April 2011

I Heard It Through The Grapevine

 

 

This song was first performed by Smokey Robinson & the Miracles in 1966 and after that by Marvin Gaye in 1967. I am more familiar with the version recorded by the band Creedence Clearwater Revival in 1970.

The advice foreigners get through friends or acquaintances can do more harm than good, even if it is offered with the best of intentions and honestly reflects the person’s own experience. For one thing, no two situations are ever exactly alike, so one must always review the differences carefully to see how they affect the pertinence of any analysis.

Furthermore, such advice is more often based on hearsay rather than personal experience, which makes it even less reliable. In other words, you should never follow this kind of advice without checking with a professional. I constantly deal with messy situations resulting from people following such advice. What is worse is that in France even information from “safe” sources such as the préfecture, tax office and so on can be misleading. French people have a tendency to answer questions in a very narrow way, which makes it extremely difficult to generalize from their replies.

Once again this past month I have received a fair number of comments regarding common law marriage in the USA. I also received a comment regarding the situation in language schools.

It is common knowledge that most language schools do not pay well and offer their employees minimum protection. Obviously, an American wanting to work in France can add “English mother tongue” to his/her résumé, and this skill – a given in the USA – can help you find a job in no time. But this is a much more complex issue than my reader made it sound. I have decided to share this message because it deals with a trend that is bad for the teachers concerned.

Many English speakers come to France wanting to work right away but having no employer to sponsor them for work papers. The prefecture and URSSAF make it quite easy for them to qualify as self-employed English teachers, but building a clientele takes time and many people lack the means to live for the months or even years it may take to get enough work. The only immediate solution is to work for an English language school to get experience, build a professional network and, in due time, find direct clients. The golden apple is to have one’s own clients in big corporations, but to do so requires obtaining a license allowing one to be paid from the corporate continuing education budget, which means having some seniority.

In short, one can deliberately choose to work on behalf of a school as a self-employed teacher for a couple of years, with larger goals in mind, or be forced into this status because it makes the teacher cheaper. There is a huge difference between the two situations – something to keep in mind when reading the testimony below.

 

 

AUTO-ENTREPRENEUR STATUS IN LANGUAGE SCHOOLS
A reader sent me a very long message reporting on what has been happening in many language schools now that self-employed status has been made much simpler. To make the long story shorter, I have boiled down and paraphrased much of my reader’s report.

“I have seen all kinds of weird and wonderful stuff going on in relation to business English or ELT (English language teaching) and the status of “self-employed” (auto-entrepreneur). Maybe some of your readers will not be surprised to hear that URSSAF at the national level has heeded certain calls, since it is now enforcing new, tougher guidelines and has introduced a stronger requirement (tougher obligation on reporting, etc.). So regarding the point you make in your March column, about determining who is really self-employed, I agree that there is a lot to be said on this matter. For my “2 cents” I will describe what I have seen (of course, I am only one person so it is difficult to draw any valid generalizations). But it looks obvious to me that it is going to become a free for all. Here are some of my observations.

The March issue of your column states: ‘What happens to some of my clients is that someone, most often an URSSAF inspector audits the individual and the company to find out if the relationship is truly an equal one and therefore the self-employed status is valid, or if the auto-entrepreneur is actually a subordinate and therefore should be an employee.’

Actually, I have worked as an employee (2007/2008) in a training center. What could be considered the lines of ‘subordination’ were relatively easy to identify, i.e., a formal contract, guaranteeing a number of hours, with a convention collective underlining the contract, a manager (pedagogical), a totally NON-transparent system for allocating the clients or determining which teacher went with whom, etc.

And then you have a situation today which is more akin to what you and I would consider to be ‘free market’ goings on:

I have received emails from ‘training centers’ with ‘numéro de formateur’ or registered by the DRTEFP (directions régionales du travail, de l’emploi et de la formation professionnelle – regional departments of labor, jobs and continuing education) that have acted under what I would consider false pretenses. In other words, send a résumé (but really this is just camouflage for putting you automatically on their ‘external list’ and mailing me), with no consent on my part, and that constitutes an ‘offer.’ This goes as far as saying ‘nous prêtons les supports.’

