Proposed amendment to VAT treatment of SMEs

Key messages

We welcome the Commission’s proposal to broaden the VAT scheme for small enterprises, under which SMEs are exempt from paying VAT not only on their domestic sales, as is allowed today, but now also on their intra-EU sales, as long as the operating SME stays below the proposed threshold of €100 000 of annual turnover in the EU and below the national exemption threshold of the Member State they are supplying to. This extension of the VAT-scheme to include intra-EU trade would further enhance the Single Market.
We support the European Commission’s proposals to simplify VAT obligations as businesses often face difficult challenges when trading across borders, with diverse, disproportionate and complex VAT rules across the EU, which may hamper their growth and discourage them from engaging in cross-border trade. These proposals to simplify VAT compliance can provide a boost to (cross-border) trade and decrease the administrative burden.
The proposed threshold of €2 million turnover in the EU, covering micro-enterprises, related to the administrative simplification measures, is too restrictive. The EU should take a more ambitious approach to ensure that small and medium enterprises can benefit from the proposed measures to decrease their administrative burden.

We support the Commission’s efforts to modernise the EU’s VAT system, reduce administrative burden and the VAT-gap. The current system is highly fragmented, complex and subsequently reduces and distorts trade and investment by creating unnecessary extensive administrative burden and trade barriers to businesses.
Further VAT reforms however should also take into account the fast-changing digitalised economy which blurs the line between goods and services and upcoming technologies which may also be helpful in closing the VAT gap and simplifying VAT reporting.
Regardless of the design of the final system on rates, businesses, and in particular SMEs, are currently in dire need of getting quick and accurate access to the relevant information about the implementation of the VAT system in the different Member States. We encourage the EU to establish an EU VAT Web Information Portal for businesses with a particular focus on SMEs.