EU VAT SME Scheme 2025: VAT Simplification for Small Sellers

The EU VAT SME scheme, coming into effect in January 2025, is part of the EU’s wider VAT reform aimed at supporting small enterprises and reducing administrative burdens in cross-border commerce. Under the scheme, small businesses can apply a VAT exemption across multiple EU countries, without needing to register for VAT in each member state individually.

This new regulation is based on Council Directive (EU) 2020/285 and is a significant step toward harmonizing VAT compliance across Europe. Until now, VAT exemptions only applied within a seller’s own country. With the new SME scheme, sellers can expand into other EU countries under a unified threshold and still benefit from simplified reporting.

If you’re a small business or online seller using Amazon, eBay, Shopify, or Etsy, this VAT scheme can dramatically reduce your obligations and make it easier to grow your business across borders.

Who qualifies for the EU VAT SME scheme?

To be eligible, businesses must meet the following conditions:

• You are established in an EU member state
• You currently benefit from a domestic VAT exemption (typically under €85,000 turnover per year)
• Your total EU turnover does not exceed €100,000 annually
• Your cross-border sales to other EU countries do not exceed €85,000 per calendar year

In Germany, you can only apply for the scheme at the point of VAT registration. If you already have an established VAT number, you must be invited to the scheme by the tax authority; there is no option to apply independently later.

If you opt out of the scheme, you cannot re-enter for 5 years.

If you meet these criteria, you can opt into the scheme and extend your local VAT exemption to other EU countries via a centralized declaration. This removes the need for multiple national VAT registrations and greatly simplifies compliance for micro and small businesses.

How does the scheme work?

Once registered through your national tax authority, your local exemption will apply to your eligible cross-border B2C sales across the EU. The scheme operates in conjunction with the One Stop Shop (OSS) framework, meaning businesses will file a single annual VAT declaration for their cross-border turnover.

• You must opt in through your home country’s tax portal
• Your exemption applies in each EU country where your sales remain under the threshold
• If you exceed the €85,000 limit, you are required to register for VAT in the destination country for the following year
• Businesses using the scheme must maintain accurate records and submit a simplified annual return
• If you exceed €100,000 turnover in the current year, you must immediately notify the tax office and switch to the standard VAT taxation process.

What are the benefits for online sellers?

The EU VAT SME scheme offers a range of advantages for e-commerce businesses and startups:

1. Simplified VAT compliance – Avoid the burden of registering and filing VAT returns in multiple countries.
2. Cost savings – Reduce administrative costs and eliminate the need for multiple VAT numbers.
3. Improved cash flow – Keep prices competitive and reduce upfront VAT payments.
4. Lower barrier to entry – Test new EU markets more easily.
5. Administrative consistency – Manage your VAT responsibilities via one system.

Limitations and important considerations

While the scheme offers benefits, there are also important negatives and limitations to consider:

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  The scheme only applies to B2C transactions. You cannot use reverse charge invoicing for B2B sales and must charge VAT on B2B transactions.

  
  
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  You cannot reclaim import VAT or any other input VAT under the SME scheme—this could impact your cost structure.

  
  
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  You must monitor thresholds closely to avoid surprises. If you exceed the €100,000 threshold, you must switch to the standard VAT system immediately.

  
  
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  You cannot rejoin the scheme for 5 years if you opt out.

  
  

Compliance tip: Use software tools to monitor your thresholds in real time, set up alerts, and plan ahead for standard VAT registration if your business grows.

How hellotax helps sellers with the SME VAT scheme

hellotax offers solutions specifically designed for sellers taking advantage of the EU VAT SME scheme:

• Threshold tracking – Monitor your cross-border turnover and receive alerts.
• Automated VAT reports – File your annual declaration easily.
• OSS integration – Seamless data sync and reporting.
• Fiscal representation – Support in countries that still require a local representative.

Conclusion

The EU VAT SME scheme 2025 is a smart solution for small sellers looking to scale in Europe without drowning in VAT paperwork. By simplifying compliance and reducing costs, it levels the playing field for small e-commerce entrepreneurs.

With hellotax, you can automate your VAT processes, stay compliant with EU rules, and focus on growing your cross-border business.

Talk to our VAT experts now

📌 You might also like: When do online sellers need EU VAT registration?

📚 Reference: Council Directive (EU) 2020/285

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