EU Web Portal launched on VAT Rules for new SME Scheme
19 December 2024| CATEGORIES: EU businesses, Simplified compliance, SME scheme| TAGS: EU, SME Scheme
From 1 January 2025, the EU’s new special VAT regime for small and medium businesses (the SME scheme) will come into effect. The EU has launched a new portal to assist businesses that want to take advantage of the scheme.
Benefits of the SME scheme
From 1 January 2025, the special scheme allows small and medium enterprises to:
- sell goods and services without charging VAT to their customers (VAT exemption) and,
- alleviate their VAT compliance obligations.
Simplified compliance
The simplified compliance obligations of businesses using the scheme include:
- Single registration: qualifying businesses will only need to register for the purpose of the SME scheme once in the Member State of Establishment (MSEST). MSEST will grant a single identification ‘EX number’ that will be used in all Member States where the business benefits from the VAT exemption.
- Single quarterly report: periodical VAT returns are replaced by a single quarterly report providing details of the turnover of the enterprise in all Member States.
- Simplified invoices.
Small enterprises choosing VAT exemption will lose the right to deduct VAT on goods and services used to make exempt supplies.
What businesses qualify for the SME scheme?
An EU business with a total annual turnover of no more than EUR 100 000 (or the equivalent in national currency) in all Member States for the current and previous calendar year is eligible for VAT exemption in its Member State of establishment and/or in other Member State(s) under the cross-border SME scheme. This is applicable only if the Member State concerned has implemented the scheme in its national legislation. The SME scheme is optional.
The web portal with more information on the SME scheme is now live and can be accessed through the page VAT rules for small enterprises.
Features of the scheme
Key points to note about the scheme are that:
- the scheme is not available to non-EU businesses;
- the maximum national annual threshold set by Member States under which small enterprises can VAT exempt their supplies of goods and services under the SME scheme (domestic and cross-border) is EUR 85 000 (or the equivalent in national currency);
- Member States have the possibility to set more than one national annual threshold, called ‘sectoral thresholds’;
- Small enterprises established in another Member State than where VAT is due can VAT exempt their supplies (cross-border), in the same way that small enterprises established in that Member State already can for domestic transactions;
- Small enterprises with a total annual turnover in the 27 Member States not exceeding the Union annual threshold of EUR 100 000 are eligible to apply the cross-border SME scheme.
The rules for the SME scheme are complex. Businesses planning to implement the national and/or cross-border aspects should carefully review the published Guides and Explanatory Notes available here.