BETA


2018/0006(CNS) Common system of value added tax: special scheme for small enterprises

Progress: Awaiting final decision

RoleCommitteeRapporteurShadows
Lead ECON VANDENKENDELAERE Tom (icon: PPE PPE) SANT Alfred (icon: S&D S&D), OŻÓG Stanisław (icon: ECR ECR), NAGTEGAAL Caroline (icon: ALDE ALDE), LÓPEZ BERMEJO Paloma (icon: GUE/NGL GUE/NGL), SCOTT CATO Molly (icon: Verts/ALE Verts/ALE)
Committee Opinion IMCO
Committee Opinion JURI
Lead committee dossier:
Legal Basis:
TFEU 113

Events

2018/11/13
   Commission response to text adopted in plenary
Documents
2018/09/11
   EP - Results of vote in Parliament
2018/09/11
   EP - Decision by Parliament, 1st reading/single reading
Details

The European Parliament adopted by 618 votes to 40, with 24 abstentions, following Parliament's consultation procedure, a legislative resolution on the proposal for a Council directive amending Directive 2006/112/EC on the common system of value added tax as regards the special scheme for small enterprises.

The European Parliament approved the Commission proposal subject to the following amendments:

Reducing VAT costs for small businesses (SMEs) : the provisions of Council Directive 2006/112/EC that allow Member States to continue to apply their special schemes to small businesses are obsolete and do not meet their objective of reducing the compliance burden for small businesses.

The amendments highlight that small businesses in the Union are particularly active in certain cross-border sectors , such as construction, communications, catering services and retail trade, and can therefore be an important source of employment. The achievement of the objectives of the VAT Action Plan therefore requires a review of the special scheme for small businesses.

VAT exemption threshold : the proposal provides for a transitional period for small businesses benefiting from the exemption whose turnover exceeds the franchise threshold in a given year. Members propose that these enterprises should be allowed to continue to benefit from the exemption for two more years (instead of one year), provided that their annual turnover does not exceed the SME threshold by more than 33% during these two years (instead of 50% in the proposal).

In order to facilitate cross-border business, the list of national thresholds for exemption should be easily accessible to all small enterprises willing to operate in several Member States.

Administrative simplification for SMEs : in order to reduce the compliance burden for small businesses, it is proposed that the Commission:

set up an online portal through which small enterprises willing to avail themselves of the exemption in another Member State shall register; put in place a one-stop shop through which small enterprises can file VAT returns of the different Member States in which they are operating. The Member State of establishment shall be responsible for VAT collection.

Member States shall also ensure that they have sufficient knowledge of the status of small enterprises and of their shareholding or ownership relationships, so as to be able to confirm their status as small enterprises. The VAT information exchange system (VIES) shall specify whether or not eligible small enterprises avail themselves of the VAT exemption for small enterprises.

Annual VAT return : Member States shall release exempt small enterprises from the obligation to submit a VAT return or they shall allow such exempt small enterprises to submit a simplified VAT return – which includes at least the following information: chargeable VAT, deductible VAT, net VAT amount (payable or receivable), total value of input transactions and total value of output transactions – to cover the period of a calendar year.

Entry into force : Members consider that VAT simplification measures for SMEs could be implemented more quickly than the definitive VAT system. They propose to bring forward the date of implementation of the proposal to 31 December 2019 (instead of 30 June 2022).

Documents
2018/07/16
   EP - Committee report tabled for plenary, 1st reading/single reading
Details

The Committee on Economic and Monetary Affairs adopted, following Parliament's consultation procedure, the report by Tom VANDENKENDELAERE (EPP, BE) on the proposal for a Council directive amending Directive 2006/112/EC on the common system of value added tax as regards the special scheme for small enterprises.

The committee recommends that the European Parliament approve the Commission proposal subject to the following amendments:

VAT exemption threshold : the proposal provides for a transitional period for small businesses benefiting from the exemption whose turnover exceeds the franchise threshold in a given year. Members propose that these enterprises should be allowed to continue to benefit from the exemption for two more years (instead of one year), provided that their annual turnover does not exceed the SME threshold by more than 33% during these two years (instead of 50% in the proposal).

