Special scheme for small enterprises under the VAT Directive 2006/112/EC : options for review : final report. Volume II.
Date: 2017-12-13
Institutions: Directorate-General for Taxation and Customs Union
Subjects: VAT, fiscal policy, provision of services, small and medium-sized enterprises, tax exemption, tax harmonisation, tax relief

Special scheme for small 
enterprises under the VAT 
Directive 2006/112/EC - 
Options for review 

Final Report  

Volume II 

Written by Deloitte 

May 2017 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017 

Directorate-General for Taxation and Customs Union 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Directorate-General for Taxation and Customs Union 
Directorate C — Indirect Taxation and Tax Administration 
Unit C1 — Value Added Tax 

Contact: 
E-mail: TAXUD-UNIT-C1@ec.europa.eu 
European Commission 
B-1049 Brussels 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Special scheme for small 
enterprises under the VAT 
Directive 2006/112/EC - 
Options for review 

Final Report  

Volume II 

2017 

Directorate-General for Taxation and Customs Union 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Luxembourg: Publications Office of the European Union, 2017 

KP-06-17-211-EN-N 
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© European Union, 2017 
Reproduction is authorised provided the source is acknowledged. 

2017 

Directorate-General for Taxation and Customs Union 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notice 

The information and views set out in this report are those of the author(s) and do not necessarily reflect 
the official opinion of the Commission. The Commission does not guarantee the accuracy of the data 
included in this study. Neither the Commission nor any person acting on the Commission’s behalf may 
be held responsible for the use which may be made of the information contained therein. 

2017 

Directorate-General for Taxation and Customs Union 

EN 

 
 
 
 
 
 
 
 
2017 

Directorate-General for Taxation and Customs Union 

EN 

 
 
 
 
 
 
Table of Contents 

Annex A – Overview of SME Schemes ................................................................................................... 1 

A.1 

Information on the return filing simplification provisions ........................................................... 1 

A.2  SME exemption scheme ........................................................................................................... 2 

A.3 

Flat-rate scheme ....................................................................................................................... 6 

A.4  Cash accounting scheme ......................................................................................................... 8 

A.5  Overview of the Member States’ VAT Committee consultations ............................................ 11 

Annex B - Data received from tax authorities ....................................................................................... 12 

B.1  Data obtained on SMEs’ domestic activities .......................................................................... 13 

B.3  Data obtained in connection with taxable cross-border transactions ..................................... 43 

Annex C – Estimation methodology ...................................................................................................... 45 

C.1   Data estimated relating to SMEs’ domestic activities ............................................................... 46 

C.2   Data estimated in connection to the SME exemption scheme ................................................. 73 

Annex D – Country specific estimates .................................................................................................. 80 

D.1 Consolidation of data related to SMEs’ domestic activities ........................................................ 80 

D.2   Consolidation of data related to the SME exemption scheme ............................................... 95 

Annex E – Ipsos MORI surveys ............................................................................................................ 98 

E.1   Profile of businesses interviewed ........................................................................................... 98 

Annex F – VAT Compliance costs estimation – Literature review ...................................................... 101 

Annex G – Standard Cost Model ........................................................................................................ 112 

G.1 Objectives, scope and sources for the analysis ....................................................................... 112 

Data and assumptions ................................................................................................................. 113 

SME exemption scheme .............................................................................................................. 119 

VAT graduated relief .................................................................................................................... 139 

Cash accounting scheme............................................................................................................. 144 

Flat-rate scheme .......................................................................................................................... 148 

Annex H – Elements of the Policy Options ......................................................................................... 164 

Annex I – Methodological note for the analysis of the options ............................................................ 174 

I.1 Introduction ................................................................................................................................. 174 

I.2 General Assumptions ................................................................................................................. 175 

Common VAT rate ....................................................................................................................... 175 

Number of SMEs in the EU .......................................................................................................... 175 

Treatment of Domestic SME Exemption Thresholds ................................................................... 175 

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Cross-border transactions in scope ............................................................................................. 176 

Number of SMEs trading cross border ........................................................................................ 180 

Hourly costs for the Standard Cost Model ................................................................................... 182 

Costs for businesses to use the MOSS ....................................................................................... 182 

I.3 Option 1 – Baseline scenario ..................................................................................................... 183 

Number of businesses under the under the baseline scenario ................................................... 183 

Businesses’ compliance costs ..................................................................................................... 184 

VAT revenue collected ................................................................................................................. 185 

I.4  Option  2  -  SME  exemption  scheme  extended  to  supplies  from  other  Member  States  and 
including streamlined simplification measures ................................................................................ 185 

Number of businesses impacted by the extension of the threshold to non-established businesses 
and turnover at stake ................................................................................................................... 186 

Number of businesses impacted by the Streamlined Simplification Package ............................. 192 

Impact on businesses compliance costs ..................................................................................... 193 

Impact on the VAT revenue collected .......................................................................................... 195 

Impact on the wider economy ...................................................................................................... 195 

I.5 Option 3 - Option 2 plus mandatory treatment of occasional traders as non-taxable person .... 196 

Number  of  businesses  impacted  by  the  treatment  of  occasional  traders  as  non-taxable  person

197 

Impact on businesses’ compliance costs ..................................................................................... 198 

Impact on the VAT revenue collected .......................................................................................... 198 

Impact on the wider economy ...................................................................................................... 199 

I.6  Option  4  -  Option  3  plus  measures  for  transition  period  reducing  the  negative  impact  of  the 
‘threshold effect’ .............................................................................................................................. 199 

Number of businesses impacted by measures for the transitional period ................................... 200 

Impact on businesses’ compliance costs ..................................................................................... 201 

Impact on the VAT revenue collected .......................................................................................... 202 

Impact on the wider economy ...................................................................................................... 202 

Annex J – Assessment of policy options – Compliance costs ............................................................ 203 

J.1   Baseline scenario .................................................................................................................... 203 

Impact on businesses trading domestically ................................................................................. 203 

Impact on businesses trading cross-border ................................................................................. 204 

J.2      Option  2  -  SME  exemption  scheme  extended  to  supplies  from  other  Member  States  and 
including streamlined simplification measures ................................................................................ 204 

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Impact on businesses trading domestically ................................................................................. 206 

Impact on businesses trading cross-border ................................................................................. 215 

J.3   Option 3 - Option 2 plus mandatory treatment of occasional traders as non-taxable person . 215 

J.4      Option  4  -  Option  3  plus  measures  for  transition  period  reducing  the  negative  impact  of  the 
‘threshold effect’ .............................................................................................................................. 215 

Annex K – CGE model ........................................................................................................................ 217 

K.1 Multi-sector Computable General Equilibrium (CGE) model .................................................... 217 

K.2 Data strategy ............................................................................................................................. 219 

K.3 Macro-economic data................................................................................................................ 219 

K.4 Construction of the EU Social Accounting Matrix ..................................................................... 220 

Annex L – Bibliography ....................................................................................................................... 224 

Studies produced at international level ........................................................................................ 224 

Studies produced at European level ............................................................................................ 225 

Datasets used .............................................................................................................................. 229 

Legislation and proposed legislation ............................................................................................ 229 

Websites ...................................................................................................................................... 230 

Case Law ..................................................................................................................................... 230 

List of Figures 

Figure 1 – Overview of application of the SME exemption scheme to domestic businesses ................. 4 

Figure 2 – Overview of obligations for SMEs to register for VAT under exemption schemes ................ 5 

Figure 3 – Overview of applicability of flat-rate scheme to only domestic businesses ........................... 7 

Figure 4 – Member States applying output only or combined cash accounting ..................................... 9 

Figure 5 – Overview of the obligation to remain in the special scheme for a specified period of time . 10 

Figure 6 – Distribution of SMEs in Belgium by sector of activity and turnover bracket ........................ 26 

Figure 7 – Distribution of SMEs in Bulgaria by sector of activity and turnover bracket ........................ 27 

Figure 8 – Distribution of SMEs in Croatia by sector of activity and turnover bracket .......................... 27 

Figure 9 – Distribution of SMEs in the Czech Republic by sector of activity and turnover bracket ...... 28 

Figure 10 – Distribution of SMEs in Denmark by sector of activity and turnover bracket ..................... 28 

Figure 11 – Distribution of SMEs in Finland by sector of activity and turnover bracket ....................... 29 

Figure 12 – Distribution of SMEs in France by sector of activity and turnover bracket ........................ 29 

Figure 13 – Distribution of SMEs in Hungary by sector of activity and turnover bracket ...................... 30 

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Figure 14 – Distribution of SMEs in Ireland by sector of activity and turnover bracket ........................ 30 

