European Parliament agrees with VAT exemption SME’s

The European Parliament voted on Wednesday Jan 15, 2020 by a large majority in favour of a simplification of the VAT rules for SMEs. Businesses will soon be able to make use of VAT exemptions in other EU countries thanks to the new scheme.

In November last year, the EU finance ministers already reached a political agreement. This agreement provides for an exemption in all member states from VAT obligations for SMEs with a uniform turnover threshold of €85,000 for companies that only do business in their own member state and an EU-wide turnover threshold of €100,000 for SMEs doing cross-border business.

Until now, all these VAT exemptions have been regulated nationally, but with the new rules they will also become accessible to small businesses that are not established in the relevant Member State but do owe VAT there. A Dutch entrepreneur can then, for example, choose to make use of the German scheme, and the same applies to a German entrepreneur doing business in the Netherlands.

Under the new scheme, a trader will no longer have to pay VAT, but on the other hand he will no longer be able to deduct the VAT he has paid himself.

2018/0006(CNS) – Common system of VAT: special scheme for SME’s