Usually on the ‘independent’ job boards you begin to see the same pattern and the same ‘usual suspects’ who will never give an indication of what the ‘hourly price’ is for the ‘course’ and of course there is never any indication of what line of ‘subordination’ exists.

Another ‘laissez faire’ attitude is that NO one compels an individual, whether self-employed or not, to respond to any of these adverts. What can one say about all this? The person who runs this site is VERY EXPLICIT about what he wishes to achieve on the site and the individuals who register or ‘announce’ they MUST not do it under a corporate status, etc.

So, there is everything and anything out there. Quite how an URSSAF inspector is expected to keep a watchful eye on all of this is completely beyond me, since you would need a planning/coordination apparatus that would dwarf anything that was put in place by the USSR!”

 

 

WEALTH TAX AND OTHER MATTERS
There have been rumors in just about every news outlet with a financial section that the French wealth tax is about to either disappear or be considerably modified.

Our current president, Mr. Sarkozy, was elected almost four years ago. Since then we have often seen such speculation, only to find when the law in question is passed that it and its implementation are very different from what was rumored. Therefore usually I stay away from these debates and headlines. Yet now it is close to certain that the French wealth tax will be drastically changed. The threshold will probably be increased from the current €780,000 to over €1 million. The latest figure reported is €1.3 million net worth. The total net worth of French residents is calculated on their worldwide assets minus any real estate located outside of French borders. Those individuals who own real estate in France but are not legal residents of France are taxed only on the value of their French real estate. There should be fewer brackets and the tax ratio will be lower. Note that 2012 is a presidential election year in France, and, as a candidate, Mr. Sarkozy wants this reform totally finished before the official campaign starts so that he can use it to his benefit.

The key will be to strike a balance between pleasing conservative voters and keeping the deficit under control. The European Union regulations put strict limits on French economic policies since the EU member states cannot run big deficits. Therefore, getting rid of the wealth tax completely would be quite unrealistic, since France would then have to create another tax to compensate for the financial loss, and even in France that would be political suicide for someone running for re-election as a conservative president.

 

 

OFFICE SPACE AVAILABLE FOR RENT
For the past two months we had thought that we had a new tenant but at the end of March we learned that the interested party could not live up to its promises. Therefore, we are back to offering my former office space for rent. It is about 35m2 and the rent is €1,110.00 a month TTC, payable quarterly. It has two rooms of about the same size and a small hallway. It is located in a courtyard and is very quiet. The address is 52 rue Notre Dame de Lorette, 75009 Paris.

 

Best regards,

 

Jean TaquetJean

 

Q & A

SELF-EMPLOYED IN FRANCE AND EMPLOYED ELSEWHERE

QUESTION
I am British and have been self-employed in France for several years. A new client is an offshoot of the European government. For reasons that I do not understand, even though it would only be for a few hours a week, I must be an employee of this organization. This opens a huge can of worms. First of all, I must be able to continue to keep my self-employed status in France since I have several other clients. Furthermore, I refuse to become a fiscal resident of Belgium, which would mean having to do all my professional registration again. Therefore I told them that this proposal was unacceptable. Their human resources manager told me that everything would be OK and that they do this all the time. I am not even sure if this is legal. If it is, then my situation would be so complex that it is really not worth it. I do not care if it is easy for them, I want to make sure that I myself can manage. Do you have any advice as to how I should handle the situation?


ANSWER
This change would indeed create a complex situation and I fully understand your concerns. For one thing it would give you different professional status in two different countries. But if I look at the new situation very carefully, and if you can properly set it up from the start, then it should be a lot more manageable than you think and maybe even profitable for you.

Let me explain my analysis step by step: Your fiscal and legal residence is in France and therefore your tax allegiance is here. Your nationality gives you the right to work in any capacity in both France and Belgium. If you are employed elsewhere in Europe, your main tax allegiance remains in France and the foreign income will simply be added to your worldwide income and be taxed as such. You should ask an international fiscal specialist if you want to know exactly how it works and what the ratio is between what you receive and what constitutes your Belgian taxable income. The declaration is a bit complex since you will need to fill out form #2042 to aggregate all the information, and, form #2047 to define the exact nature and origin of your foreign income, which will be made up of your Belgian salary and, say, unearned income from England or elsewhere.