Figure 15 – Distribution SMEs in Italy by sector of activity and turnover bracket ................................. 31 

Figure 16 – Distribution of SMEs in Lithuania by sector of activity and turnover bracket ..................... 31 

Figure 17 – Distribution of SMEs in Slovakia by sector of activity and turnover bracket ...................... 32 

Figure 18 – Distribution of SMEs in Slovenia by sector of activity and turnover bracket ..................... 32 

Figure 19 – Distribution of SMEs businesses in Spain by sector of activity and turnover bracket ....... 33 

Figure  20  –  VAT  compliance  burden  (number  of  hours)  in  2014  across  Member  States  based  on  a 
medium sized business model company (PWC and World Bank) ...................................................... 107 

Figure  21  –  Comparison  of  2014  VAT  compliance  costs  obtained  from  the  literature  and  from  the 
estimation methodology taking the Netherlands as a base cost ......................................................... 109 

Figure 22 – Range of 2014 VAT compliance costs per business estimated for each EU Member State
 ............................................................................................................................................................ 110 

Figure  23  –  Median  of  the  VAT  compliance  costs  estimated  as  a  percentage  of  turnover  for  an 
average business in each Member State. ........................................................................................... 111 

Figure 24  – Summary figure of choices faced  by businesses carrying out B2C  intra-EU sales in the 
baseline ............................................................................................................................................... 178 

Figure  25  -  Summary  figure  of  choices  faced  by  businesses  carrying  out  B2C  intra-EU  sales  in  the 
policy options ...................................................................................................................................... 179 

Figure 26 – Summary of the assumptions needed to obtain the number of businesses eligible for the 
policy change in Option 2 .................................................................................................................... 187 

Figure 27 – Illustration of the VAT revenue at stake from policy option 2 .......................................... 192 

Figure 28 - Circular Flow of Income .................................................................................................... 217 

Figure 29: Basic structure of the Social Accounting Matrix ................................................................ 222 

List of Tables 

Table 1 – Information on the return filing simplification .......................................................................... 1 

Table 2 – Overview of Member States’ VAT Committee consultations ................................................ 11 

Table 3 – Number of businesses in each turnover bracket and share of SMEs, by Member State ..... 14 

Table 4 – Proportion of businesses in each size class compared to the total number of businesses, by 
Member State ........................................................................................................................................ 15 

Table 5 – Total number and distribution of businesses in different size classes in Austria .................. 16 

Table 6 – Total number and distribution of businesses in different size classes in Croatia ................. 16 

Table 7 – Total number and distribution of businesses in different size classes in Italy ...................... 16 

Table 8 – Number and distribution of businesses in different size classes in Lithuania ....................... 17 

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Table 9 – Total number and distribution of businesses in different size classes in Luxembourg ......... 17 

Table  10  –  Total  number  and  distribution  of  VAT-registered  businesses  in  different  size  classes  in 
Denmark ................................................................................................................................................ 18 

Table  11  –  Total  number  and  distribution  of  VAT-registered  businesses  in  different  size  classes  in 
Poland ................................................................................................................................................... 18 

Table 12 – Number of VAT-registered businesses in each size class in the United Kingdom ............. 19 

Table  13  –  Distribution  of  VAT-registered  businesses  for  which  turnover  was  identified  in  each  size 
class for the United Kingdom ................................................................................................................ 19 

Table 14 – Total turnover generated from businesses in each turnover bracket (million EUR) ........... 20 

Table 15 – Estimated average turnover generated from businesses in each turnover bracket (EUR) 21 

Table  16  – Total  turnover generated  by  businesses  in  Austria  and  estimates  of  average  turnover of 
businesses in different size class .......................................................................................................... 22 

Table 17 – Total turnover generated by businesses in Croatia and estimates of average turnover of 
businesses in different size class .......................................................................................................... 22 

Table  18  –  Total  turnover  generated  by  businesses  in  Italy  and  estimates  of  average  turnover  of 
businesses in different size class .......................................................................................................... 23 

Table  19  –  Total  turnover  generated  by  businesses  classified  within  turnover  brackets  in  Lithuania 
and estimates of average turnover of businesses in different size class .............................................. 23 

Table 20 – Total turnover generated by businesses classified within turnover brackets in Luxembourg 
and estimates of average turnover of businesses in different size class .............................................. 24 

Table  21  –  Total  turnover  generated  by  VAT-registered  businesses  in  Denmark  and  estimates  of 
average turnover of these businesses in different size class ............................................................... 24 

Table  22  –  Total  turnover  generated  by  VAT-registered  businesses  in  Poland  and  estimates  of 
average turnover of these businesses in different size class ............................................................... 25 

Table 23 – Gross and net VAT revenue generated by businesses of different size (million EUR) ...... 34 

Table 24 – Gross and net VAT revenue generated by businesses of different size in Austria (million 
EUR) ...................................................................................................................................................... 36 

Table 25 – Gross and net VAT revenue generated by businesses of different size in Croatia (million 
EUR) ...................................................................................................................................................... 37 

Table  26  –  Gross  and  net  VAT  revenue  generated  by  businesses  of  different  size  in  Italy  (million 
EUR) ...................................................................................................................................................... 37 

Table 27 – Gross and net VAT revenue generated by businesses of different size in Lithuania (million 
EUR) ...................................................................................................................................................... 38 

Table  28  –  Gross  and  net  VAT  revenue  generated  by  businesses  of  different  size  in  Luxembourg 
(million EUR) ......................................................................................................................................... 38 

Table 29 – Number of businesses exempted from VAT under the SME exemption scheme .............. 39 

Table 30 – Participation rates estimated on tax authority data ............................................................. 40 

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Table  31  –  Percentage  of  turnover  generated  by  businesses  exempted  from  VAT  under  the  SME 
exemption scheme out of total turnover generated in each size class ................................................. 41 

Table 32 – Information on cross-border transactions provided by tax authorities ................................ 43 

Table  33  –  Cross-border  transactions  of  VAT-registered  businesses  below  the  VAT  registration 
threshold in Lithuania ............................................................................................................................ 43 

Table  34  –  Cross-border  transactions  of  VAT  registered  businesses  below  the  VAT  registration 
threshold in Luxembourg ....................................................................................................................... 44 

Table  35  –  Cross-border  transactions  of  VAT  registered  businesses  below  the  VAT  registration 
threshold in Slovenia ............................................................................................................................. 44 

Table 36 – Estimated number of businesses by Member State ........................................................... 48 

Table  37  –  Statistics  of  the  proportions  of  businesses  in  each  turnover  bracket  from  tax  authorities 
and Mint Global data ............................................................................................................................. 49 

Table 38 – Estimated number of businesses by turnover bracket and Member State ......................... 50 

Table 39 – Number of businesses in different size classes provided by the tax authorities in Croatia 51 

Table 40 – Estimates of the number of businesses in Croatia by turnover brackets and distribution of 
businesses by turnover brackets .......................................................................................................... 51 

Table 41 – Number of businesses in different size classes provided by the tax authorities in Italy ..... 52 

Table  42  –  Estimates  of  the  number  of  businesses  in  Italy  by  turnover  brackets  and  distribution  of 
businesses by turnover brackets .......................................................................................................... 52 

Table 43 – Number of businesses in each size class in Lithuania ....................................................... 52 

Table 44 – Estimates of the number of businesses in Lithuania by turnover brackets and distribution 
of businesses by turnover brackets ...................................................................................................... 53 

Table 45 – Total number of VAT-registered businesses in different size classes in Denmark ............ 54 

Table 46 – Estimates of the number of businesses in Denmark by turnover brackets and distribution 
of businesses by turnover brackets ...................................................................................................... 54 

Table 47 – Total number of VAT-registered businesses in different size classes in Poland ................ 54 

Table 48 – Estimates of the number of businesses in Poland by turnover brackets and distribution of 
businesses by turnover brackets .......................................................................................................... 55 

Table 49 – Number of VAT-registered businesses in each size class in the United Kingdom ............. 55 

Table  50  –  Estimates  of  the  number  of  businesses  in  the  United  Kingdom  and  distribution  of 
businesses by turnover brackets .......................................................................................................... 56 

Table 51 – Statistics of the distribution across Member States of the average turnover per business in 
each size class (in EUR) ....................................................................................................................... 57 

Table 52 – Estimated generated turnover by SMEs of different size, by Member State (in million EUR)
 .............................................................................................................................................................. 58 

Table 53 – Turnover generated by businesses of different size classes provided by the tax authorities 
in Croatia (in million EUR) ..................................................................................................................... 60 

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Table 54 – Estimates of turnover generated by businesses in Croatia by turnover brackets (in million 
EUR) ...................................................................................................................................................... 60 