In order to facilitate cross-border business, the list of national thresholds for exemption should be easily accessible to all small enterprises willing to operate in several Member States.

Administrative simplification for SMEs : Members propose that the Commission:

set up an online portal through which small enterprises willing to avail themselves of the exemption in another Member State shall register; put in place a one-stop shop through which small enterprises can file VAT returns of the different Member States in which they are operating. The Member State of establishment shall be responsible for VAT collection.

Annual VAT return : Member States shall release exempt small enterprises from the obligation to submit a VAT return or they shall allow such exempt small enterprises to submit a simplified VAT return – which includes at least the following information: chargeable VAT, deductible VAT, net VAT amount (payable or receivable), total value of input transactions and total value of output transactions – to cover the period of a calendar year.

Lastly, Members consider that VAT simplification measures for SMEs could be implemented more quickly than the definitive VAT system. They propose to bring forward the date of implementation of the proposal to 31 December 2019 (instead of 30 June 2022).

Documents
2018/07/11
   EP - Vote in committee, 1st reading/single reading
2018/06/06
   EP - Amendments tabled in committee
Documents
2018/05/17
   EP - Committee draft report
Documents
2018/04/30
   CZ_SENATE - Contribution
Documents
2018/03/28
   RO_SENATE - Contribution
Documents
2018/03/15
   PT_PARLIAMENT - Contribution
Documents
2018/03/05
   ES_PARLIAMENT - Contribution
Documents
2018/02/08
   EP - Committee referral announced in Parliament, 1st reading/single reading
2018/02/06
   DE_BUNDESRAT - Contribution
Documents
2018/01/23
   EP - VANDENKENDELAERE Tom (PPE) appointed as rapporteur in ECON
2018/01/18
   EC - Document attached to the procedure
2018/01/18
   EC - Document attached to the procedure
2018/01/18
   EC - Legislative proposal published
Details

PURPOSE: to amend the current VAT rules with a view to reducing VAT costs for small businesses (SMEs).

PROPOSED ACT: Council Directive.

ROLE OF THE EUROPEAN PARLIAMENT: the Council adopts the act after consulting the European Parliament but without being obliged to follow the opinion of the European Parliament.

BACKGROUND: small businesses (SMEs) face proportionately higher VAT compliance costs than larger businesses. The VAT Directive ( Council Directive 2006/112/EC ) therefore lays down a number of provisions aimed at reducing the burden on SMEs dealing with VAT matters. In particular, it allows Member States to grant a VAT exemption to small businesses provided that they do not exceed a certain annual turnover, which varies from one country to another.

Despite the fact that Member States may exempt SMEs from VAT – an option that is widely used – SMEs continue to suffer from disproportionate VAT compliance costs due to how the SME exemption is designed. In particular, SMEs involved in cross-border trade cannot benefit from the SME exemption in Member States other than the one in which they are established

The current system has distortive effects on competition on both domestic and EU markets. This issue is set to worsen with the shift towards destination-based taxation under the proposed definitive VAT system; many SMEs may have to charge their customers VAT that differs from that of the Member State in which they are established.

As a follow-up to the 2016 VAT Action Plan , this review aims to create a modern, simplified SME scheme by reducing VAT compliance costs for SMEs both domestically and at EU level and reducing distortions of competition both domestically and at EU level.

IMPACT ASSESSMENT: the impact assessment for the proposal was considered by the Regulatory Scrutiny Board on 13 September 2017. The Board issued a positive opinion on the proposal together with some recommendations, which have been taken into account. The Commission considers that compliance costs for SMEs are expected to be reduced by 18 % under this initiative compared to the baseline scenario outlined in the impact assessment (EUR 56.1 billion per year, compared to EUR 68 billion per year at present). Cross-border trading activities by SMEs within the EU are also expected to increase by 13.5 %. It should also have a positive impact on both voluntary compliance and on business competitiveness.

