II. AN ALIGNMENT OF SOCIAL PROTECTION OBLIGATIONS
Establishing a simple and secure tax framework for private individuals using collaborative platforms cannot be carried out without coordination with the existing rules on social contributions .
The Working Group therefore proposes a few adjustments in order to guarantee the legal certainty of these new activities, while preserving the income of the social security systems, and without calling into question the current framework of social protection rules for example, with regard to the rules applicable to micro-entrepreneurs as compared to self-employed workers, the amount of social contributions and extent of social rights and benefits, sector-specific obligations, etc.
Without making any assumptions about such developments, which largely exceed the remit of this report, require a national debate and do not fall within its competence, the Working Group believes that it is possible, by only making minor adjustments, to offer users of platforms a coherent tax and social contributions framework that is secure and without a distortion of competition or losses of tax revenue .
A. A SIMPLE AND UNIQUE CRITERION FOR DISTINGUISHING PRIVATE INDIVIDUALS FROM PROFESSIONALS
1. Presumption of non-affiliation to Social security as a self-employed worker when income is less than EUR 3,000 per year
To the extent that the proposed EUR 3,000 tax-free allowance as regards income tax aims to take account, in an inclusive and simplified way, the non-professional nature of the income received, it appears logical that this same income is not considered, with regard to social contributions, in principle as deriving from a professional activity and requiring affiliation to the social security system for self-employed workers (RSI).
With a concern for an alignment with the tax component, the Working Group therefore proposes to establish a presumption of the non-professional nature of activities undertaken through online platforms that produce gross annual income not exceeding EUR 3,000 EUR 250 gross per month, or EUR 60 per week.
The choice of a social thresholdaligned with the proposed taxation threshold is in line with Recommendation No. 24 of the IGAS report, i.e. clarify and move towards harmonisation of criteria defining what makes a person a professional among the different branches of the law . This proposal therefore also meets the principle of clarity and the objective of constitutional value of accessibility to and intelligibility of the law.
The approach by thresholds, although not currently very widespread, is also recommended by the European Commission in its communication of 2 June 2016 entitled A European agenda for the collaborative economy : For the purposes of regulating the activities in question, private individuals offering services via collaborative platforms on a peer-to-peer and occasional basis should not be automatically treated as professional service providers. Establishing (possibly sector-specific) thresholds under which an economic activity would be considered a non-professional peer-to-peer activity may be a suitable way forward. 67 ( * ) "
Establishing a threshold for clarifying the distinction between private individuals and professionals would not only be a step forward for the users of the platforms, but also:
- for the platforms themselves, which would therefore be largely freed from the responsibility and from the legal risk, as the example of Heetch shows (see above) of establishing thresholds of their own initiative. This is a demand of the very large majority of the platforms interviewed by the Working Group. The subject is particularly important for virtual marketplaces where private individuals selling handmadeobjects like A Little Market or the German Da Wanda , or for platforms offering minor services or rentals of goods between private individuals;
- for the professionals of the traditionalsectors : again, this demand was often expressed during hearings of the Working Group, each aware that a clear, objective and indeed respected criterion would be in the interest of the physicaleconomy as well as the digitaleconomy.
Establishing a single criterion of legislative value used to distinguish private individuals from professionals with regard to social contributions, but also with regard to taxation, could if necessary be used as the basis of a series of sector-specific clarifications for example as regards consumer law, compliance with health standards etc. These questions however go beyond the remit of this report.
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Proposal No. 2 Establish a simple and unique criterion for distinguishing private individuals from professionals, with regard to social contributions, based on the same threshold of EUR 3,000 of gross income. If their income from online platforms is below this threshold, users would be presumed non-professional, and therefore not affiliated to the social security regime of self-employed workers, and not subject to social contributions. |
More specifically, the Working Group proposes the establishment of a minimum affiliation thresholdto the self-employed workerssocial security system (RSI) , guaranteeing private individuals earning less than EUR 3,000 per year via online platforms that they will not be required to join the RSI and pay social contributions for this purpose whereas today, the slightest service offered via a platform or the slightest object sold on the Internet may result in affiliation to the RSI from the first euro, the payment of social contributions, the corporate land property tax (CFE) and chamber of commerce fees, as well as being subject to various sector-specific obligations.