Table 55 – Turnover generated by businesses of different size classes provided by the tax authorities 
in Italy (in million EUR) .......................................................................................................................... 60 

Table  56  –  Estimates  of  turnover  generated  by  businesses  in  Italy  by  turnover  brackets  (in  million 
EUR) ...................................................................................................................................................... 61 

Table 57 – Turnover generated by businesses of different size classes provided by the tax authorities 
in Lithuania (in million EUR) .................................................................................................................. 61 

Table 58 – Estimates of turnover generated by businesses in Lithuania by turnover brackets (in million 
EUR) ...................................................................................................................................................... 61 

Table  59  –  Turnover  generated  by  VAT-registered  businesses  of  different  size  classes  provided  by 
the tax authorities in Denmark (in million EUR) .................................................................................... 62 

Table  60  –  Estimates  of  turnover  generated  by  all  businesses  in  Denmark  by  turnover  brackets  (in 
million EUR) .......................................................................................................................................... 62 

Table  61  –  Turnover  generated  by  VAT-registered  businesses  of  different  size  classes  provided  by 
the tax authorities in Poland (in million EUR) ........................................................................................ 62 

Table  62  –  Estimates  of  turnover  generated  by  all  businesses  in  Poland  by  turnover  brackets  (in 
million EUR) .......................................................................................................................................... 63 

Table 63 – Net VAT revenue by Member State (in million EUR) .......................................................... 65 

Table  64  –  Statistics  of  the  distribution  of  net  and  gross  VAT  revenues  generated  by businesses  of 
different size across the EU .................................................................................................................. 65 

Table 65 – Estimates of the net VAT revenue generated turnover by businesses of different size, by 
Member State (in million EUR).............................................................................................................. 66 

Table 66 – Estimates of the gross VAT revenue generated turnover by businesses of different size, by 
Member State (in million EUR).............................................................................................................. 67 

Table  67  –  VAT  revenues  generated  by  businesses  of  different  size  classes  provided  by  the  tax 
authorities in Croatia (in million EUR) ................................................................................................... 69 

Table  68  –  VAT  revenues  generated  by  businesses  of  different  size  classes  provided  by  the  tax 
authorities in Croatia (in million EUR) ................................................................................................... 69 

Table  69  –  VAT  revenues  generated  by  businesses  of  different  size  classes  provided  by  the  tax 
authorities in Italy (in million EUR) ........................................................................................................ 70 

Table  70  –  VAT  revenues  generated  by  businesses  of  different  size  classes  provided  by  the  tax 
authorities in Italy (in million EUR) ........................................................................................................ 70 

Table  71  –  VAT  revenues  generated  by  businesses  of  different  size  classes  provided  by  the  tax 
authorities in Lithuania (in million EUR) ................................................................................................ 71 

Table 72 – Estimates of the VAT revenues generated by businesses in Lithuania by turnover brackets 
(in million EUR) ..................................................................................................................................... 71 

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Table 73 – Net VAT revenues generated by businesses of different size classes provided by the tax 
authorities in the Netherlands (in million EUR) ..................................................................................... 72 

Table  74  –  Estimates  of  the  gross  VAT  revenues  generated  by  businesses  in  the  Netherlands  by 
turnover brackets (in million EUR) ........................................................................................................ 72 

Table 75 – Estimated number of eligible businesses, take-up rates and exempted businesses under 
the SME exemption scheme ................................................................................................................. 76 

Table 76 – Estimated number of businesses exempted under the SME exemption scheme and their 
generated turnover ................................................................................................................................ 78 

Table 77 – Number of businesses in each turnover bracket and share of SMEs, by Member State ... 80 

Table 78  – Number  of businesses  in the turnover  bracket provided by tax authorities in Austria and 
share of SMEs ....................................................................................................................................... 81 

Table 79 – Number of businesses in the turnover bracket provided by tax authorities in Luxembourg
 .............................................................................................................................................................. 82 

Table 80 – Proportion of businesses in each size class compared to the total number of businesses, 
by Member State ................................................................................................................................... 82 

Table 81 – Total turnover generated from businesses in each turnover bracket (million EUR) ........... 84 

Table 82 – Total turnover generated from businesses in Austria in the turnover brackets provided by 
the tax authorities (million EUR) ........................................................................................................... 85 

Table  83  –  Total  turnover  generated  from  businesses  in  Luxembourg  in  the  turnover  brackets 
provided by the tax authorities (million EUR) ........................................................................................ 86 

Table 84 – Estimated average turnover generated from businesses in each turnover bracket (EUR) 86 

Table  85  –  Average  turnover  from  businesses  of  different  size  in  Austria  in  the  turnover  brackets 
provided by the tax authorities (EUR) ................................................................................................... 87 

Table 86 - Average turnover from businesses of different size in Luxembourg in the turnover brackets 
provided by the tax authorities (EUR) ................................................................................................... 88 

Table 87 – Share of total turnover generated by businesses of different size ...................................... 89 

Table  88  –  Share  of  turnover  generated  by  businesses  of  different  size  in  Austria,  classified  within 
turnover brackets provided by the tax authorities ................................................................................. 90 

Table  89  -  Share  of  turnover  generated  by  businesses  of  different  size  in  Austria,  classified  within 
turnover brackets provided by the tax authorities ................................................................................. 90 

Table 90 – Gross and net VAT revenue generated by businesses of different size (million EUR) ...... 91 

Table 91 – Gross and net VAT revenue generated by businesses of different size in Austria, classified 
within the turnover brackets provided by the tax authorities (million EUR) .......................................... 94 

Table  92  –  Gross  and  net  VAT  revenue  generated  by  businesses  of  different  size  in  Luxembourg, 
classified within the turnover brackets provided by the tax authorities (million EUR) ........................... 95 

Table 93 - Number of exempted businesses and take-up rates under the SME exemption scheme .. 95 

Table 94 – Turnover generated by businesses exempted under the SME exemption scheme ........... 97 

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Table 95 – Number of businesses interviewed by Ipsos MORI in each country, by turnover bracket . 98 

Table 96 – Number of businesses exempted under the SME exemption scheme in each country, by 
turnover bracket .................................................................................................................................... 99 

Table 97 – Percentage of businesses interviewed carrying out cross-border trade in each country and 
across the three markets ....................................................................................................................... 99 

Table  98  –  Percentage  of  businesses  carrying  out  cross-border  transactions  out  of  businesses 
exempted under the SME exemption scheme or businesses eligible to the scheme but opting for the 
common regime .................................................................................................................................. 100 

Table 99 – VAT compliance costs per business found in the literature .............................................. 101 

Table  100  –  VAT  compliance  costs  per  employee  or  as  a  percentage  of  turnover  found  in  the 
literature .............................................................................................................................................. 105 

Table 101 – VAT compliance costs estimated in 2014 for 5 Member States ..................................... 108 

Table 102 – Sample of VAT special schemes and businesses interviewed in the eight Member States 
selected for fieldwork .......................................................................................................................... 114 

Table 103 – Information Obligations used in the Standard Cost Model ............................................. 116 

Table 104 – Sample of businesses interviewed in Estonia ................................................................. 119 

Table 105 – Compliance costs for businesses outside of the SME exemption scheme in Estonia ... 121 

Table 106 – Sample of businesses interviewed in France ................................................................. 123 

Table 107 – Compliance costs for businesses within the SME exemption scheme in France ........... 124 

Table 108 – Compliance costs for businesses outside of the SME exemption scheme in France .... 126 

Table 109 – Sector-based turnover thresholds for VAT exemption in Italy ........................................ 127 

Table 110 – Sample of businesses interviewed in Italy ...................................................................... 128 

Table 111 – Compliance costs for businesses within the SME exemption scheme in Italy ............... 130 

Table 112 – Compliance costs for businesses outside of the SME exemption scheme in Italy ......... 132 

Table 113 – Sample of businesses interviewed in Romania .............................................................. 134 

Table 114 – Compliance costs for businesses outside of the SME exemption scheme in Romania . 135 

Table 115 – Sample of businesses interviewed in UK ........................................................................ 137 

Table 116 – Compliance costs for businesses outside of the SME exemption scheme in UK .......... 138 

Table 117 – Sample of businesses interviewed in Spain ................................................................... 140 

Table 118 – Compliance costs for businesses within the graduated relief scheme in Spain ............. 141 

Table 119 – Compliance costs for businesses outside of the graduated relief scheme in Spain ....... 143 

Table 120 – Compliance costs for businesses within the cash accounting scheme in Italy ............... 146 

Table 121 – Sample of businesses interviewed in Romania .............................................................. 148 

