California Dreamin’

December 2018

ll the leaves are brown (all the leaves are brown)
And the sky is grey (and the sky is grey)
I've been for a walk (I've been for a walk)
On a winter's day (on a winter's day)
I'd be safe and warm (I'd be safe and warm)
If I was in L.A. (if I was in L.A.)
California dreamin' (California dreamin')
On such a winter's day
Stopped into a church
I passed along the way
Well, I got down on my knees (got down on my knees)
And I pretend to pray (I pretend to pray)
You know the preacher like the cold (preacher like the cold)
He knows I'm gonna stay (knows I'm gonna stay)
California dreamin' (California dreamin')
On such a winter's day
All the leaves are brown (all the leaves are brown)
And the sky is grey (and the sky is grey)
I've been for a walk (I've been for a walk)
On a winter's day (on a winter's day)
If I didn't tell her (if I didn't tell her)
I could leave today (I could leave today)
California dreamin' (California dreamin')
On such a winter's day (California dreamin')
On such a winter's day (California dreamin')
On such a winter's day

The song “California Dreamin’,” by John and Michelle Phillips, was first recorded by Barry McGuire in 1965, with backup vocals by the Phillips’ quartet, the Mamas & the Papas. They released their own version as a single the same year, and it became by far the bigger hit.

Among French people, especially those who have dreamed of moving to the USA, California has an iconic status, that sets this state aside from the rest of the USA. It has always been the land one dreams about. In May 1970, the French singer Julien Clerc released “La Californie,” which became a long-lasting hit. It is safe to say that as far back as one can remember, the state of California has nourished dreams of an unattainable better life for much of the world. This separation of the state and the nation in the popular imagination of the rest of the world, is something many Americans themselves have a hard time understanding.

The results of the midterm elections in a lot of the country were favorable to the Democratic Party. It is interesting to note that the state of California is heavily Democratic. So, for some people the election results were reason to rejoice, enabling them to dream that a better future is possible. California has also long been a magnet for people living in other states – and still is, for political reasons as well as well-paid job opportunities. California dreaming, dreaming California is still today, a real thing.

As I write these words, however, wildfires are destroying homes and killing people, and California is weeping over these deaths and other losses. This is a time of mourning. One could hope that such destructive fires will not happen again, but climate change is going to make it more difficult. In much of the USA, it has been really cold. It feels like winter already when one celebrates Thanksgiving with thick snow on the ground. What makes the fires even scarier is that they should not happen when it is that cold.

I could dwell upon the leaves being not only brown but burned to ashes, about the sky being grey and people suffocating from the heavy smoke. But rather than twirling with these lyrics, I pay my respects to the victims of the blazes, especially people who lost their homes, their businesses, a loved one. We should pay attention to them, helping them rebuild their lives and giving them a reason to dream of a better future.

As long as I can remember, I have loved “California Dreamin’,” and still often listen to the albums of The Mamas & the Papas.

HOW CAN THERE BE A FRENCH BLACK FRIDAY?
I already wrote about this last year, and this year is even worse in terms of the advertisements we are being bombarded with about huge sales only on Black Friday. It reassures me a little (but not much) that many French outlets promote Black Friday week, which indicates to me they have a poor understanding of what Black Friday normally means. I also find recent developments regarding the Thanksgiving celebration to be interesting. I cannot imagine the USA going through the season of fall without celebrating it. At the same time, I look with great interest at the fact that the narrative of Native Americans is being heard more and more, and that this celebration is unsettling, to say the least, for them.

FROM MY DECEMBER 2017 ISSUE:
“I was feeling completely exasperated at seeing ‘Black Friday’ advertised everywhere in France (in English!). I wondered how many of people would even know what it referred to. How can you have a ‘Black Friday’ if you do not celebrate Thanksgiving on Thursday? The adoption of this term is totally insane and I believe it illustrates 100% bad taste consumerism. In the USA, many consider ‘Black Friday’ offensive for various reasons, a tendency that has grown with every passing year. Some believe this is insanity in consumerism, citing the craziness when crowds – I would call them hordes sometimes – enter the shops. Others focus more on the idea that family life should take precedence over consumerism, as the day after Thanksgiving is usually a de facto national holiday. There are other criticisms, but I see particular merit in those two.

“France does not celebrate Thanksgiving, and this holiday, unlike some others, cannot be easily exported, as it is part and parcel of the iconic history of the birth of the USA and the infancy of an early settlement in the New World.”