CONTENT: the main provisions of the proposed amendment to the VAT Directive are as follows:

define various concepts necessary for applying the provisions of the special scheme: the definition of "small enterprises" would cover all enterprises whose Union annual turnover in the single market is no higher than EUR 2 million ; the possibility for Member States that decide to implement the SME exemption to set their threshold at the level that best reflects to their particular economic and legal context. The exemption will be available to all EU eligible businesses , whether or not established in the Member State where they carry out supplies subject to VAT; for any small enterprise able to avail itself of the exemption in a Member State where it is not established, two conditions must be met: (i) the enterprise’s annual turnover in that Member State should be below the exemption threshold applicable there; and (ii) its overall turnover in the single market (Union annual turnover) should not be higher than EUR 100 000 ; introducing a transition period for small enterprises making use of the SME exemption whose turnover exceeds the exemption threshold in a given year; define a set of simplified VAT obligations for non-exempt small enterprises. Such a set should include simplified registration, simplified record keeping and longer tax periods, which would result in less frequent filing of VAT returns. Non-exempt small enterprises should also be able to opt for the application of normal tax periods.

The amendments will only take effect once the definitive VAT system has been introduced.

Documents

Votes

A8-0260/2018 - Tom Vandenkendelaere - Vote unique 11/09/2018 12:42:47.000

2018/09/11 Outcome: +: 618, -: 40, 0: 24
DE IT ES PL GB FR RO CZ HU BE PT AT SE NL BG SK FI HR DK LT SI EE LV IE CY MT LU EL ??
Total
86
62
50
51
67
65
28
21
20
20
18
18
18
25
15
13
12
10
11
8
8
6
6
8
6
6
5
17
2
icon: PPE PPE
203

United Kingdom PPE

2

Finland PPE

2

Denmark PPE

For (1)

1

Estonia PPE

For (1)

1

Cyprus PPE

1

Luxembourg PPE

2
icon: S&D S&D
170

Netherlands S&D

For (2)

2

Croatia S&D

2

Lithuania S&D

1

Slovenia S&D

For (1)

1

Estonia S&D

For (1)

1

Latvia S&D

1

Ireland S&D

For (1)

1

Cyprus S&D

2

Malta S&D

3

Luxembourg S&D

For (1)

1
icon: ECR ECR
69

Italy ECR

2

Romania ECR

2

Czechia ECR

2

Sweden ECR

2

Netherlands ECR

2

Bulgaria ECR

2
2

Croatia ECR

For (1)

1

Cyprus ECR

1

Greece ECR

Against (1)

1
icon: ALDE ALDE
64

Germany ALDE

3

United Kingdom ALDE

1

Romania ALDE

3

Portugal ALDE

1

Austria ALDE

For (1)

1

Sweden ALDE

2

Croatia ALDE

2

Denmark ALDE

2

Slovenia ALDE

For (1)

1

Estonia ALDE

3

Latvia ALDE

1

Ireland ALDE

For (1)

1

Luxembourg ALDE

For (1)

1
icon: Verts/ALE Verts/ALE
46

Italy Verts/ALE

For (1)

1

Spain Verts/ALE

2

United Kingdom Verts/ALE

5

France Verts/ALE

4

Hungary Verts/ALE

2

Belgium Verts/ALE

2

Austria Verts/ALE

3

Netherlands Verts/ALE

2

Finland Verts/ALE

For (1)

1

Croatia Verts/ALE

For (1)

1

Denmark Verts/ALE

For (1)

1

Lithuania Verts/ALE

For (1)

1

Slovenia Verts/ALE

For (1)

1

Estonia Verts/ALE

For (1)

1

Latvia Verts/ALE

1

Luxembourg Verts/ALE

For (1)

1
icon: GUE/NGL GUE/NGL
43

Italy GUE/NGL

2

United Kingdom GUE/NGL

Against (1)

1

Sweden GUE/NGL

For (1)

1

Netherlands GUE/NGL

Against (1)

3

Finland GUE/NGL

For (1)

1

Denmark GUE/NGL

Against (1)

1

Ireland GUE/NGL

Against (1)

2

Cyprus GUE/NGL

2
icon: EFDD EFDD
37

Germany EFDD

For (1)

1

Poland EFDD

1

Czechia EFDD

Abstain (1)

1

EFDD

Against (1)

1
icon: NI NI
19

Germany NI

2

United Kingdom NI

Abstain (1)

4

France NI

Against (1)

1

NI

For (1)

1
icon: ENF ENF
31

Germany ENF

Against (1)

