EU Launches Cross-Border SME VAT Exemption Scheme
Starting in 2025, the EU is rolling out new legislation aimed at promoting consistent tax practices across its member states, irrespective of a business’s location. The updates to the SME scheme will allow small businesses to be exempt from VAT obligations in multiple EU countries, reducing administrative burdens and encouraging cross-border trade.
Changes to VAT Exemptions for SMEs
Until December 31, 2024, small businesses were only allowed to be exempt from VAT obligations in their home country. However, with the introduction of the cross-border SME scheme on January 1, 2025, businesses will now be able to apply VAT exemptions on goods and services across several EU member states.
Once a country has implemented the scheme, small businesses can choose to opt into it.
This optional scheme provides small enterprises with the following benefits:
- Exemption from charging VAT on goods and services.
- Reduced VAT compliance requirements, including simplified invoices and a single quarterly VAT report for their total turnover across all 27 EU member states. This report only needs to be submitted to the business’s home country.
Eligibility Criteria for the Scheme
Small businesses can opt into the scheme if they meet these conditions:
- They are established in an EU member state.
- Their annual turnover across all member states does not exceed EUR 100,000.
- They stay within domestic VAT exemption thresholds in the countries where they wish to apply the scheme.
How to Apply for the Cross-Border Scheme
The scheme allows small businesses to choose which EU member states they wish to operate under it. Companies can also opt for the standard tax regime in one country while using the SME scheme in another, as long as the country has adopted it.
To apply, businesses must notify their member state of establishment, which will serve as the point of contact for other member states. Upon approval, they will receive an EX number within 35 working days, allowing them to use the scheme in selected countries.
There’s more you should know about global e-invoicing changes – learn more about the new and upcoming regulations.
