VAT registration threshold in the EU

Value Added Tax (VAT) is a VAT tax that applies to most goods and services sold in the European Union. VAT registration threshold is a VAT exemption limit for registering for VAT or VAT recovery, which varies from country to country within the EU. The rules allowing EU countries to exempt small businesses below a turnover threshold are set out in Council Directive 2006/112/EC, as amended by Directive (EU) 2020/285, which introduced a new SME scheme from 1 January 2025.

How the EU VAT Registration Threshold Works

Under the SME scheme, each EU country may set an annual turnover threshold of up to €85,000 below which small businesses can be exempt from charging VAT. In order not to exceed their VAT taxable transactions, small business operators must register for VAT as soon as they reach this limit. Therefore, it becomes difficult for them to know when to start with their VAT compliance.

VAT registration threshold in some European Union member states

The Council Directive 2006/112/EC of 28 November 2006 on the common system of value added taxation does not establish a VAT registration threshold, but each Member State is free to apply or not a VAT registration threshold for VAT taxable persons. In practice, some countries have VAT registration thresholds while others do not. These thresholds only apply to businesses established in the EU: since 2025, EU small businesses can also use the exemption in other member states if their total EU turnover does not exceed €100,000, but non-EU businesses cannot use the SME scheme and must register for VAT from their first taxable supply in a member state.

The VAT registration threshold varies depending on VAT taxable transactions in each country. Businesses must register for VAT once their taxable turnover exceeds the VAT registration threshold and the small business exemption no longer applies. VAT-exempt entities should also pay close attention to this limit, because they may need to start complying with VAT requirements if their deals get close to or exceed that point.

In addition to monitoring turnover, there are additional factors that VAT taxable entities must check in order to determine whether VAT registration threshold has been reached. While VAT-registered businesses must register for VAT once VAT taxable turnover reaches the VAT registration threshold, VAT-exempt entities should also take into account any applicable VAT transactions.

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