Special VAT scheme for small enterprises: VAT exemptions should not lead to unfair competition

On 11 July, the Economic and Monetary Committee (ECON) of the European Parliament will vote on the proposal amending Directive 2006/112/EC regarding the common system of value added tax, with the special scheme for small enterprises at the heart of discussions. As SMEs bear proportionately higher VAT compliance costs than larger companies due to their limited resources, EBC supports the overhaul of the special scheme in order to further reduce the administrative obligations for small enterprises, to facilitate cross-border trade and to generally strengthen VAT adherence.

EBC believes that VAT exemptions must be proportional and thus limited in order to avoid unfair competition and market distortions. Hence, we consider that a national maximum threshold of EUR 85 000, under which enterprises can be exempted from VAT obligations, as proposed by the European Commission, is too high. The vast majority of national thresholds are explicitly lower. Thus, a maximum national threshold of EUR 85 000 could incentivise other Member States to increase their currently applicable threshold, opening the door to unfair competition between market actors. Instead EBC strongly welcomes the amendment by Rapporteur Tom Vandenkendelaere (EPP/BE) setting a national threshold window between EUR 15 000 and EUR 50 000 under which enterprises can profit from VAT exemptions. This window takes into account the currently existing national thresholds in the European Union and develops a common level playing field by not only proposing a maximum, but also a minimum threshold.

“By displaying 99.8% of all enterprises in the European Union, SMEs form an essential part of the EU economy. We are concerned about unfair competition between those enterprises that can profit from VAT exemptions and those that cannot, which especially poses a problem for local labour intensive services such as construction. It is thus of utmost importance to ensure an equal level playing field with a special focus on those companies with the least capacities. Therefore we strongly support simplification measures for small enterprises and a realistic maximum national threshold under which enterprises can profit from VAT exemptions”, says Eugenio Quintieri, EBC Secretary General.

To read EBC position paper on the special scheme for small enterprisesplease click here