1

Poland ENF

2

Belgium ENF

Abstain (1)

1

Netherlands ENF

4
AmendmentsDossier
47 2018/0006(CNS)
2018/06/06 ECON 47 amendments...
source: 623.645

History

(these mark the time of scraping, not the official date of the change)

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shadows
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  • date: 2018-01-18T00:00:00 docs: url: http://www.europarl.europa.eu/RegData/docs_autres_institutions/commission_europeenne/com/2018/0021/COM_COM(2018)0021_EN.pdf title: COM(2018)0021 type: Legislative proposal published celexid: CELEX:52018PC0021:EN body: EC commission: DG: url: http://ec.europa.eu/info/departments/taxation-and-customs-union_en title: Taxation and Customs Union Commissioner: MOSCOVICI Pierre type: Legislative proposal published
  • date: 2018-02-08T00:00:00 body: EP type: Committee referral announced in Parliament, 1st reading/single reading committees: body: EP shadows: group: S&D name: SANT Alfred group: ECR name: OŻÓG Stanisław group: ALDE name: NAGTEGAAL Caroline group: GUE/NGL name: LÓPEZ BERMEJO Paloma group: Verts/ALE name: SCOTT CATO Molly responsible: True committee: ECON date: 2018-01-23T00:00:00 committee_full: Economic and Monetary Affairs rapporteur: group: EPP name: VANDENKENDELAERE Tom body: EP responsible: False committee_full: Internal Market and Consumer Protection committee: IMCO body: EP responsible: False committee_full: Legal Affairs committee: JURI
  • date: 2018-07-11T00:00:00 body: EP type: Vote in committee, 1st reading/single reading committees: body: EP shadows: group: S&D name: SANT Alfred group: ECR name: OŻÓG Stanisław group: ALDE name: NAGTEGAAL Caroline group: GUE/NGL name: LÓPEZ BERMEJO Paloma group: Verts/ALE name: SCOTT CATO Molly responsible: True committee: ECON date: 2018-01-23T00:00:00 committee_full: Economic and Monetary Affairs rapporteur: group: EPP name: VANDENKENDELAERE Tom body: EP responsible: False committee_full: Internal Market and Consumer Protection committee: IMCO body: EP responsible: False committee_full: Legal Affairs committee: JURI
  • body: EP docs: url: http://www.europarl.europa.eu/sides/getDoc.do?type=REPORT&mode=XML&reference=A8-2018-0260&language=EN type: Committee report tabled for plenary, 1st reading/single reading title: A8-0260/2018 type: Committee report tabled for plenary, 1st reading/single reading committees: body: EP shadows: group: S&D name: SANT Alfred group: ECR name: OŻÓG Stanisław group: ALDE name: NAGTEGAAL Caroline group: GUE/NGL name: LÓPEZ BERMEJO Paloma group: Verts/ALE name: SCOTT CATO Molly responsible: True committee: ECON date: 2018-01-23T00:00:00 committee_full: Economic and Monetary Affairs rapporteur: group: EPP name: VANDENKENDELAERE Tom body: EP responsible: False committee_full: Internal Market and Consumer Protection committee: IMCO body: EP responsible: False committee_full: Legal Affairs committee: JURI date: 2018-07-16T00:00:00
  • date: 2018-09-11T00:00:00 docs: url: http://www.europarl.europa.eu/oeil/popups/sda.do?id=31439&l=en type: Results of vote in Parliament title: Results of vote in Parliament url: http://www.europarl.europa.eu/sides/getDoc.do?type=TA&language=EN&reference=P8-TA-2018-0319 type: Decision by Parliament, 1st reading/single reading title: T8-0319/2018 body: EP type: Results of vote in Parliament
commission
  • body: EC dg: Taxation and Customs Union commissioner: MOSCOVICI Pierre
committees/0
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body
EP
associated
False
committee_full
Economic and Monetary Affairs
committee
ECON
date
2018-01-23T00:00:00
rapporteur
name: VANDENKENDELAERE Tom group: European People's Party (Christian Democrats) abbr: PPE
shadows
committees/0
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ECON
date
2018-01-23T00:00:00
committee_full
Economic and Monetary Affairs
rapporteur
group: EPP name: VANDENKENDELAERE Tom
committees/1
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IMCO
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docs
  • date: 2018-01-18T00:00:00 docs: url: https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SWD:2018:0009:FIN:EN:PDF title: EUR-Lex title: SWD(2018)0009 type: Document attached to the procedure body: EC
  • date: 2018-01-18T00:00:00 docs: url: https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SWD:2018:0011:FIN:EN:PDF title: EUR-Lex title: SWD(2018)0011 type: Document attached to the procedure body: EC
  • date: 2018-05-17T00:00:00 docs: url: http://www.europarl.europa.eu/sides/getDoc.do?type=COMPARL&mode=XML&language=EN&reference=PE621.115 title: PE621.115 type: Committee draft report body: EP
  • date: 2018-06-06T00:00:00 docs: url: http://www.europarl.europa.eu/sides/getDoc.do?type=COMPARL&mode=XML&language=EN&reference=PE623.645 title: PE623.645 type: Amendments tabled in committee body: EP
  • date: 2018-11-13T00:00:00 docs: url: /oeil/spdoc.do?i=31439&j=0&l=en title: SP(2018)724 type: Commission response to text adopted in plenary
  • date: 2018-03-05T00:00:00 docs: url: http://www.connefof.europarl.europa.eu/connefof/app/exp/COM(2018)0021 title: COM(2018)0021 type: Contribution body: ES_PARLIAMENT
  • date: 2018-02-06T00:00:00 docs: url: http://www.connefof.europarl.europa.eu/connefof/app/exp/COM(2018)0021 title: COM(2018)0021 type: Contribution body: DE_BUNDESRAT
  • date: 2018-03-28T00:00:00 docs: url: http://www.connefof.europarl.europa.eu/connefof/app/exp/COM(2018)0021 title: COM(2018)0021 type: Contribution body: RO_SENATE
  • date: 2018-03-15T00:00:00 docs: url: http://www.connefof.europarl.europa.eu/connefof/app/exp/COM(2018)0021 title: COM(2018)0021 type: Contribution body: PT_PARLIAMENT