RETENUE À LA SOURCE – INCOME TAX WITHHOLDING STARTS ON JANUARY 1st 2019
I attended a seminar on this topic given by my French accounting firm, as it is now certain that it will go ahead. I would like to explain in a basic way how it will happen.

We could have feared the worst from the French administration, since the deal was locked, sealed and delivered this past September after countless months of indecision.

First, the good news, which shows there have been some significant improvements.

The provision that employees feared most was that their family information would need to be shared with the employer. This is not happening: only the tax office will be informed. It used to happen once a year, when the declaration was submitted. But now, since this information immediately affects the bracket used to calculate the amount of tax owed, the individual must inform the tax inspector as soon as possible. This is a huge relief. It is interesting to see that in France, the tax inspector is more trusted and seen as less of a threat than the employer – a situation that is impossible to explain in only a few words. Just remember that the tax inspector is a free adviser when tax season comes, and an impartial helper.

The other good news is that independents will pay monthly by automated withdrawal, and the amount will be based on what was owed the previous year. The administration has promised that any reported change will be taken into account, and the amount of the payment changed, as quickly as possible. It remains to be seen how quickly that will actually be.

The same rule applies for rental income and other types of revenue that an authority cannot withhold directly.

A NEW IMMIGRATION LAW HAS BEEN PASSED – SOME GOOD NEWS
To obtain employee immigration status, one must be awarded the right to work as an employee. A new law grants this right to all of the foreigner’s potential employers, rather than to just one specific current employer. Previously there was a risk of losing this right when the foreigner changed employers within three years.

Another good thing is that the travailleur temporaire status and designation mentioned on the carte de séjour has been done away with. The evolution was such that it was issued when the foreigner had a contrat à durée déterminée, a short-term contract with a beginning and ending date. Now both labor contracts, the CDD and the CDI, grant the right to obtain the “salarié carte de séjour”. We will see if DIRECCTE issues the same number of authorizations and implements the law with the right intent, or if some short-term contract holders will be refused, when they would have been accepted under the previous law.

A further good thing is the disappearance of the autorisation provisoire de séjour for recent graduates transitioning to work either as an employee or a self-employed person. It has been replaced by a true immigration status called titre de séjour temporaire « recherche d’emploi ou création ». This should reassure employers and facilitate the job search.

Now almost all the remaining bad news concerning immigration is about refugee procedures.

CRIMINAL FAKE MARRIAGE – ULTERIOR MOTIVE MARRIAGE
I never try to guess which couple will last and which will not. There is no way to be sure, and we have all known what appeared to be the perfect couple who ended up getting the nastiest divorce. Because of my work, I often deal with couples where one is an undocumented alien seeking to obtain a legal stay through marriage. That puts a huge strain on the couple if it is not properly handled. It gives one spouse considerable power over the other, as the couple must stay married three years before the foreigner can retain legal residence in France. I have often seen the foreign spouse effectively blackmailed. The other distortion is that the foreign spouse may disappear once the immigration status is achieved for good, giving the impression that there was no love and it was just a scam to stay in France.

Completely aside from the immigration issue, multicultural couples have a much harder time staying together, as it is harder for them to establish the common ground needed for a long-lasting relationship. At the same time, the traditional view of marriage lasting forever is shared by fewer and fewer people these days. In major cities of Western countries, half of all marriages end in divorce, with multicultural couples representing only a tiny minority.

The video linked below is ten years old, and I know the administration has strengthened its controls and now does more investigation to uncover what French officialdom considers fake marriages. It is not just a matter of foreigners paying a large sum of money to get married and obtain a legal stay; that is a felony, for which people go to jail. But there are also couples where clearly the foreigner is not involved in the relationship as someone in love, when the other one seems to be. I liked the comment the policewoman made about the Moroccan woman and the Frenchman wanting to get married. She understood the motivations of each of them, and she seemed to care about both of them, but at the same time she had to apply the law and definitively block the wedding, leaving the Moroccan woman in a precarious situation.

FRENCH CONSULATES WILL NO LONGER OFFER NOTAIRE SERVICE
Starting in 2019, French consulates are dropping the notaire service they used to provide. This might not seem like a huge loss to most of us, but it is for countries in which such a service is not offered privately. It is a big deal in countries where there is no other way to verify the signing of an official document. In such countries, it was a real service that was badly needed: the consular notarization enabled, for instance, real estate transactions to occur in France without the person having to go to France. Throughout my career I have seen more and more transactions done this way. Since the clients are almost always Americans and French notaires often accept notarization by an American notary public, this is a reasonable alternative. Yet even today, I think many rural notaires would not accept such notarizations, as they are not done according to French procedure.

https://frenchmorning.com/notariat-consulaire-supprime-a-partir-de-2019/

FRENCH BAILIFFS SEIZED A RYANAIR JET OVER AN UNPAID DEBT
Here is an excerpt of an article I found on the website www.thelocal.fr:
“French authorities said on Friday they seized a Ryanair plane, forcing 149 London-bound passengers off the aircraft, to get the Irish low-cost airline to repay illegal public aid, the latest in a string of troubles for the carrier.

