Review of the rules on the special scheme for small enterprises under the VAT Directive 2006/112/EC

Abstract

On 18 January 2018 the Commission adopted a proposal for a Council Directive amending Directive 2006/112/EC on the common system of value added tax as regards the special scheme for small enterprises. The proposal belongs to the reform package announced in the VAT Action Plan aimed at modernising the EU VAT system in order to make it simpler, more fraud-proof and business-friendly. The proposal aims at updating the VAT rules on the special scheme for SMEs and bringing them closer to the reality of the single market as well as adjusting them to the destination-based taxation. The SME package proposal was subject to a two-year discussion in the Council. Eventually, it was adopted on 18 February 2020 and will apply from 1 January 2025. The article explains the context of the review – the problems that it tackles, the objectives of the SME simplification package, the solutions proposed by the Commission and their final shape resulting from the Council discussions.