Simplified VAT rules for small business in the EU: 2025 changes

August 1, 2022

The EU’s SME scheme aims to support small and medium enterprises and reduce the administrative burden. It works by allowing VAT exemptions, set by every member of the European Union individually. The European finance ministers first initiated the SME scheme in 2020, when the need for simplified taxation processes was identified.

The updates in the scheme are part of the EU‘s effort to increase the fairness of its taxation regime by unifying some of the tax regulation aspects.

Currently, SME‘s VAT exemption is applied when a company‘s turnover does not reach a threshold set by its origin country. The threshold varies across countries, although the EU has set a maximum threshold of EUR 85,000, which means that a country cannot exempt companies earning more than this amount annually.

In 2025, the SME scheme will be extended and applied to businesses supplying to any destination in the EU, regardless of their origin country. The EU-wide tax exemption will apply to companies with annual revenue (generated in one or more EU countries) smaller than EUR 100,000.

The scheme, together with other updates aimed at unifying Europe‘s taxation, is expected to give a competitive advantage to the EU‘s businesses and help them scale within the EU. This, together with other Intra-Community directed initiatives, has already helped companies during the Covid-19 pandemic and helped countries retain stable tax revenues.

If you want to learn about the EU‘s VAT changes in more detail, please get in touch with our team, and we will guarantee a personalized and professional consultation that will benefit your business.