“Claiming that Ryanair owed them 525,000 euros ($595,000) in subsidies wrongfully paid out to the airline, the authorities sent in a bailiff under police protection on Thursday to seize the plane on the tarmac of Bordeaux airport as it was readying to take off for London Stansted.

“Just under 24 hours later, the no-frills airline relented and paid up, authorities said Friday, allowing it to reclaim its aircraft.”

The French word for bailiff is huissier and when you see a document from them or when they knock on your door, you need to pay attention. Sometimes it is empty threats, but other times they have the power to confiscate things and sell them at auction when a debt has not been paid. Grounding an airplane to get a debt paid is rare, which is why it made the news.

https://www.bbc.com/news/business-46152849

I would like to remind everyone that there is no January issue.

I would like to wish you all
A MERRY CHRISTMAS AND A HAPPY NEW YEAR
I am looking forward to the year to come, 2019.
Like many, I feel that 2018 was a very hard year, and
I lost a lot of sleep trying to follow everything that was going on.

Best regards,

Best regards,

REGISTERING A SMALL BUSINESS – AUTO-ENTREPRENEUR

QUESTION

I wanted to ask you some more about auto-entrepreneur status. I have found that there are many different methods for obtaining auto-entrepreneur status (micro-enterprise, etc.). I’m not quite sure why I would get caught, since this status is completely legal. Any information you can give would be greatly appreciated as I'm finding mixed opinions.

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ANSWER

To show how a fiscal status fully recognized by the French administration can be a legally dangerous choice, I need to explain what is at stake.

I would like to review the history of the independent status so you understand how all this is perceived by the prefecture – which is a police force as far as you are concerned, since you are an immigrant.

 

1 – History of self-employed status
Colbert named by the king, Louis XIV, was the first to have a non-aristocrat as his trusted ministre and it was he who organized the French business world into the following categories:

  • profession libérale = professional offering services and expertise or teaching
  • artisan = craftsperson
  • commerçant = merchant.

In those days people who worked were not respected, the aristocrats were the proper people. Among them, the profession libérale was the best person because he did not sell anything. The artisan was a decent person because his expertise and his skills made possible to create what he sold. The commerçant was defined as a pure crook, as he showed no expertise in selling the products he bought without changing anything.

About 20 years ago, the micro income tax status was introduced. It represented a revolution. It allowed the self-employed not to itemize their business expenses. For a profession libérale, 100€ in sales broke down into 65€ in profit (called bénéfices non commerciaux or BNC) and 35€ in what was presumed to be expenses. The revolution was in the fact that the French administration was trusting an independent to declare his income without having his accounting reviewed first.

 

2 – The six immigration statuses
- visiteur
- étudiant
- salarié
- vie privée
- commerçant-artisan
- passeport talent

The last one has often changed in line with political decisions; the others have existed for decades.

As you can see, commerçant and artisan are coupled together. Their income tax regime is called bénéfices industriels et commerciaux or BIC.

You can also see that profession libérale is not mentioned. However, the prefecture used to make a point of separating professionals taxed under BIC from those ones taxed under BNC.

 

3 – A radical change – the creation of the auto-entrepreneur status
The auto-entrepreneur status was basically misused from its creation. It was supposed to allow one to carry on a second, independent activity even while working as an employee. Therefore, little regulation was attached to it. It stemmed from Nicolas Sarkozy’s presidential campaign promise “working more to earn more!”

But because no controls or regulations were made at the URSSAF level, people realized they could register a business this way without having a separate job. The status became popular so quickly that it was soon too late to fix the situation. So now it is considered another way of registering a business.

Its worst flaw, when it comes to legal logic and tradition, is that it mingles together the three historical types of status – profession libérale, artisan and commerçant.

 

4 – The impact on the prefecture dealing with an auto-entrepreneur registration as profession libérale
There are two major consequences as far as the prefecture is concerned:

  • (a) The officials there frequently lump profession libérale together with the other two, and ask for documents that are impossible to obtain as each status has its specific business registration procedure. Therefore, the only way to stay away from this trap, is to choose the profession libérale BNC classic status.
  • (b) Because auto-entrepreneur is so popular, the prefecture is quite suspicious of it, systematically assuming it is a sign of fraud, and it is difficult to convince the officials that you have a strong, real business.

