VAT: Council reaches provisional agreement on simplified rules for small businesses

The purpose of the new rules is to reduce administrative burden and compliance costs for small enterprises and to help create a fiscal environment which will help small enterprises grow and trade cross-border more efficiently.

Businesses have VAT administrative obligations and act as VAT collectors. This generates compliance costs that are proportionately higher for small enterprises than for bigger businesses. The existing VAT system, which foresees that VAT exemption for small enterprises is only available to domestic players. The reform agreed today will enable to apply similar VAT exemption to small enterprises established in other member states. one of the decisive factors for qualifying for such exemption will be the levels of turnover generated in a given year.

The updated rules will also improve the design of the exemption, thereby contributing to reducing VAT compliant costs. It will also provide the opportunity to encourage voluntary compliance and therefore help reduce revenue losses due to non-compliance and VAT fraud.

The text foresees that small enterprises will be able to qualify for simplified VAT compliance rules in case their annual turnover remains below a threshold set by a Member State concerned, which can not be higher than 85 000 EUR. Under certain conditions, small enterprises from other member states, which do not exceed this threshold, will also be able to benefit from the simplified sheme, if their total annual turnover in the whole of the EU will not exceed 100 000 EUR.

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