Table 122 – Sample of businesses interviewed in Belgium ................................................................ 149 

Table 123 – Compliance costs for businesses within the flat-rate scheme in Belgium ...................... 151 

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Table 124 – Compliance costs for businesses outside of the flat-rate scheme in Belgium ................ 153 

Table 125 – Compliance costs for businesses outside the flat-rate scheme in Poland ..................... 155 

Table 126 – Flat rates applied in Spain .............................................................................................. 157 

Table 127 – Sample of businesses interviewed in Spain ................................................................... 157 

Table 128 – Compliance costs for businesses within the flat-rate scheme in Spain .......................... 159 

Table 129 – Flat-rates applied in UK .................................................................................................. 160 

Table 130 – Compliance costs for businesses within the flat-rate scheme in UK .............................. 162 

Table 131 – Elements of the policy options – description and assessment ....................................... 165 

Table 132 – Comparison of Flash Eurobarometer and IfM Bonn data on exporting businesses ....... 181 

Table 133 – Sensitivities on the assumptions used to calculated the number of impacted businesses 
by Option 2 .......................................................................................................................................... 189 

Table 134 – Sensitivities on the number of businesses impacted by Option 2 .................................. 190 

Table 135 – Number of businesses identified as occasional traders and sensitivities ....................... 198 

Table 136 – Proportion of businesses impacted by policy option 4, EU-level and by Member State 200 

Table 137 – Scenarios for streamlined simplification packages under policy option 2....................... 205 

Table 138 – Compliance costs for businesses trading domestically and applying the VAT exemption 
scheme under option 2 (Generalised simplification scenario) ............................................................ 207 

Table  139  –  Compliance  costs  for  businesses  trading  domestically  and  opting  out  of  the  VAT 
exemption scheme under option 2 (Generalised simplification scenario) .......................................... 208 

Table 140 – Compliance costs for businesses trading domestically and applying the VAT exemption 
scheme under option 2 (Medium simplification scenario) ................................................................... 210 

Table  141  –  Compliance  costs  for  businesses  trading  domestically  and  opting  out  of  the  VAT 
exemption scheme under option 2 (Medium simplification scenario) ................................................. 211 

Table 142 – Compliance costs for businesses trading domestically and applying the VAT exemption 
scheme under option 2 (Minimal simplification scenario .................................................................... 213 

Table  143  –  Compliance  costs  for  businesses  trading  domestically  and  opting  out  of  the  VAT 
exemption scheme under option 2 (Minimal simplification scenario).................................................. 214 

Table 144 – Compliance costs for businesses within the transitional period under option 4 ............. 216 

Table 145 - Primary data inconsistencies encountered and the specific data reconciliation strategy 223 

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Annex A – Overview of SME 
Schemes 

A.1 

Information on the return filing simplification provisions  

Information on the return filing simplification provisions is set out in the table below. 

Note: This information was collected in March 2016. 

Table 1 – Information on the return filing simplification  

Country 

Eligibility 

Return 
frequency 
simplification 

filing 
or 

Notes 

Belgium 

< EUR 2.5 million 

Quarterly 

Czech Republic 

<  CZK  10  million 
> CZK 6 million 

Quarterly 
No obligation to e-file 

Denmark 

Finland 

France 

<  DKK 
DKK 5 - 50 million  

5  million 

Six-monthly 
Quarterly 

<EUR 
25 
< EUR 50 000 

000 

000 

783 

<  EUR 
(goods) 
<  EUR 
(services) 
VAT < EUR 15 000 pa 

236 

000 

Annually 
Quarterly 

Annually 
Annually 
Quarterly 

Hungary 

No obligation for filing 

For 
fraud 
some 
sensitive  sectors  (such 
as  mobile  phones) 
turnover  is  reduced  to 
EUR 250,000 

Conditions 

apply.

Firms  must  be  natural 
persons. 

sector 
cleaning, 

Construction 
including 
repairing, 
maintenance, 
and 
demolition 
transformation services 
excluded.   

Full  exemption 
from 
filing if no VAT due and 
no  obligation 
file 
ECSL. 

to 

Ireland 

Italy 

Annually,  otherwise  bi-
monthly 

<  EUR 
(services) 
<  EUR 
(goods) 

400 

000 

400 

000 

Quarterly 
Quarterly 

Luxembourg 

<  EUR 
<  EUR 

620 
112 

000 
000 

Quarterly 
Annually 

All 
taxpayers  with 
turnover  above  EUR 

1 | P a g e  

 
 
 
 
  
  
  
  
  
  
Country 

Eligibility 

Poland 

Portugal 

< EUR 25 000   

< EUR 650 000 

Slovak Republic 

< EUR 100 000 

Return 
frequency 
simplification 
No return required 

filing 
or 

Notes 

112  000  have  to  file 
electronically. 

Quarterly 

Quarterly 

Quarterly 

Spain 

SMEs  under  simplified 
scheme 

Quarterly 
Annually: the final VAT 
return 

Sweden 

< SEK 1 million 

Annually 

applicable 

Not 
limited partnerships. 

to 

United Kingdom 

< GBP 1.35 million and 
accounting 
annual 
scheme 

Annually 

Source: Deloitte compilation of data from the Deloitte Tax Network Survey (collected March 2016) 

A.2  SME exemption scheme1  

The  Deloitte  tax  network  was  provided  with  a  list  of  the  most  common  elements  per  scheme  and 
asked to provide input on the availability of the element and, if applicable, further information on this 
element in their Member State. In the body of the text the below input has been summarised. 

For the SME exemption scheme, the following (comprehensive) list of elements was provided to the 
tax network: 

  The SME is exempt from the obligation to charge VAT on supplies covered by the scheme; 
  The SME has no right to deduct input VAT on purchased goods and services. 
  The SME exemption scheme is only applicable to domestic businesses; 
  The SME exemption scheme only covers domestic supplies; 
  The SME covered by the scheme is not required to register for VAT purposes; 
  The  SME  covered  by  the  scheme  is  required  to  register  for  other  purposes  such  as 

commercial or tax purposes; 

  The SME covered by the scheme is released from obligation to submit periodical VAT returns; 
  The accounting obligations of the SME covered by the scheme are simplified; 
  The SME covered by the scheme can opt-out and apply the common VAT rules; and 
  The SME has the obligation to issue VAT invoices. 

Additionally,  we  asked  whether  any  other  fundamental  elements  were  present  that  were  not 
mentioned in this list. 

In what follows, all of the above elements will be discussed separately.  

1 This analysis does not include the Swedish SME exemption scheme, implemented from 1 January 2017, as the information 
was collected in March 2016, when the Swedish scheme was not yet in force 

2 | P a g e  

 
 
  
  
  
  
  
 
 
 
 
 
 
                                                      
Exemption from the obligation to charge VAT and no right to deduct input VAT 

All Member States have implemented this element of the scheme. An SME in scope of this exemption 
has  no  obligation  to  charge  VAT.  The  consequential  downside  is  that  no  input  VAT  deduction  is 
available for the relevant SMEs.  

Nevertheless,  it  should  be mentioned  that  some countries  inserted  the  rule  that  in  case  the  exempt 
company does charge VAT on an invoice, it becomes liable to pay the VAT. Such a rule is a reflection 
of  the  safeguard  laid  down  in  Article  203  of  the  VAT  Directive,  which  provides  that  “VAT  shall  be 
payable by any person who enters the VAT on an invoice”. 

Applicability to domestic businesses and/or domestic supplies 

With  regard  to  this  element,  the  schemes  start  to  get  more  mixed.  In  80%2  of  the  relevant  Member 
States3, the SME exemption only applies to domestic businesses, meaning that these Member States 
only exempt supplies of goods and services by taxable persons who are established in their Member 
State. SMEs not established in the relevant Member State where the transaction takes place for VAT 
purposes  cannot  benefit  from  the  exemption.  In  the  remaining  Member  States  a  non-established 
taxable person performing taxable transactions in a certain Member State can benefit from the SME 
exemption. 

Additionally,  when  asked  whether  the  SME  exemption  covers  only  domestic  supplies  22  Member 
States (85%)4 answered positively.5 This could mean that cross-border intra-EU supplies of goods or 
services are generally not covered by the scheme or could point to a misinterpretation of the question 
raised. 

