Changes to the VAT exemption scheme for SME’s as from 2025

Per 1 January 2025, all European Member States have to adapt their national VAT legislation to a changed EU framework in respect of the special scheme for small enterprises (‘SME scheme’). The VAT exemption for SME’s will be extended to transactions carried out in other EU Member States than the one where they are established. This offers new possibilities for small businesses with cross border activities, whereby they need to follow new procedures.

Current SME regime

In Belgium, businesses with an annual turnover of up to EUR 25,000 can opt for the exemption scheme. In this case, they do not charge VAT on their outgoing invoices but they cannot recover VAT on costs made for their business. These SME’s must obtain a VAT registration but they do not have to submit periodic VAT returns.

The exemption only applies to supplies made in Belgium and, up to a EUR 10,000 threshold, to supplies from Belgium to private consumers in other Member States. Almost all EU Member States have a similar domestic SME exemption regime.

New SME scheme

Combining different thresholds

As of 2025, the new SME scheme enters into force in Belgian legislation (Dutch/French), extending the possibility for exemption to taxpayers carrying out transactions in different EU Member States.

Small enterprises based in Belgium carrying out transactions in other Member States should consider a double threshold as from 1 January 2025:

• the global union threshold (annual turnover across the European Union) of EUR 100,000; and
• the national threshold of the other Member State, with a maximum of EUR 85,0000.
  

The exemption abroad can be used both by SME’s making use of the Belgian SME exemption or SME’s that cannot benefit from that exemption as they exceed the EUR 25,000 threshold.

Small enterprises based outside of Belgium but within the European Union, can make use of the Belgian VAT exemption when conducting activities in Belgium, to the extent they respect both the Belgian threshold of EUR 25.000 and the global union threshold.

Formalities

When a Belgian taxpayer wants to apply the SME exemption outside Belgium, there is a new administrative process to be followed before the exemption takes effect :

• The taxpayer must make a prior notification to the Belgian tax administration, indicating in which countries it wants to apply the exemption and the (expected) turnover in each Member State. Belgium will pass this information on to all countries of taxation where the seller wants to apply the exemption. Within a period of … days, the verification process should be completed.
• The taxpayer will be identified in Belgium (home country) for the SME exemption by an individual identification number (VAT number), with a suffix “EX”.
• The taxpayer must file a quarterly report in Belgium indicating the total value of supplies in Belgium and in the other countries where it applies the SME exemption. The taxpayer has no reporting obligations in the other Member States.

SME web portal

Recently, the European Commission has launched its SME web portal. The portal displays general information on the functioning of the SME scheme as well as the Explanatory Notes and the SME Guide that were developed to help businesses understand these new rules. The portal will also provide information on the SME related national rules of each Member State and will in 2025 provide an access to the SME-on-the-web database where the VAT registration status of SME’s that make use of the cross border.

This information is helpful for small businesses to understand their options and obligations under the extended SME scheme, as well as for businesses interacting with small businesses to understand their specific status.

Implementation in Belgium

At Belgian level, we are awaiting a FAQ or circular letter with further clarification. The Belgian tax administration has recently announced that the module enabling small businesses to register for the new SME regime in one or more other Member States will be available starting 3 March 2025 via the e-service Intervat (Dutch/French). In the meantime, Belgian taxable persons wishing to carry out taxable transactions in another Member State as from 1 January 2025 must contact the tax administration of that Member State (or register for the OSS regime if the conditions are met) from the start of this activity. Belgian taxable persons already carrying out taxable transactions in another Member State and who have registered for the OSS regime or have been VAT-identified in that Member State must maintain these registrations and continue to account for VAT on these transactions until the SME module becomes available.