New VAT Rules for Small Businesses

The domestic VAT SME scheme allows small businesses to sell goods and services to their customers without charging VAT. In Ireland, the VAT registration thresholds are:

€42,500 for businesses supplying services; and
€85,000 for businesses supplying goods.

Irish businesses operating below these thresholds making supplies of goods and services within Ireland are not required to register and charge for VAT. However, up to 31 December 2024, if the Irish business made supplies in another EU Member State, there was no registration threshold and the business could have registration and filing obligations in the Member State where the supply took place.

From 1 January 2025, the EU VAT SME scheme allows these small businesses the option to avail of the registration thresholds in other Member States. If eligible, these businesses will not have to register for VAT when supplying goods and services there.

To be eligible to use this EU VAT SME scheme in another Member State, an Irish business must:

be established for VAT purposes in Ireland only,
not exceed the domestic turnover threshold(s) of the other Member State(s) where supplies are made,
not exceed the Union turnover threshold of €100,000,
be registered in Ireland to use the scheme and file quarterly reports once registered. These reports declare the turnover of the small business in all EU Member States.

An Irish business wishing to register to use the scheme in other Member States must make a formal application to Revenue. If successful, it will receive an individual identification number with the suffix “EX”. This number must be provided on any invoices issued by the business.

Business customers located in other EU countries who receive an invoice with “EX” are not obliged to account for VAT using the reverse charge mechanism on that invoice. It is the business customer’s responsibility to check the VAT exempt status of the small enterprise using the SME verification check.

The EU VAT SME scheme is only open to small businesses established within the European Union. It does not apply to small businesses established in the United Kingdom, including Northern Ireland.

It is possible for a small business to avail of the EU VAT SME scheme in some Member States and the standard VAT regime or One Stop Shop scheme in others. As businesses that avail of the VAT SME schemes cannot reclaim VAT on their costs, each small business must assess the best option for them.

However, this new scheme will significantly reduce compliance for small EU-based businesses selling to other EU countries.

If you require further information or assistance, please contact us.