The logic behind paying social charges is that you pay for the services you use. Some people might disagree with this statement but it is what grounds the financing of social services in Western Europe. You are spending most of your time in France and therefore using the French social services, so you will pay the French social charges on your Belgian income, rather than the Belgian charges. Therefore your Belgium employer would fill out form A1, based on Article 13.2 of EU Directive 883/2004, and send it to the organization receiving your usual payment for social charges, presumably RSI.

While the reality might not be as simple as I have made it sound, at least the mechanics of it are easy to understand and probably to set up.

 

 

 

IS RENTING MY HOME SHORT-TERM RENTAL?

QUESTION
My parents recently bought an apartment near the American University in Paris, since I have attended this school for a year. The plan is that it will be rented or sold when I graduate. I have changed my plans and am staying in Paris with my girlfriend, and working rather than attending the university. I am getting proposals to perform in various places in France and I will be traveling for several weeks at a time. So, to ease my parents’ disappointment, I told them that I would do short-term rentals and this way I would be paying for the apartment alone. They have heard awful things about this way of renting and it is making the matter even worse. Can I convince them that I can do it safely and that I will not be caught?


ANSWER
I believe the key issue in your situation has been improperly identified, although I do fully understand your parents’ reaction. There are two very different ways to view your situation and therefore your plan. Your parents have reacted to the first one, which is that they are the owner and you are one of several tenants, all of whom are staying short term. This would clearly fall under short-term rentals, an activity that carries a lot of negative consequences.

You are probably looking at the situation in the second way, which is that your parents have one paying tenant: you. The apartment will be your primary residence for fiscal purposes as far as the French and American authorities are concerned. On certain occasions – and there can be many of them – you sublet your primary residence and you declare this rental income to the authorities. The only issue left is that your parents as the owners must allow you to do so. If they can see it this way, I think that they would accept it. Furthermore, there is no reason to hide this activity. There is no law that prevents anyone from letting someone else use their home for free or for pay. The only problem might be if you rent it out for a majority of the time and in effect live elsewhere more or less permanently. That would be cheating. But as long as you are away because you are performing in various places and staying in hotels, B&Bs and so on, the risk is close to zero even if you were to face an audit, since there is no place you would be staying longer than your home.

You also have the right to take in roommates, again with your parents’ approval as your landlord. After that it is an issue of the size of the apartment and the need for privacy, which only you can decide.

Now, there are some basic guidelines that you should follow:

  • 1 – Never have anyone stay in the apartment for a longer period than you yourself do in a calendar year.
  • 2 – Never have anyone stay there for more than six months, especially if it is a foreigner in a calendar year.
  • 3 – Avoid at all costs having the person declare the apartment as his primary residence for fiscal purposes.
  • 4 – Never allow anyone other than your partner and yourself to have his/her name on any utility; everything must be sent in your name.

French law heavily protects one’s domicile, i.e., primary residence. If your apartment somehow becomes someone else’s primary residence, you could have a lot of trouble getting rid of them. If you have any doubt about this risk, ask a lawyer specialized in this field so that you know exactly what the courts use as guidelines to define one’s residency in a third party’s place.

How do you convince your parents that this is a much safer plan than the usual kind of short-term rental? I cannot answer this question; I do not feel competent to advise you about it. But considering how much of the issue is defined by what the residence principale is, I would take the time to give them an in-depth explanation of this French legal concept, and only then would I explain how it relates to your proposal. The idea is to show them that what you plan is, objectively and visibly, a completely different set-up from what they envision.

Good luck.

 

 

 

USE OF A MECHANICAL TOILET IN A PARISIAN BUILDING

QUESTION
I bought a small apartment as an investment in the 7th arrondissement in Paris. As an American single person in France, I found this project took a long time to carry out. I had the apartment fully renovated, and I rented it out with a normal French lease. While I was away recently my tenant reported to me that the neighbor downstairs came up because his drain pipes were clogged with fecal matter and the water damage it created was awful. My tenant accused me of renting an improper apartment and is now threatening to sue me. My plumber swore up and down that it was impossible for the material to be coming from my toilet, which drains into the appropriate pipe. Then he mentioned that he had seen that this problem indeed existed when he worked on my pipes, but that it was coming from another apartment.

