… continuing the story.
It was time to declare my five-euro turnover (see One last thing about being a micro-entrepreneur) and to pay my social contributions. Now that I had the IBAN and BIC of my Pro account (see Easier said than done), this should have been a straightforward process. Few questions were remaining, though.
What should I declare?
According to PayPal,
there are no fees to receive money from friends or family, but PayPal had no way to know that the person who gave me 5 € (via one of my Donate buttons; see footer) was my wife. For actual donation, there are fees; the rate1 at the time was 2.9 % + 0.35 €
(5 x 2.9) / 100 + 0.35 = 0.495 €
In the blink of an eye – in one click, should I say – my wife and I managed to transform 5 € into 4.50 €. Just for the sake of not being removed from the micro-entrepreneur system (and checking whether the Donate buttons were working properly).
Now, this was just the beginning! As explained in the first post of this mini-series, whatever the amount of money you make (and the way you earn it), you have to declare all your incomes. Yep, even for a five-euro donation on a blog!
Entrepreneurs who use PayPal and therefore receive turnover from their PayPal account may be tempted to hide it. This is forbidden and risky. WikiCréa
Under the auto-entrepreneur scheme, social contributions and income tax are calculated based on a percentage of the revenue declared (see Social security contributions). Now, the question arises: what should I declare? 5 €? 4.50 €? I did not sell any goods nor provide any service. There was no invoice indeed; this was just a donation. The simple answer is as follow:
(5 x 11) / 100 = 0.55 €
All PayPal transactions must be reported and justified. Accordingly, I had to report 5 € in the revenue column (of my ledger) and 0.50 € – as PayPal fees – in the expenses column. The tax administration will ensure that all revenue is properly declared. In my case, the actual turnover was indeed 5 € and I had to declare this exact amount!
As I was a beneficiary of the ACRE – an early-activity exemption scheme which allowed reducing your social security contribution – and I was already in my second year, I had to pay only 11 % taxation2 instead of the regular 22.7% (see Social security contributions). Still, I was not happy with the taxation being round up to 1 €! As for the vocational training contribution – an additional 0.10 % withdrawn from your turnover – they round it down to 0 € (instead of 0.005 €).
If you take money out of your left pocket and put it in your right pocket, you’re no richer.Merton H. Miller
In short, by taking money out of my left pocket and putting it in my right pocket, I managed to lose 30 % (i.e. 1.50 €). Clearly, not a profitable business!
Losing money was expected; again, the all point of this transaction was to secure my micro-entrepreneur status (see One last thing about being a micro-entrepreneur). Now, the next question was whether the IBAN and BIC for my PayPal account would work.
To set up a direct payment with my new Pro account, I filled both the IBAN and BIC fields and clicked on Save. Declaring my 5 € was also a straightforward process. For the payment, I chose my newly registered method and clicked on Send. All was looking good. I printed the confirmation and felt some relief that this entire story was over. This was January 4.
To be continued…
1 For info, the standard rate in the USA is 2.9 % + $ 0.30 per donation and if you are an eligible nonprofit organization, you can apply to receive the discounted nonprofit fee of 2.2 % + $ 0.30 per donation. ^
2 With the ACRE, I had to pay only 5.5 %, 11.0 %, and then 16.5 % of my income (the first, second, and third year, respectively). At least, until very recently! Since April 2020, the new rates are as follow: 5.5 %, 16.5 % and 19.8 %. Worse still; for the newcomers, the reduction is now 11 % for one year only (instead of the previous three years). ^