To sum up, the way the status is chosen is the following:
- 1st, the legal status: profession libérale
- 2nd, the specific fiscal status: micro BNC
- 3rd, the choice between classic status or auto-entrepreneur.

5 – Why this status can be dangerous
Now, the last piece of the explanation is why this status can be dangerous. In many ways, the French administration wants to protect people from unscrupulous employers. Indeed, lately more and more employers have dismissed employees and outsourced operations to contractors, often registered as auto-entrepreneur even though the business is their sole client. Tax inspectors, including the ones at URSSAF, audit auto-entrepreneur repeatedly because they know the vast majority of those making money are in effect employed by a single client. To efficiently fight such situations, which are illegal, they find it easiest to audit the auto-entrepreneur to see who employs them, then nail the rogue corporations fair and square, with all the proof they need to start prosecution.

In the meantime, the auto-entrepreneur has to become an employee, a status often incompatible with their immigration category. But the prefecture has all the reason it needs to refuse to renew their immigration status and give them 30 days to leave France (a decision commonly called OQTF, for (obligation de quitter le territoire francais).

The very recent decision issued by the Cour de Cassation, which is explained in these three articles, illustrates very well the risk mentioned above.

https://www.twobirds.com/en/news/articles/2018/france/delivery-riders-are-employees-not-self-employed-workers-according-to-a-french-supreme-court-ruling

https://www.liberation.fr/direct/element/pour-la-premiere-fois-la-cour-de-cassation-considere-un-livreur-a-velo-comme-un-salarie_90605/

https://www.lesechos.fr/economie-france/social/0600236562129-la-cour-de-cassation-requalifie-des-coursiers-a-velo-en-salaries-2225552.php

 

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WHO PAYS THE PREMIUM FOR PUMA COVERAGE?
QUESTION

Is an American resident of France who receives US Social Security retirement benefits required to pay the cotisation supplementaire maladie under PUMA?

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ANSWER

What could or should be an easy answer to an easy question is not in this case, for several reasons. The main one is that what has happened in the past, including the recent past, cannot happen again. Furthermore, there have been court rulings that change the way the French administration needs to handle this issue.

I would like to review the situation before PUMA so you can understand the problem, which I described in my column several times in 2017. Then I can explain what cannot happen anymore, which is what you fear, although there is still some uncertainty.

BEFORE
The couverture maladie universelle (CMU) existed for over 15 years. It had two key characteristics for foreigners in your situation: You could sign up for it rather easily, and you could declare the taxable income the US 1040 form showed. The 8% cotisation (premium) was only owed after one voluntarily signed up for the public health coverage, and you knew how much you had declared.

THE CHANGE
The CMU was replaced by PUMA, which was meant to be simpler and safer for the people covered. It was for everybody except those who voluntarily had signed up for the CMU and paid a premium based on their foreign income. Between January 2016 and December 2017, no premium was charged, calculated or anything else. Then from mid-December both the people who were covered and those who were not, started receiving bills from URSSAF regarding 2016 premiums. The people who were not covered disputed this bill.

The key difference between how the premiums of CMU and PUMA were calculated, is that URSSAF, the collection agency for French social charges, is now getting information from the tax office. There were many people who were declaring their foreign income to France and were covered by a private health policy, as was and still is their right. They are the ones who received the bills from URSSAF and disputed them.

TODAY
It is now obvious that the problem is nonexistent for people signing onto the program today who were not declaring their income before – i.e., people with your profile. So now I can answer your question much more precisely.

There are three basic scenarios for what happens after you move to France:
1 – You get covered by the public system and in due time declare your foreign income. Chances are you will eventually pay little if anything for the coverage since retirement income is excluded from the 8% calculation of the cotisation supplementaire maladie (CSM).
2 – You get covered by the public system and never declare your foreign income. It is possible to get away with this for a while, since the prefecture does not demand to see French taxes from Americans. One can see that eventually the administration will notice the discrepancy and ask for back premiums.
3 – You declare your income and keep your private insurance, which is probably your case. This is where there is still a tiny unknown. The new regulation that is supposed to be in effect should make it possible for you not to be charged the CSM. But it is very recent and I am not sure the implementing legislation has been passed yet. If you are not moving any time soon, it should be cleared by the time you do.

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DISCLAIMER

Please forward this message to all those who would be interested in its contents. The information contained in this newsletter is intended only as general information. 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.

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