2  Austria,  Belgium,  the  Czech  Republic,  Germany,  Denmark,  France,  Greece,  Croatia,  Hungary,  Ireland,  Italy,  Lithuania, 
Luxembourg, Latvia, Malta, Poland, Portugal, Romania, Slovakia, Sweden and the United Kingdom. 
3 The “relevant” Member States are all Member States that opted for a SME exemption scheme in their national VAT law. This 
excludes Sweden (adopted in January 2017, after data collection) 
4  Austria,  Belgium,  Bulgaria,  Cyprus,  the  Czech  Republic,  Germany,  Denmark,  France,  Croatia,  Hungary,  Ireland,  Italy, 
Lithuania, Luxembourg, Latvia, Poland, Portugal, Romania, Slovenia, Slovakia and the United Kingdom.  
5  “Domestic  supplies”  are  supplies  for  which  the  place  of  supply  is  deemed  to  be  the  Member  State  of  establishment  of  the 
SME.  That  means,  that  domestic  supplies  include  also  the  cross-border  distance  sales  as  far  as  the  place  of  supply  is  the 
Member State of establishment. 

3 | P a g e  

 
 
 
 
                                                      
Figure 1 – Overview of application of the SME exemption scheme to domestic businesses  

Source:  Deloitte  compilation  of  data  from  the  Deloitte  Tax  Network  Survey  (collected  March  2016,  Sweden  in 

March 2017)  

Exemption from the obligation to register for VAT or other purposes 

Registration for VAT purposes 

Out of the 26 Member States applying the scheme in their national VAT legislation, 186 (69%) exempt 
companies under the SME exemption scheme from registering for VAT purposes. 

It  is  noteworthy  that  two  Member  States7  do  not  foresee  this  exemption  from  registration,  and  they 
apply a sort of automatic VAT registration when the business is registered for other purposes (e.g. in 
the trade register). 

Nevertheless,  most  Member  States  still  require  companies  to  register  in  case  of  non-domestic 
transactions  as  these  are  often  not  covered  under  the  scheme,  sometimes  foreseeing  special 
registration procedures.  

Exceeding  the  threshold  triggers  the  obligation  to  register  and  apply  the  full  VAT  regime,  which 
creates a threshold effect, which means that SMEs might prefer to stay under the threshold as this in 
most Member States means that the business has to comply with full VAT obligations all at once. This 
is  a  significant  drawback  of  the  special  scheme  and  places  pressure  on  SMEs  to  remain  below  the 
threshold (see section 5 of Volume I on Problem Assessment).   

6 Austria, Bulgaria, Cyprus, Denmark, Estonia, Finland, France, Croatia, Ireland, Lithuania, Latvia, Poland, Portugal, Romania, 
Slovenia, Slovakia, Sweden and the United Kingdom. 
7 Hungary and Luxembourg. 

4 | P a g e  

 
 
 
 
 
                                                      
Figure 2 – Overview of obligations for SMEs to register for VAT under exemption schemes 

Source:  Deloitte  compilation  of  data  from  the  Deloitte  Tax  Network  Survey  (collected  March  2016,  Sweden  in 

March 2017) 

Registration for other purposes 

Even though these companies are exempt from the obligation to register for VAT purposes,  near all 
Member  States  (24  out  of  26)  still  oblige  them  to  register  for  other  purposes.  For  example, 
companies are often still required to register for income tax purposes, social security purposes or to 
register in the trade register for the purposes of the commercial legislation of the relevant country (e.g. 
an obligation to have a company number or to obtain the necessary licenses). 

Exemption from the obligation to file periodical VAT returns 

Nearly  all  Member  States  (92%)8  exempt  the  SMEs  under  the  SME  exemption  scheme  from  filing 
periodical  VAT  returns.  Two  Member  States  (8%)9  still  require  SMEs  under  the  scheme  to  file 
periodical  returns.  One  of  these  two  Member  States10  inserted  this  obligation  in  case  an  SMEs’ 
turnover exceeds a certain amount, however these returns are simplified.  

An  SME  which  purchases  services  from  abroad  or  purchases  goods  exceeding  a  certain  amount  is 
required  to  file  a  special  VAT  return  in which  it  self-assesses  the  VAT.  This  VAT  cannot  usually  be 
recovered  by  means  of  this  special  simplified  VAT  return  in  the  Member  State:  in  other  words,  the 
input VAT incurred is not deductible by the SME and constitutes a cost. 

Simplified accounting obligations 

8  Austria,  Belgium,  Bulgaria,  Cyprus,  the  Czech  Republic,  Germany,  Denmark,  Estonia,  Finland,  France,  Greece,  Croatia, 
Hungary,  Ireland,  Italy,  Lithuania,  Luxembourg,  Latvia,  Portugal,  Romania,  Slovenia,  Slovakia,  Sweden  and  the  United 
Kingdom. 
9 Malta and Poland. 
10 Malta. 

5 | P a g e  

 
 
 
 
                                                      
In 62%11 of the relevant Member States, SMEs can benefit from simplified accounting obligations. The 
following examples of simplified accounting obligations were provided (not an exhaustive list): 

  Exempt from obligation to keep journals for incoming and outgoing invoices; 
  Simplified  reporting  requirements,  e.g.  no  obligation  to  compile  a  management  report,  no 

obligation to compile an annual report; and 

  Reliefs in relation to the contents of the financial statements. 

Possibility to opt-out 

In  all  Member  States,  the  SMEs  eligible  for  the  SME  exemption  scheme  can  opt  out,  and  as  such, 
voluntarily register for VAT. The SME then falls under the regular VAT system, with the obligation to 
account for VAT and a right to deduct input VAT. The reasons to opt out may be that the SME trades 
mostly  with  other  VAT  registered  businesses  or  also  that  some  businesses  prefer  trading  with  VAT 
registered businesses. 

In some Member States, the decision to opt-out is binding for a few years. These periods vary from 
two to five years in different Member States. 

Obligation to issue VAT invoices 

About a third (31%)12 of the relevant Member States oblige SMEs under the exemption scheme to still 
issue VAT invoices, although no VAT is due on these supplies. In all of these cases, Member States 
require that the invoice mentions that VAT is not applicable. 

A.3  Flat-rate scheme 

The  Deloitte  tax  network  was  provided  with  a  list  of  the  most  common  elements  per  scheme  and 
asked to provide input on the availability of the element and, if applicable, further information on this 
element  in  their  Member  State.  In  Section  4.2.3  of  Volume  I,  the  main  elements  of  and  findings 
relating  to  the  flat-rate  scheme  are  provided.  This  section  provides  additional  details  on  the 
functioning of the scheme in the Member States. 

Simplified accounting obligations 

The purpose of the flat-rate scheme is to reduce the administrative burden for SMEs (and not the tax 
burden). It is often applied in fraud sensitive sectors. As such, in 7 out of the 8 Member States13, the 
SMEs under the flat-rate scheme can benefit from simplified accounting obligations. 

Under the flat-rate scheme, businesses are allowed to account for VAT in a simplified way. Several 
options are possible: 

  The  SME  covered  by  the  scheme  accounts  for  VAT  due  based  on  a  specific  basis  or  a 
different taxable base than outgoing supplies (e.g. number of bags of flower purchased by a 
baker or weight of the purchased coffee); or 

  The SME covered by the scheme accounts for VAT applying the special lower flat-rate; or 
  A combination of both. 

11 Austria, Belgium, Germany, Denmark, Estonia, Finland, France, Ireland, Italy, Luxembourg, Latvia, Malta, Poland, Portugal, 
Slovenia and the United Kingdom. 
12 Belgium, France, Greece, Croatia, Hungary, Luxembourg, Malta and Portugal. 
13 The scheme was implemented by Belgium, Cyprus, Germany, Spain, Greece, Malta, Poland and the UK. Only Cyprus does 
not foresee a simplification of the accounting obligations. 

6 | P a g e  

 
 
 
 
                                                      
3 out of these 8 Member States14 apply (amongst others) the first method, another 4 countries15 apply 
the second method and one Member State applies a combination of both16. 

As regards the first method, several techniques are used. For example, one of the Member States17 
makes use of the following three techniques, depending on the sector: 

  Lump sum gross profit margins are added to the amount of the purchases (excluding VAT); 
  The  amount  of  sold  products  is  determined  on  a  lump  sum  basis  and  this  amount  is  to  be 

multiplied by the price per unit; or 

  The turnover is determined on a lump sum basis by multiplying the number of working hours 

by an hourly rate. 

Finally,  almost  all,  but  Cyprus,  foresee  a  form  of  simplification  of  the  accounting  obligations  or  tax 
obligations. For example, they might be exempted from the obligation to keep VAT accounting books. 

Applicability to domestic businesses and/or domestic supplies 

3  out  of  the  8  Member  States18  explicitly  reserve  the  flat-rate  scheme  for  domestic  businesses. 
Additionally, in two Member States, the specific nature of the transactions covered has the effect that 
it applies to domestic businesses19.  

Thus,  in  reality,  only  three  Member  States  allow  non-domestic  businesses  to  apply  the  flat-rate 
scheme20. 