  • date: 2018-04-30T00:00:00 docs: url: http://www.connefof.europarl.europa.eu/connefof/app/exp/COM(2018)0021 title: COM(2018)0021 type: Contribution body: CZ_SENATE
events
  • date: 2018-01-18T00:00:00 type: Legislative proposal published body: EC docs: url: http://www.europarl.europa.eu/RegData/docs_autres_institutions/commission_europeenne/com/2018/0021/COM_COM(2018)0021_EN.pdf title: COM(2018)0021 url: https://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&lg=EN&type_doc=COMfinal&an_doc=2018&nu_doc=0021 title: EUR-Lex summary: PURPOSE: to amend the current VAT rules with a view to reducing VAT costs for small businesses (SMEs). PROPOSED ACT: Council Directive. ROLE OF THE EUROPEAN PARLIAMENT: the Council adopts the act after consulting the European Parliament but without being obliged to follow the opinion of the European Parliament. BACKGROUND: small businesses (SMEs) face proportionately higher VAT compliance costs than larger businesses. The VAT Directive ( Council Directive 2006/112/EC ) therefore lays down a number of provisions aimed at reducing the burden on SMEs dealing with VAT matters. In particular, it allows Member States to grant a VAT exemption to small businesses provided that they do not exceed a certain annual turnover, which varies from one country to another. Despite the fact that Member States may exempt SMEs from VAT – an option that is widely used – SMEs continue to suffer from disproportionate VAT compliance costs due to how the SME exemption is designed. In particular, SMEs involved in cross-border trade cannot benefit from the SME exemption in Member States other than the one in which they are established The current system has distortive effects on competition on both domestic and EU markets. This issue is set to worsen with the shift towards destination-based taxation under the proposed definitive VAT system; many SMEs may have to charge their customers VAT that differs from that of the Member State in which they are established. As a follow-up to the 2016 VAT Action Plan , this review aims to create a modern, simplified SME scheme by reducing VAT compliance costs for SMEs both domestically and at EU level and reducing distortions of competition both domestically and at EU level. IMPACT ASSESSMENT: the impact assessment for the proposal was considered by the Regulatory Scrutiny Board on 13 September 2017. The Board issued a positive opinion on the proposal together with some recommendations, which have been taken into account. The Commission considers that compliance costs for SMEs are expected to be reduced by 18 % under this initiative compared to the baseline scenario outlined in the impact assessment (EUR 56.1 billion per year, compared to EUR 68 billion per year at present). Cross-border trading activities by SMEs within the EU are also expected to increase by 13.5 %. It should also have a positive impact on both voluntary compliance and on business competitiveness. CONTENT: the main provisions of the proposed amendment to the VAT Directive are as follows: define various concepts necessary for applying the provisions of the special scheme: the definition of "small enterprises" would cover all enterprises whose Union annual turnover in the single market is no higher than EUR 2 million ; the possibility for Member States that decide to implement the SME exemption to set their threshold at the level that best reflects to their particular economic and legal context. The exemption will be available to all EU eligible businesses , whether or not established in the Member State where they carry out supplies subject to VAT; for any small enterprise able to avail itself of the exemption in a Member State where it is not established, two conditions must be met: (i) the enterprise’s annual turnover in that Member State should be below the exemption threshold applicable there; and (ii) its overall turnover in the single market (Union annual turnover) should not be higher than EUR 100 000 ; introducing a transition period for small enterprises making use of the SME exemption whose turnover exceeds the exemption threshold in a given year; define a set of simplified VAT obligations for non-exempt small enterprises. Such a set should include simplified registration, simplified record keeping and longer tax periods, which would result in less frequent filing of VAT returns. Non-exempt small enterprises should also be able to opt for the application of normal tax periods. The amendments will only take effect once the definitive VAT system has been introduced.
  • date: 2018-02-08T00:00:00 type: Committee referral announced in Parliament, 1st reading/single reading body: EP
  • date: 2018-07-11T00:00:00 type: Vote in committee, 1st reading/single reading body: EP
  • date: 2018-07-16T00:00:00 type: Committee report tabled for plenary, 1st reading/single reading body: EP docs: url: http://www.europarl.europa.eu/sides/getDoc.do?type=REPORT&mode=XML&reference=A8-2018-0260&language=EN title: A8-0260/2018 summary: The Committee on Economic and Monetary Affairs adopted, following Parliament's consultation procedure, the report by Tom VANDENKENDELAERE (EPP, BE) on the proposal for a Council directive amending Directive 2006/112/EC on the common system of value added tax as regards the special scheme for small enterprises. The committee recommends that the European Parliament approve the Commission proposal subject to the following amendments: VAT exemption threshold : the proposal provides for a transitional period for small businesses benefiting from the exemption whose turnover exceeds the franchise threshold in a given year. Members propose that these