Brussels promotes the simplification of VAT for SMEs

The employers of small businesses applaud the idea, while the self-employed predict greater costs and complexity

The demand of small businesses to have a European VAT more adapted to the size of their business is closer. The proposal launched a few weeks ago by Brussels is well received, with nuances that are expected to be improved during processing.

The aim is to simplify the tax through measures that reduce the costs of compliance with VAT regulations for smaller companies, expenses that are disproportionate compared to those of SMEs that operate only in their own country and those of large companies. And the proposal addresses cases of VAT exemption.

Cepyme receives the EC's intention positively, since it "recognizes the specific problems of SMEs, in general, and small businesses, in particular." Francisco Aranda, spokesperson for the Madrid confederation CEIM, agrees that “all those measures that are aimed at easing administrative procedures will be well received.”

Regarding the possibility of Member States having greater room for maneuver to apply reduced and super-reduced VAT tax rates, Aranda highlights that, “if it were implemented, it would contribute to boosting consumption and, therefore, the economy.” ”.

The Association of Self-Employed Workers (ATA), on the other hand, is quite critical: “Although we share the objective of establishing a more robust VAT system, less open to fraud and simpler, we believe that the proposal goes in the opposite direction, since complicates the system. Forcing SMEs and the self-employed to apply 28 different VATs in the EU, depending on the country of destination, will create additional costs and greater legal uncertainty,” says Celia Ferrero, executive vice president of the entity.

At Pimec, the employers' association of small Catalan businesses, they believe that the simplification of VAT for SMEs that invoice up to two million euros is a priority and they support the tax exemption in case of irrelevant sales figures.

THE NUMBERS

11% VAT compliance is more expensive for companies that operate in other countries compared to those that do not leave their own, they estimate in Brussels.

18% is the proportion in which these expenses will be reduced with Brussels' measures, Cepyme predicts.

The consequences of applying the measures presented by the EU would be really important since, for example, the compliance costs incurred by SMEs are expected to be reduced by 18%, that is, by approximately 1,080 million euros per year. But they estimate that cross-border commercial activities of small companies within the EU will increase by 13.5%.

More paperwork

They are not of the same opinion at ATA, who foresee a negative impact "not only because of the effort and cost that will be required to invoice in each case based on a different VAT, but because we fear that the proposed certified company figure (CTP), which It would allow orders to be received without VAT in relationships between companies, only benefiting large companies, due to how complicated and expensive it is to access that status. “It should be fast, cheap and easy for SMEs and the self-employed.” The Catalan employers' association also warns that accessing CTP status will mean an increase in administrative burdens.

Another issue on the table is the VAT exemption for companies that do not exceed a certain volume of business. “At Cepyme we see the need to maintain this type of exemption and partner states should be obliged to apply it. However, such exemptions should be designed in a way that does not create unfair competition for non-exempt SMEs and should not provide an incentive for fraud.”

MEASURES

Scope. SMEs that have a turnover of less than two million may benefit from measures to simplify VAT registration, invoicing or bookkeeping obligations.

Exemptions. Member States may relieve VAT-exempt small businesses from tax obligations relating to identification, invoicing, accounting and declarations.
Limit. 100,000 euros is the maximum business volume so that companies that operate in more than one State can benefit from the exemption.

Here it must be explained that they can currently only benefit from the exemption in their own country, but not in other Member States with whom they have commercial relations. “It is very important that this exemption is also achieved at the European level, since it would expand the markets for this type of companies and the potential of the single market would be fully exploited by selling in other Community States other than their own and reducing the tax burden and administrative costs. "what the transaction of these products or services entails," they conclude in the national employers' association.