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
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
What are the benefits for online sellers?
The EU VAT SME scheme offers a range of advantages for e-commerce businesses and startups:
- Simplified VAT compliance – Avoid the burden of registering and filing VAT returns in multiple countries.
- Cost savings – Reduce administrative costs and eliminate the need for multiple VAT numbers.
- Improved cash flow – Keep prices competitive and reduce upfront VAT payments.
- Lower barrier to entry – Test new EU markets more easily.
- Administrative consistency – Manage your VAT responsibilities via one system.
Common limitations and compliance tips
Despite the advantages, there are some limitations:
- The scheme only applies to B2C transactions.
- It cannot be used if you store inventory in another country (e.g., Amazon FBA warehouses).
- You must monitor thresholds to avoid VAT liability surprises.
Compliance tip: Use software to monitor thresholds and plan for registration ahead of time.
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.
You might also like: When do online sellers need EU VAT registration?
Reference: Council Directive (EU) 2020/285
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The post EU VAT SME Scheme 2025: VAT Simplification for Small Sellers appeared first on Hellotax Blog.
This articles is written by : Nermeen Nabil Khear Abdelmalak
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