can enable €50,000 to be apprehended tax-free (2.).
1. Classic scheme – Sole proprietorship for self-employed nurses: apprehending €50,000 costs around €20,000
A self-employed nurse with a sole proprietorship is taxed as a non-commercial profit (BNC), and is also subject to social security charges on his or her profits (social security for the self-employed and CARPIMKO).
For sales of up to €70,000, the self-employed nurse can opt for the micro-BNC system (the BNC taxable for income tax is calculated by deducting a flat rate of 34% in charges from gross sales). The self-employed nurse can also opt for the actual regime, and determine his or her taxable BNC by deducting actual expenses from sales. The option for the micro-BNC regime is relevant if actual expenses paid (including social security charges) do not exceed 34% of sales.
Example: What is the tax and social security cost of apprehending €50,000 for a self-employed nurse?
Ms. X is a self-employed nurse with a sole proprietorship, with net sales (excluding social security contributions) of €50,000. In order to apprehend this €50,000, she will have to pay approximately €18,000, excluding professional association contributions, i.e. an available net amount of €32,000:
2. Diagram 2 – Setting up an SEL for self-employed nurses and buying out your self-employed business without taxation?
A nurse’s SEL can be set up by transferring his or her business assets to an SEL set up for this purpose. However, the nurse does not generate any income from this transfer.
A nurse’s SEL can also be set up by creating the SEL with a small amount of share capital in cash, followed by the sale of the business itself. In this case, the SEL will pay the purchase price of the business directly to the nurse, who will receive the money.
Principle: capital gains tax at 30%: In the event of the purchase of his or her business by the SEL, the nurse will generate a capital gain subject to income tax and social levies. As this is a non-depreciable asset, the capital gain on the sale of the business is subject to short- or long-term capital gains or losses, if the business has been held for more than 2 years at the time of sale, the entire capital gain is considered long-term, and is taxed at the overall rate of 30% (12.8% for income tax and 17.2% for social security contributions). Thus, in principle, the apprehension of a sale price of €50,000 should cost 30% of the capital gain, i.e. €15,000 (versus €18k for the apprehension of BNC income).
Exception: Total exemption from capital gains tax for nurses who have been self-employed for more than 5 years, with sales of less than €90,000, subject to abuse of tax law.
Article 151 septies of the French General Tax Code provides for total (or partial, depending on sales) exemption from income tax and social levies on capital gains from sales to the self-employed if, in particular
- the self-employed nurse has been running the business for more than 5 years; and
- the self-employed nurse achieves less than €90,000 in annual sales (sales are assessed on the average of the last 2 financial years; the exemption is partial between €90,000 and €120,000 in sales).
Example: What is the tax and social cost of apprehending €50,000 for the transfer of a nurse’s business to a nursing SEL?
Ms. X has been a self-employed nurse for over 5 years, with annual sales of €89,000. Her business assets are valued at €50,000. She decides to set up a nursing SEL by contributing €100 in cash capital, and the SEL buys out her business for €50,000.
After studying her situation, she qualifies for exemption under article 151 septies of the French General Tax Code, and will be able to apprehend the €50,000 without direct taxation or social security charges, paying only registration fees of €810 (compared with €18,000 for the apprehension of traditional BNC income).
Such a scheme for selling your own business via a nurse’s SEL, which is tax-exempt under article 151 septies of the French General Tax Code, requires compliance with a number of conditions, and requires preparation, analysis and arguments to avoid any risk of abuse of tax law.
In this respect, we would like to draw your attention to the fact that it is advisable to be accompanied by an expert professional to ensure the security of such an arrangement. We will also need to address issues such as the valuation of the business, the SEL’s tax status (income tax or corporation tax), and the implementation of more complex schemes such as the creation of a société de participations financières de professions libérales (SPFPL).
What are the advantages for a nurse of going into partnership? → Make an appointment and let us discuss the scheme best suited to your situation
AGN AVOCATS – Tax Department
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