From 1/1/2025, the new EU Small Business regime comes into effect, offering significant growth opportunities to small businesses.

With the aim of enhancing the competitiveness of small and medium-sized enterprises (SMEs) and simplifying procedures for cross-border transactions, the European Union has introduced a new VAT exemption regime for small businesses. This regime allows small businesses to expand their activities to other Member States, removing the obligations and administrative burdens normally associated with cross-border transactions (e.g. obtaining a TIN, possible obligation to submit declarations according to the national rules of each member state, etc.). 

The main features of the new regime are:

• Simplified Procedures: Businesses will be able to make use of the small business exemption regime with simplified procedures, both in their Member State of establishment and in other Member States that apply the same regime.
• One-Stop Shop: Combined with the one-stop shop for e-commerce transactions, which is already in operation from 1/7/2021, small businesses enjoy a significant facilitation in the VAT return procedures due in each member state, for the sales of goods and the provision of services to individuals / final consumers.
• Defined Limits: Small businesses that will make use of the exemption regime in more than one member state will be able to carry out annual transactions of up to 100,000 euros, throughout the EU. The internal exemption limit that a member state may establish will not be able to exceed 85,000 euros. Greece currently has a limit of 10,000 euros.
  From 1/1/2025 at EU level a business is considered small for VAT purposes when its EU annual turnover, i.e. the total cross-border sales of goods and services, does not exceed €100,000.
• Cross-border Exemption: The cross-border exemption is activated by registering the business in the small business exemption regime of any other Member State that applies the said regime. With its registration, it conducts transactions with these member states without being required to register in them for VAT purposes (e.g. obtaining a TIN, submitting declarations, etc.), provided that it complies with the obligations established and implemented by each Member State for the exempted small businesses within it.

How It Works: In order for a company to join the special SME regime of another MS, it will be sufficient to submit a relevant request (prior notification) to the tax administration of its country, accompanied by data on the transactions it has carried out in the previous and current year, in all EU Member States. Furthermore, because the above concerns transactions exempted from VAT, subjects who will be included in the exempted SME regimes of other Member States should submit to the tax administration of their Member State of establishment quarterly reports on the transactions they carry out each quarter, in order to monitor compliance with exemption limits (domestic/national and EU).

For the needs of implementing the new, EU-uniform VAT exemption regime for SMEs from 1/1/2025 (Directive 2020/285/EU), and for the implementation of the above possibilities for SMEs, it is going to be put into operation in the IAPR online application, which:

• is developed with common specifications in all MS,
• will enable the tax administrations of the MS to interact in order to:
  a) on the one hand, complete the requests of Greek companies for inclusion in exempting regimes of SMEs of other MS, and
  b) on the other hand, grant approval for the inclusion of businesses of other MSs in the SME exemption regime in Greece,
• will allow the submission of the quarterly reports (QR) of those which register in the system and carry out exempt transactions to other MS and the data with the QRs will be obtained from tax administrations of other MS.

Benefits for Businesses:

• Market Expansion: Small businesses can expand their trade and "open up" to other countries’ economies, boosting their growth.
• Red Tape Reduction: Simplified procedures reduce the administrative burden for businesses.
• Strengthening Competitiveness: The new regime helps to strengthen the competitiveness of small businesses in the unified market.

According to the above, from 1/1/2025 a Greek company will be able to apply to make use of the small business exemption regime in any other EU member state it wishes, as long as

• its turnover in the previous year and in the current year does not exceed 100,000 euros in the EU as a whole and
• does not exceed the domestic exemption limit of each Member State in which the exemption is requested.

In order to make use of this option, it will submit a request electronically to IAPR, with attached information regarding compliance with the exemption limits. The request is sent electronically to the tax administrations of the other member states from which the exemption is requested. This possibility will be provided to the Greek company, whether it is included in the special regime of small businesses in Greece or not.

That is:

• A Greek company can operate under the rules of the normal VAT regime within the country and at the same time use the exemption regime for small businesses of other member states.
• At the same time, a company established in another member state, e.g. in France, which is included in the exemption regime for small businesses there, requests through the French Tax Administration to make use of the exemption regime for small businesses in Greece. Its request is forwarded to the Greek Tax Administration with the aforementioned procedure, accompanied by the details of its transactions both in all EU member states and within Greece. The same applies in the event that the French company is included in the exemption regime for small businesses in France. In both cases, the total of exempted transactions that it will be able to carry out in all EU member states cannot exceed 100,000 euros per year and in Greece it cannot exceed the domestic exemption limit of 10,000 euros.

For more information, you can contact the following email addresses: deef.a@aade.gr, deef.d@aade.gr