2025 SME Special Scheme introduces pan-EU €100,000 VAT registration threshold to reduce foreign compliance burden for EU businesses
From 1 January 2025, there is a new, optional €100,000 EU VAT registration threshold, enabling EU-resident businesses to sell in other EU states, declaring the sales as exempt using a new type of ‘EX’ VAT registration. Thus avoiding the need to register for small levels of sales in other EU states.
The updated SME Special Scheme has introduced two thresholds: domestic (similar to current regime) for the country of establishment (maximum €85,000); and cross-border €100,000 for exempt selling in other EU states. This will need an EX number and quarterly sales reports. The new scheme is not available to non-EU businesses.
The European Commission has provided resources available to help businesses understand and take advantages of the cross-border VAT simplifications:
- Explanatory notes
- SME guide
- SME Webportal (still in development)
Two separate SME VAT threshold rules
This will be achieved by two types of VAT registration thresholds for EU resident businesses:
- €85,000 Domestic threshold, effectively the current regime, which member states may set at a level of up to €85,000 per annum; and
- €100,000 Cross-border threshold, which business can opt to make exempt sales in other EU member states. This is up to €100,000 total sales and may be used in conjunction with the Domestic threshold. One caveat is that the sales in any one state under the Cross-border threshold may not exceed that country’s Domestic threshold. If a businesses wishes to utilise the cross-border threshold, they must register to obtain a new ‘EX‘ prefix VAT identifier from their country of residence. The business will use this number to report quarterly to their home tax authority the VAT exempt sales for the nominated EU states. This would require something similar to the One Stop-Shop return for declaring these sales. In theory, a small business could not be domestically VAT registered, but have a cross-border VAT registration and an OSS registration. However, they will be blocked from IOSS return scheme for imports of low-value consignments.
Currently, non-residents must immediately VAT register if supplying eligible goods or services in another EU state. The EU distance selling thresholds were withdrawn on 1 July 2021 as part of the EU VAT e-commerce package reforms.