It should be noted that such a minimum threshold:
- would not prevent users from joining the social security even if they earn less than EUR 3,000 per year , if they believe that their activity is of a professional nature, giving an entitlement to social benefits. The minimum thresholdonly amounts to freeingprivate individuals from having to deal with subtle questions of doctrine and administrative procedures that will always be too complex given the small amounts at stake;
- neither would it force a person to join the social security above EUR 3,000 gross per year : when this threshold is passed, ordinary law would apply, i.e. an assessment on a case by case basis by the user himself, if relevant under the control of the URSSAF and the court, of the professional nature or otherwise of the activity undertaken, in particular in relation to the net profit or other activities undertaken elsewhere, if this is the case. It is a minimum threshold, and not a maximum threshold the latter having been set at EUR 7,846 for rentals of movable property or EUR 23,000 for furnished rentals by the Social Security Financing Act for 2017 (see above).
The proposal of the Working Group: a minimum
threshold
in addition to the maximum thresholdsfor
affiliation to Social security
|
(Proposal) |
(Law not modified) |
(Law not modified) |
|
€0 per year to €3,000 per year |
more than €3,000 per year |
more than €7,846 per year
more than €23,000 per year
|
|
Affiliation
Unless a voluntary decision to join the RSI is made, the user is not considered to be a self-employed worker. |
Affiliation
When the activity is regarded as being of a professional nature, ordinary law applies. |
Compulsory
NB: there is no maximum thresholdfor sales of goods and services. |
The thresholds are expressed in annual proceeds from all activities carried out via online platforms..
Source: Senate Finance Committee
The mechanism proposed by the Working Group takes into account the particular case of users of online platforms who are already affiliated to the RSI as self-employed workers . In this case, the income they derive from online platforms, if it remains below the EUR 3,000 gross threshold, would be assumed to constitute non- professional income, unless it is derived from activities that are of the same nature as their coreprofessional activity, directly connected to it, or undertaken using the same resources. Two types of cases would then be distinguished:
- activities unrelated to the main activity : an artisan baker who rents incidentally his personal accommodation on an online platform when he goes on holiday would not have the income derived from this rental taken into account for the calculation of his social contributions;
- activities related to the main activity : by contrast, a seller of hand-madeobjects present both in a physical shop and in a virtual marketplace would have all his income taken into account for the calculation of his social contributions.
In this case, the Working Group considers that it is not appropriate to limit the application of the “social” threshold only to those activities for which the income is automatically reported (as it is for the income tax threshold) . It would be in the general interest that this is applied to all sideline activities carried out by private individuals via online platforms.
2. A criterion with no effect on the equality of treatment and the requirement of fair competition between professionals
The introduction of a threshold for joining the social security for users of online platforms would be a completely new measure, which raises some questions, particularly as regards the principle of equality. Indeed, currently, a self-employed worker who realises a very low income, or who is even loss-making, is nonetheless required to join a social security system .
In the light of the hearings and analyses carried out over the past few months, the Working Group considers, however, that the solution proposed is the most relevant, for reasons of fact and of law .
Firstly, there is no questioning of the principle according to which all self-employed workers are, by definition, affiliated to a social security system , whether or not they undertake their activity via an online platform. The proposed threshold is therefore in no case intended to exemptcertain self-employed workers from this obligation, but to establish a simple rule moreover optional to distinguish the self-employed worker, i.e. the professional, from the private individual who is an amateur or undertaking a sideline activity.
Thus, the innovation has no bearing on the principle of changing from the status of private individual to that of professional, since this question has always been posed and is still posed, but on the criteria used to defined this change : instead of the complex, outdated and largely ignored criteria, it is proposed to replace or rather to add, in the form of an ultimate guarantee a criterion that is simple and suited to a world where exchange between private individuals on the Internet become massive, standardised, and traceable in real time, and where the users like the platforms and the authorities need legal certainty.
The affiliation thresholds of EUR 7,846 and EUR 23,000 established on 1 January 2017 , which are mandatory, meet a similar need to simply demarcate the border between private individuals and professionals. In this regard the optional affiliation threshold proposed by the Working Group is more flexible and allows greater leeway for the user to assess his own situation.
