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Hi Tony,

We are looking at buying a gite complex in Charente Maritime. We have the turnover data and the outgoings etc,. but have no clue about what tax is payable – there’s no point us knowing what the gross income is when we don’t know what we’ll end up with (ie, if tax is 20% we’ll live a lot better than if it’s 50%!). Can you give us a steer, and also point us in the right direction – perhaps to an accountant who knows about gites? We’re happy to pay for the right advice as clearly it could make or break a deal.

Many thanks in anticipation,

Louise

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Hello Louise,

I wish you success with your proposed venture. You are right to do very severe due diligence on any vacation business, especially in France.

My opinion of accountants is very very low – I have been deceived and tricked by these rascals too often and have absolutely no confidence in their opinion on anything to do with business or enterprise – their opinion is worthless regarding the viability of a business (or much else).

Tourism in France is a big business (I believe officially, the biggest business), but there is not much potential for growth. France claims in excess of 70 million visitors a year, by far the largest number in the world, but this has not grown in recent years and revenue figures suggest a shrinkage – accurate figures are not yet in for 2010, but are likely to show a 20 percent drop from 2009, which was down from 2008 – so any figures for any tourist business are largely irrelevant.

However 70 million or so potential customers offer a fantastic opportunity – the trick is to identify how you can beat the competition in your area for your market profile.

The problem getting any realistic projections for a business is compounded by the huge amount of competition and growth in the supply of accommodation over the last ten years. in many areas this is unsupportable by the demand and growth in demand is very uncertain as I have indicated.

You question is about taxes – for a small Ma and Pa operation, up to 15 people or 5 rooms – there are good options – it can be a fixed 13 percent of gross income if it is under 70,000 euro (this depends on other factors in the AutoEntrepeneur scheme). However, for a viable business you need the structure of company, usually a SARL, here you need good accounting software and need to keep firm control of all costs and expenses – I cannot go into all the options and paperwork here – there are many websites and people able to advise and help – but direct taxation, social charges etc will account for between 50 to 60 percent of your gross revenue (the social charges are very high) – if you have to employ anybody then this is likely to completely wipe out any chance of a profit.

If the business already employs people, they are unsackable and expensive – I know of companies ruined by a payroll of only three people. Short term contracts can only be renewed once and after a year they become permanent staff – be very very careful.

But if this is less than five Gites and under 15 people maximum, with no employees, turning over less than 70,000 euro then think of it as a lifestyle business – you will work hard for very little residual income, but it is a good life while you are fit and well and can fix drains, plumbing, power cuts and can keep accountants off your land.

Please let me know how you get on

Bonne Chance

Tony

Front Entrance from parking area to our Gite and B&B at Villa Roquette