enterprises should be allowed to continue to benefit from the exemption for two more years (instead of one year), provided that their annual turnover does not exceed the SME threshold by more than 33% during these two years (instead of 50% in the proposal). In order to facilitate cross-border business, the list of national thresholds for exemption should be easily accessible to all small enterprises willing to operate in several Member States. Administrative simplification for SMEs : Members propose that the Commission: set up an online portal through which small enterprises willing to avail themselves of the exemption in another Member State shall register; put in place a one-stop shop through which small enterprises can file VAT returns of the different Member States in which they are operating. The Member State of establishment shall be responsible for VAT collection. Annual VAT return : Member States shall release exempt small enterprises from the obligation to submit a VAT return or they shall allow such exempt small enterprises to submit a simplified VAT return – which includes at least the following information: chargeable VAT, deductible VAT, net VAT amount (payable or receivable), total value of input transactions and total value of output transactions – to cover the period of a calendar year. Lastly, Members consider that VAT simplification measures for SMEs could be implemented more quickly than the definitive VAT system. They propose to bring forward the date of implementation of the proposal to 31 December 2019 (instead of 30 June 2022).
  • date: 2018-09-11T00:00:00 type: Results of vote in Parliament body: EP docs: url: https://oeil.secure.europarl.europa.eu/oeil/popups/sda.do?id=31439&l=en title: Results of vote in Parliament
  • date: 2018-09-11T00:00:00 type: Decision by Parliament, 1st reading/single reading body: EP docs: url: http://www.europarl.europa.eu/sides/getDoc.do?type=TA&language=EN&reference=P8-TA-2018-0319 title: T8-0319/2018 summary: The European Parliament adopted by 618 votes to 40, with 24 abstentions, following Parliament's consultation procedure, a legislative resolution on the proposal for a Council directive amending Directive 2006/112/EC on the common system of value added tax as regards the special scheme for small enterprises. The European Parliament approved the Commission proposal subject to the following amendments: Reducing VAT costs for small businesses (SMEs) : the provisions of Council Directive 2006/112/EC that allow Member States to continue to apply their special schemes to small businesses are obsolete and do not meet their objective of reducing the compliance burden for small businesses. The amendments highlight that small businesses in the Union are particularly active in certain cross-border sectors , such as construction, communications, catering services and retail trade, and can therefore be an important source of employment. The achievement of the objectives of the VAT Action Plan therefore requires a review of the special scheme for small businesses. VAT exemption threshold : the proposal provides for a transitional period for small businesses benefiting from the exemption whose turnover exceeds the franchise threshold in a given year. Members propose that these enterprises should be allowed to continue to benefit from the exemption for two more years (instead of one year), provided that their annual turnover does not exceed the SME threshold by more than 33% during these two years (instead of 50% in the proposal). In order to facilitate cross-border business, the list of national thresholds for exemption should be easily accessible to all small enterprises willing to operate in several Member States. Administrative simplification for SMEs : in order to reduce the compliance burden for small businesses, it is proposed that the Commission: set up an online portal through which small enterprises willing to avail themselves of the exemption in another Member State shall register; put in place a one-stop shop through which small enterprises can file VAT returns of the different Member States in which they are operating. The Member State of establishment shall be responsible for VAT collection. Member States shall also ensure that they have sufficient knowledge of the status of small enterprises and of their shareholding or ownership relationships, so as to be able to confirm their status as small enterprises. The VAT information exchange system (VIES) shall specify whether or not eligible small enterprises avail themselves of the VAT exemption for small enterprises. Annual VAT return : Member States shall release exempt small enterprises from the obligation to submit a VAT return or they shall allow such exempt small enterprises to submit a simplified VAT return – which includes at least the following information: chargeable VAT, deductible VAT, net VAT amount (payable or receivable), total value of input transactions and total value of output transactions – to cover the period of a calendar year. Entry into force : Members consider that VAT simplification measures for SMEs could be implemented more quickly than the definitive VAT system. They propose to bring forward the date of implementation of the proposal to 31 December 2019 (instead of 30 June 2022).
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  • The European Parliament adopted by 618 votes to 40, with 24 abstentions, following Parliament's consultation procedure, a legislative resolution on the proposal for a Council directive amending Directive 2006/112/EC on the common system of value added tax as regards the special scheme for small enterprises.