Figure 3 – Overview of applicability of flat-rate scheme to only domestic businesses 

Source: Deloitte compilation of data from the Deloitte Tax Network Survey (collected March 2016) 

14 Belgium, Cyprus, Malta. 
15 Germany, Greece, Poland, the UK. 
16 Spain. 
17 Belgium. 
18 Cyprus, Germany and the UK. 
19 This is the case in Greece and Belgium. For instance, in Greece the regime applies to coastal fishery, sponge extracting, the 
exploitation of vessels in lagoon of Ioannina and of horse drawn vehicles. 
20 Malta, Poland and Spain. 

7 | P a g e  

 
 
 
                                                      
Applicability to domestic supplies 

In 6 out of 8 Member States, the flat-rate scheme explicitly only applies to domestic supplies. In one 
of these countries, companies performing exports and intra-Community supplies may not even enter 
this regime. 

Additionally, there is one Member State where the law does not specifically restrict the application to 
domestic supplies, but where the sectors and transactions to which the scheme applies automatically 
restrict its applicability to domestic supplies by its nature.21 

Finally, there is one Member State where the flat-rate scheme also covers non-domestic supplies, i.e. 
exports and intra-Community supplies. 

A.4  Cash accounting scheme 

We  have  compiled  additional  data  in  respect  of  the  cash  accounting  scheme  and  how  it  operates 
practically across the Member States.  As a general point, we note that there is a lack of uniformity in 
the  way  that  the  scheme  is  applied  and  with  this  in  mind,  we  have  set  out  some  of  our  key 
observations below. 

Outputs only or combined 

By  way  of  background,  as  mentioned  in  Volume  I  (Section  4.2.4)  it  is  not  necessary  for  a  Member 
State  to  implement  cash  accounting  in  relation  to  both  outputs  and  inputs  (also  referred  to  as 
combined cash accounting).  As such, from the outset there is significant variation as to how Member 
States choose to apply the special scheme.  

From  the  data  received,  it  is  understood  that  Germany,  Ireland,  the  Netherlands  and  Lithuania  all 
apply the scheme only to the extent that it relates  to output tax. Businesses  in these countries may 
recover input tax in accordance with the normal VAT rules in that country i.e. on an accruals basis.  

21 See example on Greece. 

8 | P a g e  

 
 
 
 
 
                                                      
Figure 4 – Member States applying output only or combined cash accounting 

Source:  Deloitte  compilation  of  data  from  the  Deloitte  Tax  Network  Survey  (collected  March  2016,  Finland  in 

March 2017) 

As expected, we note from tax authority data that in general these Member States mention a risk of 
fraud  in relation  to  scenarios  where  VAT  that  has  been  deducted  but  no  output  tax  is  subsequently 
paid to the tax authority.  

However, Member States who do not apply output tax based only cash accounting find that taxpayers 
see the inability to deduct input tax as a major drawback to using the scheme.  

Optional registration to use the cash accounting scheme 

All  Member  States  that  operate  the  cash  accounting  scheme  allow  businesses  to  choose  whether 
they want to use it or not. However, the Netherlands applies the scheme to the relevant businesses22 
by default and businesses need to opt out, if they wish to apply the regular VAT regime. 

This allows SMEs a level of flexibility to assess which method of accounting has the greatest benefit 
to  them.  Where  input  tax  costs  are  very  high  in  a  line  of  business  and  the  Member  State  operates 
combined  cash  accounting  for  inputs  and  outputs,  an  SME  may  consider  it  more  advantageous  to 
operate  the  normal  VAT  rules.    However,  where  the  inputs  are  relatively  low  but  output  tax  has  a 

significant impact on the SME’s cash flow it would be advantageous for the business to account for 
VAT on a cash basis. 

Application to use scheme 

We have found that there is no consistency in relation to the need to notify or apply to the relevant tax 
authority before the scheme may be implemented.  

From our review, we found that nine Member States23 require a business to apply to the tax authority 
before they use the scheme.   

22  Applies  only  to  listed  categories  of  locally  trading  taxable  persons  (hairdressers,  shopkeepers,  shoe  repair  etc.),  mainly 
making supplies to non-taxable persons. 
23 These are Bulgaria, Germany, Spain, Greece, Croatia, Hungary, Ireland, Luxembourg and Sweden.  

9 | P a g e  

 
 
 
 
                                                      
In  Finland,  Italy  and  the  UK  there  is  no  requirement  for  a  business  to  apply  or  even  notify  the  tax 
authority that they intend to use the scheme but if they choose to apply it they must ensure that they 
comply with the additional record keeping requirements.  The UK tax authority survey states that the 
advantage of there being no requirement for businesses to advise the tax authority that they intend to 
use the scheme is that the tax authority incurs no processing costs.  

In  the  remaining  Member  States,  a  business  must  notify  the  tax  authority  before  they  adopt  the 
special scheme. 

Length of Use 

13 out of the 24 Member States24 that implement cash accounting stipulate that once a business opts 
to use the cash accounting scheme, they must continue to use it for a specified period.   

Figure 5 – Overview of the obligation to remain in the special scheme for a specified period of time  

Source: Deloitte compilation of data from the Deloitte Tax Network Survey (collected March 2016) 

Additional administrative requirements 

The tax authority survey suggests that an important drawback of the cash accounting system is the 
increased administrative burden to businesses.  This is most commonly in the form of increased book 
keeping  requirements  as  all  Member  States  who  apply  cash  accounting  require  a  trader  to  keep 
additional records so that on audit, the tax authority may monitor the flow of cash to ensure that the 
business  has  been  compliant.    In  addition,  we  understand  that  in  Bulgaria  there  are  more  detailed 
accounting requirements in relation to payments and chargeability of VAT. 

Overall,  the  cash  accounting  scheme  is  popular  and  considered  effective  in  a  number  of  countries.  
As such, we consider that the additional record keeping requirements can achieve the goal of being 
stringent  enough  to  prevent  fraud  but  still  easy  enough  to  comply  with  to  be  a  practical  solution  for 
SMEs.    Where  the  administrative  requirements  are  considered  burdensome,  we  suspect  that  this 
prevents many qualifying SME businesses from using the special scheme as it greatly increases the 
complexity of accounting for VAT.   

24 Bulgaria, Cyprus, Croatia, Greece, Hungary, Italy. Latvia, Lithuania, Luxembourg, Poland, Portugal, Romania, Slovakia 

10 | P a g e  

 
 
 
 
                                                      
A.5  Overview of the Member States’ VAT Committee consultations  

Table 2 – Overview of Member States’ VAT Committee consultations  

VAT 

MS 
Committee 
Consultations  on  SME  flat-
rate scheme (Art 281) 

Latest 
consultation 

VAT 

MS 
Committee 
Consultations  on  SME  simplified 
procedures 
charging  & 
for 
collection (Art 281) 

 Latest 
consultation 

Country 

Czech Republic 

Cyprus 

Poland 

Hungary 

Austria 

Year 

2004 

2006 

2004 

2005 

2014 

Country 

Belgium 

Germany 

France 

Italy 

Austria 

Greece 

Portugal 

Spain 

United Kingdom 

Cyprus 

Hungary 

Year 

1978 

1989 

1979 

1997 

2004 

2009 

2005 

1998 

2003 

2004 

2005 

11 | P a g e  

 
 
 
  
  
  
  
  
  
  
  
  
  
  
  
 
 
Annex B - Data received from 
tax authorities 

This  appendix  presents  the  information  directly  received  from  tax  authorities  in  response  to  the 
survey. Complete or partial information has been received from the following 23 countries: 

  Austria 

  Belgium 

  Bulgaria 

  Czech Republic 

  Croatia 

  Denmark 

  Estonia 

  Finland 

  France 

  Hungary 

Ireland 

Italy 

  Latvia 

  Lithuania 

  Luxembourg 

  Malta 

  Netherlands 

  Poland 

  Portugal 

  Slovakia 

  Slovenia 

  Spain 

  Sweden 

  United 

Kingdom

For the purpose of the study, a specific definition of SMEs is adopted, which refers to businesses with 
an annual turnover not exceeding EUR 2 million (i.e. micro-business, according to the EU definition)25. 
Data  was  collected  on  SMEs  according  to  their  annual  turnover,  while  no  specific  parameters  on 
headcount were considered: 

  EUR 500 001 – EUR 2 000 000; 
  EUR 100 001 – 500 000; 
  EUR 50 001 – 100 000; 
  EUR 5 001 – 50 000; and 
  does not exceed EUR 5 000.

