The EU is introducing a new VAT special scheme for SMEs in 2025, aiming to simplify compliance by extending VAT exemptions to cross-border transactions and standardizing thresholds. While intended to ease the burden on small businesses, the reform presents potential challenges. Key changes include:
- Cross-border exemption: SMEs exempt in their home country can extend this exemption to other EU member states.
- Standardized thresholds: Consistent national exemption thresholds across the EU (e.g., €35,000 in Malta).
- Temporary threshold exceedance: Allows SMEs to retain exempt status despite temporary breaches.
- Streamlined reporting: Reduced administrative burdens for both exempt and non-exempt SMEs.
- Maltese Transposition: Malta has amended its VAT Act to align with the EU directive, introducing new reporting requirements and exemption rules.
However, concerns exist that the “simplification” could create new complexities. SMEs might face disadvantages due to the inability to reclaim input VAT when dealing with taxable persons under specific articles. Additionally, the exemption doesn’t cover all transactions, such as intra-community acquisitions, potentially leading to compliance errors. Experts, like Fernando Matesanz, warn that the scheme could be a “poisoned chalice” for SMEs that do not fully understand its implications.
Source: RSM
