EU Seeks Feedback On VAT Systems For SMEs

by Ulrika Lomas, Tax-News.com, Brussels

21 December 2016

The European Commission has proposed amending the special exemption scheme for SMEs contained in the VAT Directive.

Under the SME scheme, EU member states are allowed to exempt from VAT supplies of goods or services by SMEs with an annual turnover not exceeding a given threshold, or to apply simplified procedures to SMEs for charging and collecting VAT. Member states may also release SMEs covered by the scheme from some or all of their VAT compliance obligations.

According to the Commission, the rules still make it excessively complex and expensive for SMEs to comply with their VAT obligations. It added that the rules "do not take into account the single market perspective, since suppliers from other member states do not get the same VAT treatment as domestic suppliers."

The Commission said that, as a result, SMEs bear proportionately higher VAT compliance costs than large businesses.

The Commission is preparing a comprehensive simplification package for SMEs, through which it intends to create a more business-friendly environment. It has launched a consultation with the aim of gathering views on the current VAT provisions for SMEs and their application, and on possible changes to these provisions. The results of the consultation will feed into the review of the SME scheme.

The consultation is open until March 20, 2017.

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