25 See: http://ec.europa.eu/growth/smes/business-friendly-environment/sme-definition/index_en.htm  

12 | P a g e  

 
 
 
 
 
                                                      
B.1 

Data obtained on SMEs’ domestic activities 

As part of the study, an overview of the current situation of SMEs across the 28 Member States was 
produced.  This  Annex  presents  the  data  received  from  tax  authorities  covering  the  following 
information points: 

  The number of businesses in each turnover bracket;  
  The revenue generated by businesses in turnover bracket; 
  The sector of activity of businesses in each turnover bracket; and 
  The gross and net VAT revenue generated by businesses in each turnover bracket. 

Number of businesses in each turnover bracket 

Most tax authorities that responded to the survey were able to provide the number of businesses in 
their Member States. These were however given in different formats: 

  Some  were  able  to  directly  provide  the  number  of  businesses  classified  within  the  turnover 
brackets specified above. This is the case for 15 Member States26, and the data obtained is 
presented in Table 3 and Table 4. 

  Some tax authorities provided the total number of businesses in their country, but classified 
within turnover brackets different to the ones specified. This is the case for 5 Member States27 
and the data provided is presented as received in Table 5 to Table 9. 

  Some  tax  authorities  provided  the  number  of  VAT-registered  businesses  only,  classified 
within  the  turnover  brackets  specified.  These  numbers  underestimate  the  total  number  of 
businesses  in  the  country,  due  to  some  businesses  being  exempted  from  VAT-registration 
under  the  SME  exemption  scheme.  This  is  the  case  for  2  Member  States28  and  the  data 
provided by the tax authorities is presented in Table 10 and Table 11. 

  Finally, one tax authority provided the number of VAT-registered businesses only, classified in 
turnover  brackets  different  to  the  ones  specified29.  This  data  is  presented  in  Table  12  and 
Table 13. 

26  Belgium,  Bulgaria,  Czech  Republic,  Estonia,  Finland,  France,  Hungary,  Ireland,  Latvia,  Malta,  Netherlands,  Slovakia, 
Slovenia, Spain and Sweden. 
27 Austria, Croatia, Italy, Lithuania and Luxembourg.  
28 Denmark and Poland.  
29 This is the case for the United Kingdom.  

13 | P a g e  

 
 
 
                                                      
Data provided by tax authorities who classified businesses in the specified turnover 

Table 3 – Number of businesses in each turnover bracket and share of SMEs, by Member State 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 
000 – EUR 
100 000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Belgium30 

2015 

193 749 

221 452 

113 661 

210 550 

69 597 

37 828 

Bulgaria 

2014 

76 575 

142 937 

31 069 

48 510 

17 985 

8 044 

Czech 
Republic 

2014 

574 794 

119 672 

38 149 

78 477 

39 888 

21 270 

Estonia 

2014 

56 818 

40 393 

8 843 

14 183 

5 493 

2 808 

Finland 

2014 

300 128 

130 025 

54 202 

81 144 

29 314 

15 443 

France 

2014 

4 739 000 

1 097 000 

657 000 

1 175 000 

364 000 

168 000 

Hungary 

2015 

382 308 

339 193 

61 379 

76 974 

27 715 

12 267 

Ireland 

2013 

87 854  

171 862  

51 948  

77 933  

24 547  

14 189  

Latvia 

2014 

56 467 

36 002 

9 912 

16 062 

6 853 

3 509 

Malta 

2014 

19 312 

17 012 

4 035 

6 739 

2 845 

1 737 

Netherlands 

2015 

649 216 

535 521 

236 309 

346 139 

108 555 

59 681 

Slovakia 

2013 

314 810 

287 217 

37 911 

49 354 

17 900 

9 354 

Slovenia 

2014 

55 892 

85 799 

19 329 

28 333 

9 430 

5 141 

Spain 

2013 

1 386 101 

1 912 163 

432 716 

509 903 

159 172 

74 234 

Sweden 

2014 

620 552 

297 864 

110 382 

182 816 

69 064 

35 783 

Source: Data obtained from surveys to tax authorities.  

30 The tax authorities in Belgium actually provided the data in the following first two brackets: Less than EUR 5 580 and EUR 5 
580 – EUR 50 000. However, considering that the number of businesses with turnover between EUR 5 000 and EUR 5 580 and 
their generated turnover is assumed to be negligible, the data is reported in the brackets specified before. 

14 | P a g e  

 
 
                                                      
Table 4 – Proportion of businesses in each size class compared to the total number of businesses, by 

Member State 

Member 
State 

Reference 
year 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 100 
000 

EUR 100 
000 – 
EUR 500 
000 

EUR 500 
000 – 
EUR 2 
000 000 

More 
than 
EUR 2 
000 000 

Share 
of 
SMEs 

Belgium31 

2015 

23% 

26% 

14% 

25% 

8% 

4% 

96% 

Bulgaria 

2014 

23% 

44% 

10% 

15% 

6% 

2% 

98% 

Czech 
Republic 

2014 

66% 

14% 

4% 

9% 

5% 

2% 

98% 

Estonia 

2014 

44% 

32% 

7% 

11% 

4% 

2% 

98% 

Finland 

2014 

49% 

21% 

9% 

13% 

5% 

3% 

97% 

France 

2014 

58% 

13% 

8% 

14% 

5% 

2% 

98% 

Hungary 

2015 

42% 

38% 

7% 

9% 

3% 

1% 

99% 

Ireland 

2013 

21% 

40% 

12% 

18% 

6% 

3% 

97% 

Latvia 

2014 

44% 

28% 

8% 

12% 

5% 

3% 

97% 

Malta 

2014 

37% 

33% 

8% 

13% 

6% 

3% 

97% 

Netherlands 

2015 

33% 

28% 

12% 

18% 

6% 

3% 

97% 

Slovakia 

2013 

44% 

40% 

5% 

7% 

3% 

1% 

99% 

Slovenia 

2014 

27% 

42% 

9% 

14% 

5% 

3% 

97% 

Spain 

2013 

31% 

43% 

10% 

11% 

3% 

2% 

98% 

Sweden 

2014 

47% 

23% 

8% 

14% 

5% 

3% 

97% 

Source: Deloitte estimates based on data obtained from surveys to tax authorities. 

31 See footnote on previous table.  

15 | P a g e  

 
 
                                                      
Data provided by tax authorities who provided the number of businesses in turnover brackets 
different to the ones specified 

Table 5 – Total number and distribution of businesses in different size classes in Austria 

Member 
State 

Reference 
year 

Variable 

Less 
than 
EUR 30 
000 

EUR 30 
000 – 
EUR 
100 000 

EUR 10 
000 – 
EUR 
220 000 

EUR 
220 000 
– EUR 
700 000 

EUR 
700 000 
– EUR 
2 000 
000 

More 
than 
EUR 2 
000 000 

Share of 
SMEs 

Number of 
businesses* 

611 
793 

192 
826 

88 201 

85 286 

39 731 

31 267 

- 

Austria 

2013 

Distribution 
of busi-
nesses** 

58% 

18% 

9% 

8% 

4% 

3% 

97% 

*Source: Data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities 

Table 6 – Total number and distribution of businesses in different size classes in Croatia 

Member 
State 

Reference 
year 

Variable 

Croatia 

2014 

Number of 
businesses* 

Distribution 
of busi-
nesses** 

Less 
than 
EUR 6 
550 

EUR 6 
550 to 
EUR 65 
500 

EUR 65 
500 to 
EUR 
131 000 

EUR 
131 000 
to EUR 
655 000 

EUR 
655 000 
to EUR 
1 965 
250 

More 
than 
EUR 1 
965 250 

Share of 
SMEs 

63 224 

97 423 

25 311 

27 030 

6 988 

4 726 

- 

28% 

44% 

11% 

12% 

3% 

2% 

98% 

*Source: Data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities 

Table 7 – Total number and distribution of businesses in different size classes in Italy 

Member 
State 

Reference 
year 

Variable 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 
50 000 

EUR 
50 000 
– EUR 
100 
000 

Number of 
businesses* 

930 
383 

2 006 
675 

815 
155 

EUR 
100 
000 – 
EUR 
515 
000 

1 101 
570 

EUR 
515 
000 – 
EUR 2 
000 
000 

312 
376 

More 
than 
EUR 2 
000 000 

Share 
of 
SMEs 

139 431 

- 

Italy 

2013 

Distribution 
of busi-
nesses** 

17% 

38% 

15% 

21% 

6% 

3% 

97% 

*Source: Data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities 

16 | P a g e  

 
 
 
 
Table 8 – Number and distribution of businesses in different size classes in Lithuania 

Member 
State 

Refer
ence 
year 

Variable 

Lithuania 

2015 

Number of 
businesses* 

Distribution 
of identified 
busi-
nesses** 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 
50 000 

