The VAT small business exemption lets a small company avoid charging VAT. Since the EU reform for small businesses, the mechanism extends to sales made in other Member States, under conditions. It concerns French businesses and those from other EU countries alike.
What are the thresholds, what is the identification number with the EX suffix for, and which obligations remain? Here is a practical overview, to be completed by a check of national rules.
The thresholds to respect
Two levels of thresholds apply and must be met at the same time:
- an EU-wide ceiling: the company’s annual turnover across the whole Union must not exceed €100,000;
- the national threshold of each Member State in which the exemption is used, which varies from country to country and must be met separately.
The identification number with the EX suffix
Businesses that benefit from the scheme receive an individual identification number with the EX suffix. This number must appear on invoices and allows the tax authorities to identify them as exempt small businesses.
It is not a standard VAT number: it shows that the business falls under the exemption scheme. For transactions that require a VAT number, the situation must be analysed case by case.
The obligations
The scheme lightens the formalities, but it does not remove them:
To go further on filings in general, see our page on VAT returns.
Exceeding the ceiling: a point to watch
Exceeding the EU ceiling means the exemption is lost immediately, from the date of the overrun. The business must then charge VAT from that date and, depending on the country, register there.
A missed report or a late notification to the authorities may expose you to penalties and late-payment interest.
Who is it worthwhile for?
The scheme suits a small business that sells in Europe without holding stock and wants to lighten its obligations. It suits less a business whose purchases bear a lot of VAT, since that VAT can no longer be recovered.
| Profile | Is the exemption a good fit? |
|---|---|
| Small business, sales of services or goods in Europe, few purchases with VAT | Often attractive |
| Business with significant purchases subject to VAT | Compare with the normal regime, as VAT is no longer recoverable |
| Business with stock in another country | Analyse carefully, as a local registration may be required |
| Turnover close to the €100,000 ceiling | Monitor the threshold closely and anticipate the overrun |
How Hanoutax can help
Hanoutax acts as a French VAT agent (mandataire fiscal) for European companies. We help with your VAT treatment analysis to determine whether the exemption suits your situation, then handle, as the case may be, your registration in France and your returns under a power of attorney.
FAQ
What is the ceiling of the EU VAT small business exemption?
The company’s annual turnover across the whole Union must not exceed €100,000. In addition there is the national threshold of each Member State in which the exemption is used, which varies from country to country.
What is the EX suffix number for?
It is the individual identification number given to businesses that benefit from the scheme. It must appear on invoices and allows the tax authorities to identify them as exempt small businesses.
Which reporting obligations remain?
The business reports its EU turnover each quarter, within the month following the end of the quarter. It notifies the authorities when the ceiling is exceeded, within 15 working days.
What happens if I exceed the €100,000 ceiling?
The exemption is lost immediately, from the date of the overrun. The business must charge VAT from that date and, depending on the country, register there. Anticipating the overrun is therefore essential.
Can I deduct VAT on purchases under the exemption?
No. A business that invoices without VAT cannot deduct VAT on its purchases. The scheme is therefore less attractive for a business whose purchases bear a lot of VAT: compare it with the normal regime.
Is the exemption right for your company? Let’s review it.
Related reading
Informational content, not legal advice. The rules that apply depend on your situation.