    The European Parliament approved the Commission proposal subject to the following amendments:

    Reducing VAT costs for small businesses (SMEs): the provisions of Council Directive 2006/112/EC that allow Member States to continue to apply their special schemes to small businesses are obsolete and do not meet their objective of reducing the compliance burden for small businesses.

    The amendments highlight that small businesses in the Union are particularly active in certain cross-border sectors, such as construction, communications, catering services and retail trade, and can therefore be an important source of employment. The achievement of the objectives of the VAT Action Plan therefore requires a review of the special scheme for small businesses.

    VAT exemption threshold: the proposal provides for a transitional period for small businesses benefiting from the exemption whose turnover exceeds the franchise threshold in a given year. Members propose that these enterprises should be allowed to continue to benefit from the exemption for two more years (instead of one year), provided that their annual turnover does not exceed the SME threshold by more than 33% during these two years (instead of 50% in the proposal).

    In order to facilitate cross-border business, the list of national thresholds for exemption should be easily accessible to all small enterprises willing to operate in several Member States.

    Administrative simplification for SMEs: in order to reduce the compliance burden for small businesses, it is proposed that the Commission:

    • set up an online portal through which small enterprises willing to avail themselves of the exemption in another Member State shall register;
    • put in place a one-stop shop through which small enterprises can file VAT returns of the different Member States in which they are operating. The Member State of establishment shall be responsible for VAT collection.

