Micro-daycare in 2026: PAJE vs PSU funding model, VAT and profitability

Direct answer. A micro-daycare (≤ 12 places since 2023) can operate under two mutually exclusive models: PAJE/CMG, where families receive direct subsidies from the French welfare authority (CAF), or PSU, where the facility is contracted with the CAF and applies a statutory tariff scale. In both cases, childcare for under-3s is VAT-exempt — a tax framework that fundamentally alters the accounting model. Profitability depends on occupancy rate, choice of funding model, and control of the payroll bill.

Since 1 January 2023, the maximum capacity of micro-daycare facilities has increased from 10 to 12 places (article R2324-46 of the French Public Health Code, amended by decree no. 2021-1131 of 30 August 2021). This does not mean a facility can accept exactly 12 children at all times: regulatory capacity is tied to staff ratios, but temporary overbooking up to 115 % of licensed capacity is allowed (up to 14 children on peaks).

Opening a micro-daycare requires:

• written agreement from the local authority (via the Child Protection Department) ;
• licensing, which specifies the mandatory staff ratio and authorised capacity ;
• a facility project statement compliant with the NORMA reforms (decree 2021-1131 and ordinance 2021-611).

This licensing is the first step: it governs the entire economic model that follows.

The choice of funding model is binding and determines profitability. A micro-daycare can operate under only one of the two regimes — never both at the same time.

1. PAJE/CMG: free pricing, CAF top-up#

Under this model, the micro-daycare sets its hourly rate freely. Families pay the facility directly and receive the Childcare support supplement (CMG) from the CAF, typically paid as a third-party payment directly to the facility.

Critical condition for opening CMG entitlement: the hourly rate charged must not exceed €10 per hour. Above this, families cannot claim CMG.

The CMG covers part of the cost, but a minimum co-payment of 15 % remains with the family. This means the daycare does not receive the full amount it invoices: part is borne by the family, and a part comes from the CAF.

Advantages of PAJE/CMG:

• pricing freedom (up to €10/h to maintain CMG eligibility) ;
• straightforward administration ;
• attractive to families through third-party payment.

Drawbacks:

• pricing ceiling (€10/h); above that, loss of CAF support ;
• family co-payment (15 % minimum) may limit demand ;
• income capped if the facility wants to remain competitive.

2. PSU: national scale, contracted places#

Under this model, the micro-daycare is contracted with the CAF. It applies the national family contribution scale set by the CAF. This scale varies according to family income and the number of children in care.

Family contributions are indicative — typically between €0.06 and ~€1.44 per hour depending on income. The CAF covers the entire balance of the cost through the Unified Service Subsidy (PSU).

Places are open to all (no fee-based selection), creating a social inclusion obligation.

Advantages of PSU:

• equal access to places (progressive scale by income) ;
• stable, government-funded financing via the CAF ;
• positive social image, direct government support ;
• easier recruitment (CAF-eligible families guaranteed).

Drawbacks:

• strict regulatory framework ;
• heavier administration (contracting, regular CAF reporting) ;
• potentially lower income than PAJE/CMG if family contributions are low ;
• loss of pricing freedom.

This is where the model changes fundamentally. Childcare for under-3s by facilities falling under the first and second paragraphs of article L2324-1 of the French Public Health Code — daycare centres and micro-daycares — is VAT-exempt.

This exemption applies to:

• public authorities (municipal daycare) ;
• non-profits (non-profit daycare) ;
• for-profit businesses (micro-daycare SARL, SAS, etc.).

It has been in force since 1 April 2007 (law 2007-290 of 5 March 2007). It rests on article 261, clause 4°, 8° bis of the French General Tax Code (CGI) and is documented in the BOFiP tax authority guidance.

Major accounting consequence: a micro-daycare caring for under-3s collects zero VAT on its invoices. But it bears VAT on all purchases and investment (fixtures, furniture, supplies), and cannot recover this input VAT.

In exempt regimes, input VAT is generally not recoverable on the facility's costs: the facility absorbs the VAT on investment and operating expenses. This impacts the cost of fit-out, specialised furniture (infant beds, bathrooms) and running costs.

Worked example:

• A micro-daycare buys fixtures for €10,000 ex-VAT, or €12,000 inc. VAT (20% rate).
• Because the facility is VAT-exempt on childcare revenue, it cannot recover the €2,000 in input VAT.
• The facility's actual cost is €12,000, not €10,000.