Therefore, and as in the case of its “income tax” part, the proposed measure would not introduce any distortion of competition between professionals . Indeed, when they are affiliated to a social security system, because they have chosen to do so or compulsorily after crossing the maximumthreshold, the users of online platforms are subject to social security contributions on all of their income , i.e. from the first euro earned, and regarded as self-employed workers under ordinary law. The affiliation threshold minimum or maximum in no event involves an exemption of lower income , but is a warning thresholdabove which it is assumed that all income is professional income.
In other words, no craftsman, trader or service provider will ever benefit from a bonusby using an online platform rather than traditional means when he undertakes an activity as a professional and is affiliated as such to the social security.
3. Towards other maximum social contribution thresholds?
Although the Working Group proposes the establishment of a minimum social thresholdaligned with the tax thresholdof EUR 3,000, in order to ensure that income that is not subject to income tax could not result in compulsory affiliation to the RSI, this does not exclude thinking on establishing other maximum social contribution thresholds , in addition to those established out in the Social Security Financing Act for 2017 for rentals of furnished accommodation (EUR 23,000) and rentals of movable property (EUR 7,846).
However, at this stage, it does not seem appropriate to propose a new measure.
With regard to the two existing thresholds for the rental of movable and immovable property , they are justified in their principle because, in their absence, there is no criterion to clearly distinguish property income and activity income. As to the level of these thresholds, it would be premature to state what they should be today , and all more so to propose changing them, at a time when the online platformsecosystem needs stability and legal simplicity. It will be recalled, moreover, that the EUR 23,000 threshold applicable to short-term rentals has the advantage of being aligned with an existing system.
With regard to the affiliation thresholds for the other activities , i.e. sales of goods and provision of services, it is not about distinguishing activity income from property income, but between activity income providing evidence, or otherwise, of self-employed worker status (a profession).
In this regard, although establishing compulsory affiliation thresholds for these activities does not seem to pose a problem in principle, the question of the rightlevel for them is still currently open . Indeed, the two existing thresholds are expressed in gross proceeds, but in reality, the commercial nature of the activity is better assessed with regard to net income. However, deductible expenses can be extremely variable with regard to sales and services . Therefore, two options, still in their early stages, could be explored:
- either the establishment of thresholds expressed in net proceeds , which would enable the professional nature of the activity to be graspedwith greater accuracy, but would make the mechanism less clear and would an impose a greater accounting and administrative burden on users of collaborative platforms who only receive modest additional income;
- or the establishment of thresholds expressed in gross proceeds , which could be envisaged by analogy with the micro-tax system.
That said, such a development appears to be premature at this stage , especially as the minimumthreshold of EUR 3,000 proposed above would in any event guaranteeing the non-professional nature of most sideline activities.
The Working Group therefore proposes, in an initial stage, to maintain the compulsory affiliation thresholds as they are as regards the rental of movable and immovable property set recently, and for the moment not to set compulsory affiliation thresholds for sales of goods and the provision of services.
4. Towards a collaborative worker status - eventually?
The IGAS mission advocates creating an ultra-simplified collaborative micro-entrepreneur status (Recommendation No. 26): subject to being reported to the RSI, any private individual could undertake an occasional or sideline activity below a lower threshold of EUR 1,500 per year of collaborative income received via online platforms. Like the micro-entrepreneur, he would then pay a levy in discharge of income tax, social levies and social contributions , which could either be for a flat rate or proportional. No other formality or affiliation would be required, beyond reporting to the RSI.
Although such an option is a matter for national debate which goes beyond the remit of this report, it may however be noted that the IGAS also proposes to restrict the benefit of this status to activities undertaken via online platforms only , without this appearing to create a disproportionate infringement of the principle of equality : The payment of a levy in discharge for occasional and sideline income under this collaborative micro-entrepreneur system, although this income often remains unreported in the physical economy, could be put forward as one of the general interest grounds justifying treating this type of income in a differentiated way in relation to taxation and social contributions .
Eventually, the presumption of the non-professional nature of unsalaried activities producing additional income lower than EUR 3,000 per year could even have general scope, not limited to the activities on the online platforms . But again, this would be a wide-sweeping reform, consisting of creating either a general exemption, or an ultra-simplifiedmicro-entrepreneur status which could not be done without a national debate. This scenario is therefore not investigated in this report.
* 67 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and to the Committee of the Regions, A European agenda for the collaborative economy , 2 June 2016.