2025 SME Special Scheme introduces pan-EU €100,000 registration threshold to reduce foreign VAT compliance burden

28 June 2024

To reduce the VAT compliance burden for small to medium-sized enterprises (SMEs) in the EU, many member states have implemented an 'SME Scheme', which exempts businesses from having to register and charge VAT on sales if their annual turnover is below a certain threshold. These VAT registration thresholds only apply to resident businesses in their own EU country and vary significantly across member states, ranging from €10,000 in Greece to €85,000 in Italy.

From 1 January 2025, significant changes to the SME scheme will see VAT registration thresholds extended for use by EU companies trading in other EU member states. This means EU companies trading as non-residents in other EU member states will not have to VAT register if their revenue is below the national threshold set in the EU country of sale, and their annual revenue across the whole of the EU does not exceed €100,000.

This initiative aims to encourage more EU based SMEs to trade within the EU single market by eliminating the need for immediate VAT registration, thereby reducing administrative and compliance costs. The new scheme will not be available to non-EU businesses, who will still have to register for VAT from their first sale. 

The European Commission is preparing explanatory notes and an SME guide to clarify the new rules. Additionally, a Taxes-in-Europe Database (TEDB) will be developed for member states to report their thresholds, making it easier for EU businesses to understand these regulations.