How am I supposed to answer my furious tenant and get the other parties involved to go after the true perpetrator instead of me, even though I am the one who appears to be responsible?

ANSWER
The situation you are experiencing is precisely the reason that the use of mechanical toilets is illegal in Paris unless they are connected to the appropriate pipes.

To answer your most important question, “How am I supposed to answer my furious tenant?”, I would advise you to get your plumber in and have him explain the situation to your tenant and even show him where the different drainage outlets are and where they go. This will reassure the tenant that the problem has nothing to do with your apartment.

As for how to “get the other parties involved to go after the true perpetrator?”, this issue is a lot more complex and requires a little explanation to make the matter understandable.

There are two types of wastewater pipes. The normal plumbing in a French apartment drains what is known as gray water through small plastic pipes connected to sinks, showers and bathtubs. In French this is called la collecte des eaux usées. There is a special sewage pipe for the toilet, which is huge and often as old as the building: la collecte des eaux vannes. So your plumber is right, it is usually impossible for fecal matter to make its way into the gray water plumbing.

Nowadays every Parisian apartment must have a private toilet to be considered a decent lodging. But most of modern Paris and its sewage system date back to the 1850s. Without getting too graphic here, some apartments are located too far away from the dedicated sewage pipes; in addition, there is a need for a fairly steep slope for the toilet to work. So such apartments are often equipped with mechanical toilets, which are supposed to grind everything up thoroughly before sending it into the gray water drain pipe. Yes, these toilets are often hooked up to the wrong pipe, la collecte des eaux usées.

As long as there are not too many of these devices using the same pipe, and as long as the grinder works well, there should be no unpleasant incidents. But in fact such incidents are becoming more and more frequent. That appears to be what is happening in your case: You are being blamed for something that is happening in another apartment – or maybe several, for all you know.

The only legal solution is long and tedious. First, the property management company and your downstairs neighbor must be convinced that your apartment is NOT where the problem originates. This could take several visits by various plumbers.

Then the plumber usually employed by the management company will have to visit all the apartments “upstream” of your downstairs neighbor until he finds the guilty party. This is a lot easier said than done, for several reasons. French people, especially in Paris, do not like strangers in their homes and they do not want to take time off work for this purpose. They could leave their keys with someone else in the building, but that would mean trusting this person, which is not that common either. Last but not least, the guilty apartment owner(s) will try every trick in the book not to open the door for such an inspection! So even if the probable mechanical toilet(s) can be located fairly rapidly, nailing the owner(s) while documenting the existence of the illegal toilets will be a lot more complex.

Eventually, however, the management will get in, even if it takes a court summons. And you would think that once the process reaches this level, the problem is solved. WRONG. The value of Parisian real estate is such that the owners will devote all the energy, time and money at their disposal to fight any attempt to change the current set-up, since very likely it would mean the apartment would no longer have a toilet and therefore could not be sold or rented as a decent lodging. Considering the amount of loss at stake, the owners have reason to fight every step of the way, ensuring that the procedure drags on for years or even decades.

Now, there is a practical solution that does not address the legal issue at all. The management company asks the plumber to install wider gray water drain pipes so that any mechanical toilets, whether working well or poorly, do not affect the rest of the tenants. This is the fastest, cheapest solution. But it would entail a de facto endorsement of an illegal situation, which many people have trouble accepting. Indeed, the main problem with this solution is to convince the management company and the co-owners to pay for the repair as a common expense, meaning everybody would pay part of the overall price. The most common reaction is going to be: “Why should I pay because of someone else’s wrongdoing?” The answer is that no alternative solution will ever be satisfactory.

You are faced with a challenging situation. Good luck.



Please forward this message to all who would be interested in its contents. The information contained in this newsletter is intended as exclusively general information. Therefore, I strongly urge readers to seek professional guidance concerning the legal and tax matters mentioned. This newsletter is intended as a general guide and is not to be taken as professional advice.