SME Scheme Update: New EU VAT Compliance Rules

July 14, 2022 in Ecommerce Tips

How is the SME Scheme changing?  

In January 2025 an SME Scheme update will be applied giving businesses established in EU Member States VAT exemptions. This extends the previous SME Scheme and will make the SME Scheme VAT exemption applicable for businesses making supplies in EU countries where they are not directly established.  

Finance ministers in 2020 initiated the SME Scheme in order to simplify administrative processes SMEs were dealing with. The new regime aims to make the EU taxation environment fair for all businesses, regardless of where they are established.  

What are the current SME Scheme rules? 

Currently, Member States are allowed to exempt supplies made by SMEs if their turnover does not exceed a given threshold. These thresholds are set by each individual Member State. SMEs not established in an EU country will not be able to benefit from this exemption.  

The SME Scheme rules will work via these parameters until December 31, 2024.   

How will the rules change in 2025? 

In 2025, EU Member States will have the option to continue the current exemption threshold for SMEs. This will only apply to businesses whose annual turnover does not exceed EUR 85,000, which is the maximum EU-wide exemption threshold.  

The new rules extend the current scheme. This opens the scheme of small enterprises making taxable supplies in other Member States than the one in which they are established. SMEs can benefit from this scheme if their annual turnover does not exceed EUR 100,000. This amount has been set as a safeguarding measure to prevent larger businesses from benefitting from the SME Scheme exemption.  

The new SME Scheme update will give EU businesses the opportunity to benefit from the exemption in other countries where they are not directly established.  

What are the benefits of opting into the scheme? 

The introduction of the EU government SME Scheme has already been beneficial for EU businesses. During the pandemic, many small enterprises experienced difficulties and saw little opportunity for expansion. This scheme is effective in simplifying compliance processes in order to make cross-border EU expansion easier.  

The scheme will provide eligible SMEs with processes that can lighten the administrative burden and cut registration costs. The new rules will save SMEs an estimated 18% in VAT registration costs per year.  

Plus, the EU is an excellent market to set up your business. EU shoppers participating in ecommerce are set to increase, reaching 569 million consumers by 2025. If you’re looking to establish a loyal customer base and grow internationally, the EU is an excellent place to start.  


At we’ve helped hundreds of businesses expand throughout Europe. Our team of EU VAT experts are always happy to help and can offer advice to businesses of all sizes. VAT can be very complex, particularly when starting out, so get in touch with us for further assistance.  

To learn more about EU VAT we have lots of useful resources that can help. If you sell into the EU, via your own website or want to know about EU VAT changes visit our website. Are you unsure which compliance service your business requires? Take our EU VAT Quiz to find out! 

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