    Member States shall also ensure that they have sufficient knowledge of the status of small enterprises and of their shareholding or ownership relationships, so as to be able to confirm their status as small enterprises. The VAT information exchange system (VIES) shall specify whether or not eligible small enterprises avail themselves of the VAT exemption for small enterprises.

    Annual VAT return: Member States shall release exempt small enterprises from the obligation to submit a VAT return or they shall allow such exempt small enterprises to submit a simplified VAT return – which includes at least the following information: chargeable VAT, deductible VAT, net VAT amount (payable or receivable), total value of input transactions and total value of output transactions – to cover the period of a calendar year.

    Entry into force: Members consider that VAT simplification measures for SMEs could be implemented more quickly than the definitive VAT system. They propose to bring forward the date of implementation of the proposal to 31 December 2019 (instead of 30 June 2022).

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  • PURPOSE: to amend the current VAT rules with a view to reducing VAT costs for small businesses (SMEs).

    PROPOSED ACT: Council Directive.

    ROLE OF THE EUROPEAN PARLIAMENT: the Council adopts the act after consulting the European Parliament but without being obliged to follow the opinion of the European Parliament.

    BACKGROUND: small businesses (SMEs) face proportionately higher VAT compliance costs than larger businesses. The VAT Directive (Council Directive 2006/112/EC) therefore lays down a number of provisions aimed at reducing the burden on SMEs dealing with VAT matters. In particular, it allows Member States to grant a VAT exemption to small businesses provided that they do not exceed a certain annual turnover, which varies from one country to another.

    Despite the fact that Member States may exempt SMEs from VAT – an option that is widely used – SMEs continue to suffer from disproportionate VAT compliance costs due to how the SME exemption is designed. In particular, SMEs involved in cross-border trade cannot benefit from the SME exemption in Member States other than the one in which they are established

    The current system has distortive effects on competition on both domestic and EU markets. This issue is set to worsen with the shift towards destination-based taxation under the proposed definitive VAT system; many SMEs may have to charge their customers VAT that differs from that of the Member State in which they are established.

    As a follow-up to the 2016 VAT Action Plan, this review aims to create a modern, simplified SME scheme by reducing VAT compliance costs for SMEs both domestically and at EU level and reducing distortions of competition both domestically and at EU level.

    IMPACT ASSESSMENT: the impact assessment for the proposal was considered by the Regulatory Scrutiny Board on 13 September 2017. The Board issued a positive opinion on the proposal together with some recommendations, which have been taken into account. The Commission considers that compliance costs for SMEs are expected to be reduced by 18 % under this initiative compared to the baseline scenario outlined in the impact assessment (EUR 56.1 billion per year, compared to EUR 68 billion per year at present). Cross-border trading activities by SMEs within the EU are also expected to increase by 13.5 %. It should also have a positive impact on both voluntary compliance and on business competitiveness.

    CONTENT: the main provisions of the proposed amendment to the VAT Directive are as follows:

    • define various concepts necessary for applying the provisions of the special scheme: the definition of "small enterprises" would cover all enterprises whose Union annual turnover in the single market is no higher than EUR 2 million;
    • the possibility for Member States that decide to implement the SME exemption to set their threshold at the level that best reflects to their particular economic and legal context. The exemption will be available to all EU eligible businesses, whether or not established in the Member State where they carry out supplies subject to VAT;
    • for any small enterprise able to avail itself of the exemption in a Member State where it is not established, two conditions must be met: (i) the enterprise’s annual turnover in that Member State should be below the exemption threshold applicable there; and (ii) its overall turnover in the single market (Union annual turnover) should not be higher than EUR 100 000;
    • introducing a transition period for small enterprises making use of the SME exemption whose turnover exceeds the exemption threshold in a given year;
    • define a set of simplified VAT obligations for non-exempt small enterprises. Such a set should include simplified registration, simplified record keeping and longer tax periods, which would result in less frequent filing of VAT returns. Non-exempt small enterprises should also be able to opt for the application of normal tax periods.

    The amendments will only take effect once the definitive VAT system has been introduced.

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