The European Commission is hoping to cut the costs of VAT compliance for European businesses from €68 to €56.1 billion. The current rules allow member states to grant SMEs VAT exemptions, an option they are only too ready to make use of, but the way the exemption has been designed is not ideal, in the Commission's view.
Currently, these exemptions are permitted on the basis of a turnover threshold set nationally. Without calling these national thresholds into question, the Commission is proposing to add a European threshold, which will cover all companies with an annual turnover throughout the EU not exceeding €2 million.
Another obstacle the Commission hopes to lift concerns the fact that businesses operating in more than one-member state are generally not entitled to benefit from the exemption anywhere else than in the member state in which they are registered. This creates competition distortions between local businesses and foreign ones operating on the same market.
It proposes that SMEs be able to enjoy VAT exemption in a member state other than the one in which they are registered, on two conditions: firstly, if their annual turnover is below the applicable threshold in that member state and, secondly, if their overall turnover on the single market does not exceed €100,000.
These rules are to be implemented from July 2022.
They went down well with the accountancy experts. On behalf of the ACCA, Chas-Roy Chowdhury welcomed the possibility for businesses operating in more than one country to be able to benefit from the exemption in member states other than the one in which they are registered. However, he stressed that the one-stop shop would have to deal seamlessly with the different national thresholds that will apply in different countries.
The Commission has also published a proposal to give the member states back powers to set their own reduced or super-reduced rates. See EUROPE 11940 for details. (Original version in French by Élodie Lamer)