Home EU small business VAT exemption: is it right for you?
EU small business VAT exemption: is it right for you?
A small overseas turnover may qualify for exemption. Consider purchases, growth plans and your existing VAT schemes before making a choice.
A choice for individual EU countries
EU-KOR allows qualifying businesses to use a VAT exemption in one or more other EU countries. To apply through the Netherlands, your business must be established here. Total EU turnover must not exceed € 100,000 in either the current or previous calendar year. Each selected country also has its own threshold and conditions; some examine an additional year.
Exemption also affects input VAT
You do not charge VAT on activities covered by the exemption, but cannot deduct VAT on costs relating to those activities. Before opting in, compare the effect on sales prices and purchases. Fewer returns alone are not a sufficient basis for the decision, especially when you plan investments.
A practical comparison
A designer plans to supply exempt services to consumers in another EU country and buys equipment for that work. Exemption may affect customer prices, but also the deduction of VAT on the equipment. Prepare two budgets: one with VAT and one with exemption. First establish whether the services are taxable in that country.
Keep tracking turnover by country
The quarterly report includes turnover from all EU countries, including the Netherlands and countries where you do not use EU-KOR. File within one month after the quarter, including periods with no turnover. A customer’s home country is not always the country to which turnover must be allocated for VAT.
The € 100,000 threshold covers the EU as a whole. If exceeded, exemption also ends for the transaction that takes you over the threshold. Continue monitoring national thresholds as well.
Check your other VAT schemes
EU-KOR and the Union OSS scheme may be used alongside each other for different countries, subject to conditions. EU-KOR cannot be combined with participation in the Import One Stop Shop (IOSS). Purchases such as reverse-charged services can still create VAT reporting obligations.
Prepare for a review
- Turnover allocated by VAT country for the previous and current years.
- A description of customers, services and goods movements.
- Planned investments and VAT on business purchases.
- Your current KOR, OSS or IOSS registrations and growth forecast.
Valorem can use this overview to assess the implications country by country. Apply exemption from the confirmed start date for the country concerned.
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