This favourable treatment on revenue (no VAT collected) is offset by unfavourable treatment on costs (input VAT non-deductible). This is a regulatory trade-off baked into the model.

Profitability depends on three variables:

1. Occupancy rate and place management#

A licensed micro-daycare with 12 places only generates revenue on places actually occupied. The cost structure for childcare is dominated by variable expenses (salaries, supplies) linked to child attendance.

Common strategies:

• Regular attendance: children 3-5 days/week (stable contracts) ;
• Ad-hoc care: days booked at premium rates ;
• Temporary overbooking: up to 115 % of capacity = 14 children on peak days to boost cash flow.

An occupancy rate of 80-90 % is generally considered viable. Below that, fixed costs (rent, management staff, insurance) become too heavy relative to revenue.

2. Payroll and staff ratios#

The largest expense category in a micro-daycare is payroll: salaries for childcare workers, nursery nurses, management and support staff. This typically accounts for 60-75 % of the budget.

The staff ratio is set by regulation (article R2324-43 of the French Public Health Code): one staff member per three children who do not yet walk, and one per five children who walk.

For a 12-place facility (for example 4 non-walking children and 8 walking children), the regulatory calculation requires the rounded-up value of 4 ÷ 3 (= 2) plus the rounded-up value of 8 ÷ 5 (= 2), i.e. at least 4 staff present simultaneously, plus a technical lead.

Typical monthly payroll: €12,000–€16,000 gross for a full micro-daycare, depending on the collective agreement and seniority.

3. Rent, fit-out and overheads#

Rent or mortgage amortisation (if owner-occupied) is the second-largest fixed cost. It depends on location (urban vs rural), required floor area (roughly 10 m² per place, so 120 m² for 12 places plus common areas, typically 150–180 m² total) and local property market.

Typical monthly overheads:

• Rent: €2,000–€4,000 (by region) ;
• Supplies (nappies, formula, hygiene): €1,500–€2,000 ;
• Utilities, phone, broadband: €500–€800 ;
• Insurance and liability cover: €400–€600 ;
• Cleaning and maintenance: €300–€500.

An operator can run multiple micro-daycare facilities (separate establishments, each licensed independently). This strategy allows:

• geographic diversification ;
• larger business scale without merging facilities ;
• better absorption of occupancy fluctuations.

The common legal form is SARL or SAS (corporate income tax regime, IS). This provides:

• separate accounting per facility (via cost centre analysis) ;
• clearer cost tracking (rent, dedicated staff) ;
• flexibility on distributions and reinvestment.

A non-profit association (social/public format) is also possible, especially in PSU, but imposes additional governance requirements (board meetings, annual reports to local authorities).

Alert 1: conflating PAJE and PSU simultaneously#

This is a serious administrative error. A micro-daycare cannot operate under both models at once. The choice must be clarified at licensing and observed strictly.

Alert 2: ignoring VAT impact on capital investment#

The VAT exemption on childcare revenue is real, but does not extend to initial investment costs (fit-out, furniture). A micro-daycare must factor in this VAT burden when calculating initial financing need.

Alert 3: underestimating payroll costs#

Most micro-daycare projections underestimate staff costs. Real-world factors (sick leave cover, holidays, mandatory training) typically add 10-15 % to the base payroll figure.

Alert 4: projecting occupancy too optimistically#

An occupancy rate of 95 % in year 1 is rare. Realistic projections range 65-75 % in year 1, 80-85 % in year 2, and 85-90 % from year 3 onwards.

Recently we advised a micro-daycare founder in the Paris region who was considering switching from the PAJE/CMG model to PSU to improve social access and revenue stability. The analysis showed that the extra administrative burden and CAF contracting costs (monthly reconciliation, reporting, audits) represented roughly €2,000 per year in direct expense. More critically, the transition caused a revenue gap of 2-3 months while family contributions were renegotiated and the PSU scale was implemented. These timing and cash-flow considerations often vanish from a simple business plan.

Hayot Expertise tip. If you are considering setting up or launching a micro-daycare, first clarify the funding model (PAJE or PSU) with your local CAF and child protection authority. This choice drives your tax treatment, cost structure and commercial positioning. In parallel, prepare a detailed cash forecast: capital investment (VAT included), payroll, rent, and a conservative occupancy scenario for the first three years. Consult a tax specialist accountant to validate these figures before signing a lease.