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EU proposes exempting SMEs from cross-border VAT obligation

  • Jan 19, 2018 | Richard Asquith

EU proposes exempting SMEs from cross-border VAT obligation

On 18 January 2018, the European Commission (EU) published a proposal to eliminate foreign EU VAT obligations for small enterprises (‘SME’).

Currently, EU small businesses selling in their own country are exempt from VAT if their sales are below a set threshold. This threshold varies between member states, e.g. €10,000 in France; and £85,000 in the UK. However, when selling in other EU states, SME’s enjoy no such simplification  – they must register and charge local VAT on the first sale. This imposes a VAT compliance cost on small companies, and restricts the free operation of the Single Market for small companies.

The EU is now proposing:

  • A €2 million revenue threshold across the EU, under which small businesses would benefit from simplification measures, whether or not they have already been exempted from VAT;
  • The possibility for Member States to free all small businesses that qualify for a VAT exemption from obligations relating to identification, invoicing, accounting or returns;
  • A turnover threshold of €100,000 which would allow companies operating in more than one Member State to benefit from the VAT exemption
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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He can be contacted at: He is part of the European leadership team which won International Tax Review's 2019 Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.