Everything you need to know about the controlled declaration tax regime

Are you directly concerned by the controlled declaration or are you considering opting for this tax regime?

If so, you're probably asking yourself a lot of questions about the accounting obligations that this system entails, which businesses are subject to it (or wish to opt for it), how to file your 2035 return, or how to switch from the controlled declaration to micro-BNC?

All the answers in this article!

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What is the controlled declaration regime?

Definition

The " déclaration contrôlée" (controlled declaration) systemis a system of actualtaxation on non-commercial profits (BNC) generated by the liberal professions, which takes into account the deduction of certain expenses.

The following is a non-exhaustive list:

• travel and meal expenses
• business premises expenses
• purchase of equipment, furniture and raw materials
• installation costs,
• staff costs.

Accounting and tax obligations

Companies subject to this scheme follow a cash accountingsystem , with fewer administrative formalities.

The following requirements must be met:

• keep an expenditure and income journal;
• keep a register of depreciation and fixed assets;
• register with a CGA (approved management centre) to avoid a 25% surcharge on taxable profits.

👆Some companies are exceptions to the rule and must follow the general chart of accounts (PCG):

• bailiffs
• notaries
• and companies exceeding two of the following three thresholds:
• 50 employees
• 3,100,000 euros turnover,
• 1,550,000 in balance sheet total.

Companies subject to the controlled declaration regime

Automatically

This system applies automatically to companies :

• declare non-commercial profits (BNC) ;
• which generated annual turnover in excess of €72,500 excluding VAT in the previous year.

Companies below this turnover threshold are automatically subject to the micro-BNC scheme.

By option

Why opt for this system if you are covered by the micro-BNC scheme? The controlled declaration system allows expenses to be deducted from the tax base, which may be more advantageous in some cases.

Which is more advantageous: controlled declaration or special BNC scheme?

Let's take the example of a business with sales of €35,600 in 2020. As it is below the €72,500 threshold, it is automatically subject to the micro-BNC scheme. Is it worth opting for the controlled declaration scheme? This depends on the amount of deductible expenses.

➡️ Case 1 - Deductible expenses of €5,800

Micro-BNC

Taxable base

35 600 x (1 - 0,34)

= 23 496

Controlled return

Taxable amount

35 600 - 5800

= 29 800

👉 The tax base is more advantageous under the micro-BNC scheme.

➡️ Case 2 - Deductible expenses of €11,000

Micro-BNC

Tax base

35 600 x (1 - 0,34)

= 23 496

Controlled return

Taxable amount

35 600 - 13 000

= 22 600

👉 The tax base is lower with the controlled declaration.

❗️Attention: a lower tax base does not necessarily mean that there are fewer social security charges to pay. To make your decision, you will need to apply the correct respective tax rates to the two tax bases, to obtain the correct final amounts and compare them.

💡 A good idea? Call on the services of a chartered accountant when you set up your business or during the year to see which regime is most favourable to you.

The 2035 declaration for non-commercial profits

When you are subject to the controlled declaration regime, you must complete the 2035 declaration, which complements the 2042 annual income tax return.

💡 You will also need to enter the amount of profit on the 2042 form.

• When should I file my 2035 return? Before the beginning of May.
• Where can I find the 2035 declaration? On the tax website .
• Where do I transfer the profit from the 2035 to the 2042? If it is a deficit, enter it in section 5 QE or 5 RE. If it is a profit, enter it in section 5 QC or 5 RC.

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The change of tax regime for BNC

How do you switch from controlled declaration to micro BNC?

In year N, you may find that your turnover in N-1 fell below €72,500. You are then eligible for the micro-BNC scheme for the declaration of year N+1 on the profits of year N.

Once you have checked that the micro-BNC scheme is indeed more advantageous for your business, send your application by post to your localSIE (business tax office) before 1 February of the current year.

How do I switch from the micro-BNC scheme to the controlled declaration scheme?

The procedure for optingout of the micro-BNC scheme is the same whether you have :

• exceeded the €72,500 micro-BNC ceiling two years running,
• or have an interest in opting for the controlled declaration.

👌 All you have to do is send in your 2035 declaration before May, like all other businesses subject to the controlled declaration.