Everything you need to know about the controlled declaration tax system

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 this system entails, which companies are subject to it (or wish to opt for it), how to file your 2035 declaration, or how to switch from 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) is a system of actualtaxation on non-commercial profits (BNC) generated by the liberal professions, which takes into account the deduction of certain expenses.

These include, but are not limited to

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

Accounting and tax obligations

Companies subject to this regime follow a cash accountingsystem , with streamlined administrative formalities.

They must comply with the following requirements

• keep a journal of income and expenditure;
• keep a register of depreciation and fixed assets;
• register with a CGA (center de gestion agréé) to avoid a 25% surcharge on taxable profits.

👆 Certain 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 in sales,
• 1,550,000 euros balance sheet.

Companies subject to the controlled declaration regime

Automatically

This system applies automatically to companies :

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

Companies below this sales threshold are automatically subject to the micro-BNC system.

Optional

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

Which is more advantageous: déclaration contrôlée or régime spécial bnc?

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

➡️ Case n° 1 - Deductible expenses of €5,800

Micro-BNC

Taxable base

35 600 x (1 - 0,34)

= 23 496

Controlled return

Taxable base

35 600 - 5800

= 29 800

👉 The tax base is more advantageous with the micro-BNC system.

➡️ Case n° 2 - Deductible expenses of 11,000 euros

Micro-BNC

Taxable base

35 600 x (1 - 0,34)

= 23 496

Controlled return

Taxable base

35 600 - 13 000

= 22 600

👉 The tax base is more advantageous with the controlled declaration.

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

💡 The right 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 favorable 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'll also need to report the amount of profit on the 2042 form.

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

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Change of tax regime for BNC

How do you switch from controlled declaration to micro BNC?

In year N, you may find that your sales in N-1 have fallen below 72,500 euros. In this case, you are eligible for the micro-BNC regime for the N+1 tax return, based on N year profits.

Once you've checked that the micro-BNC scheme is indeed more advantageous for your business, send your request by post to your localSIE (Service des Impôts des Entreprises) before February 1st of the current year.

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

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

• exceeded the 72,500 euro 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.