EUR 
50 000 
– EUR 
100 
000 

EUR 
100 
000 – 
EUR 
500 
000 

EUR 
500 
000 – 
EUR 2 
000 
000 

More 
than 
EUR 2 
000 
000 

20 467  22 505  12 361  22 887 

9 272 

5 380 

Unide
ntified 

Share 
of 
SMEs 

141 
503 

- 

22% 

24% 

13% 

25% 

10% 

6% 

- 

N/A 

*Source: Data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities 

Table 9 – Total number and distribution of businesses in different size classes in Luxembourg 

Member State 

Reference 
year 

Luxembourg 

2014 

Variable 

Number of 
businesses* 

Distribution 
of busi-
nesses** 

Less than 
EUR 25 000 

EUR 25 000 
– EUR 112 
000 

EUR 112 000 
– EUR 620 
000 

More than 
EUR 620 000 

27 160 

12 149 

14 404 

13 306 

41% 

18% 

21% 

20% 

*Source: Data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities 

17 | P a g e  

 
 
 
 
 
Data provided by tax authorities who provided the number of VAT-registered businesses only, 
classified within the specified turnover brackets 

Table  10  –  Total  number  and  distribution  of  VAT-registered  businesses  in  different  size  classes  in 
Denmark 

Member 
State 

Reference 
year 

Variable 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 
100 
000 

EUR 
100 
000 – 
EUR 
500 
000 

EUR 
500 
000 – 
EUR 2 
000 
000 

More 
than 
EUR 2 
000 
000 

Share 
of 
SMEs 

Number of 
businesses* 

149 
935 

127 
370 

51 772 

87 721 

38 456 

20 946 

- 

Denmark 

2014 

Distribution 
of busi-
nesses** 

32% 

27% 

11% 

18% 

8% 

4% 

96% 

*Source: Data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities 

Table  11  –  Total  number  and  distribution  of  VAT-registered  businesses  in  different  size  classes  in 
Poland 

Member 
State 

Reference 
year 

Variable 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 
100 
000 

Number of 
businesses* 

322 
059 

686 
062 

235 
538 

EUR 
100 
000 – 
EUR 
500 
000 

339 
517 

EUR 
500 
000 – 
EUR 2 
000 
000 

112 
397 

More 
than 
EUR 2 
000 
000 

Share 
of 
SMEs 

52 199 

- 

Poland 

2015 

Distribution 
of busi-
nesses** 

19% 

39% 

14% 

19% 

6% 

3% 

97% 

*Source: Data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities 

18 | P a g e  

 
 
 
 
Data provided by tax authorities who provided the number of VAT-registered businesses only, 
classified within turnover brackets different to the ones specified 

Table 12 – Number of VAT-registered businesses in each size class in the United Kingdom 

Member 
State 

Referen
ce year 

EUR 0 

EUR 1 -  
EUR 124 
000 

EUR 124 
000 – 
EUR 229 
000 

EUR 229 
000 – 
EUR 458 
400 

EUR 458 
400 – 
EUR 764 
000 

EUR 764 
000 – 
EUR 1 
528 000 

EUR 1 
528 000 
– EUR 15 
280  000 

More 
than 
EUR 15 
280 000 

Unident
ified 

United 
Kingdom 

2015 

226 320 

702 100 

352 280 

290 160 

144 850 

137 210 

170 760 

30 810 

73 580 

Source: Data obtained from surveys to tax authorities  

Table 13 – Distribution of VAT-registered businesses for which turnover was identified in each size 
class for the United Kingdom 

Member 
State 

Referen
ce year 

EUR 0 

EUR 1 -  
EUR 124 
000 

EUR 124 
000 – 
EUR 229 
000 

EUR 229 
000 – 
EUR 458 
400 

EUR 458 
400 – 
EUR 764 
000 

EUR 764 
000 – 
EUR 1 
528 000 

EUR 1 
528 000 
– EUR 15 
280  000 

More 
than 
EUR 15 
280 000 

Unident
ified 

United 
Kingdom 

2015 

11% 

34% 

17% 

14% 

7% 

7% 

8% 

2% 

- 

Source: Deloitte estimates based on data obtained from surveys to tax authorities 

Quantify the turnover generated by businesses in each turnover bracket  

With the exception of the United Kingdom, all tax authorities that provided the number of businesses 
in their Member States have provided estimates of the total turnover generated by businesses in each 
bracket. The data obtained is presented below.   

19 | P a g e  

 
 
 
 
 
Data provided by tax authorities who classified businesses in the specified turnover brackets 

Table 14 – Total turnover generated from businesses in each turnover bracket (million EUR)  

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 
000 – EUR 
100 000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Belgium32 

2015 

239 

5 215 

8 266 

46 408 

67 655 

1 199 008 

Bulgaria 

2014 

144 

2 688 

2 227 

10 872 

17 541 

113 544 

Czech 
Republic 

2014 

Estonia 

2014 

Finland 

2014 

91 

54 

95 

2 538 

2 762 

18 641 

39 412 

183 362 

742 

640 

3 248 

5 411 

34 620 

2 956 

3 888 

18 058 

28 585 

352 579 

France 

2014 

615 

26 339 

47 645 

263 319 

347 847 

4 040 157 

Hungary 

2015 

382 

6 257 

4 354 

18 009 

26 766 

239 224 

Ireland 

2013 

92  

3 787  

3 718  

17 145  

24 057  

529 427  

Latvia 

2014 

Malta 

2014 

25 

11 

819 

712 

3 706 

6 689 

41 523 

329 

289 

1 538 

2 811 

29 384 

Netherlands 

2015 

468 

12 016 

16 996 

74 733 

105 157 

1 511 135 

Slovakia 

2013 

372 

5 027 

2 678 

11 062 

17 547 

169 012 

Slovenia 

2014 

72 

1 835 

1 381 

6 189 

9 267 

89 164 

Spain 

2013 

1 746 

37 304 

30 592 

110 915 

152 749 

1 759 000 

Sweden 

2014 

650 

6 285 

7 932 

41 232 

67 320 

748 165 

Source: Data obtained from tax authorities 

The  average  turnover  of  SMEs  in  each  size  class  has  also  been  calculated  and  the  results  are 
presented below. 

32 The tax authorities in Belgium actually provided the data in the following first two brackets: Less than EUR 5 580 and EUR 5 
580 – EUR 50 000. However, considering that the number of businesses with turnover between EUR 5 000 and EUR 5 580 and 
their generated turnover is assumed to be negligible, the data is reported in the brackets specified. 

20 | P a g e  

 
 
                                                      
Table 15 – Estimated average turnover generated from businesses in each turnover bracket (EUR) 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 
000 – EUR 
100 000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Belgium33 

2015 

1 233 

23 547 

72 724 

220 413 

972 100 

31 696 311 

Bulgaria 

2014 

1 880 

18 805 

71 695 

224 111 

975 303 

14 115 406 

Czech 
Republic 

2014 

159 

21 208 

72 411 

237 534 

988 069 

8 620 687 

Estonia 

2014 

950 

18 370 

72 374 

229 007 

985 072 

12 329 060 

Finland 

2014 

317 

22 732 

71 735 

222 548 

975 120 

22 831 018 

France 

2014 

130 

24 010 

72 519 

224 101 

955 624 

24 048 554 

Hungary 

2015 

999 

18 446 

70 934 

233 966 

965 773 

19 501 434 

Ireland 

2013 

1 042  

22 036  

71 579  

220 002  

980 026  

37 312 474  

Latvia 

2014 

451 

22 754 

71 873 

230 744 

976 119 

11 833 257 

Malta 

2014 

565 

19 346 

71 572 

228 160 

988 141 

16 916 638 

Netherlands 

2015 

721 

22 437 

71 922 

215 906 

968 702 

25 320 209 

Slovakia 

2013 

1 180 

17 503 

70 643 

224 134 

980 284 

18 068 465 

Slovenia 

2014 

1 284 

21 387 

71 457 

218 437 

982 682 

17 343 786 

Spain 

2013 

1 260 

19 509 

70 699 

217 521 

959 649 

23 695 344 

Sweden 

2014 

1 047 

21 100 

71 860 

225 540 

974 750 

20 908 381 

Source: Deloitte estimates based on tax authority data 

33 See footnote on previous table.  

21 | P a g e  

 
 
 
                                                      
Data  provided  by  tax  authorities  who  provided  the  turnover  generated  by  businesses  in 
turnover brackets different to the ones provided 

Table 16 – Total turnover generated by businesses in Austria and estimates of average turnover of 
businesses in different size class 

Member 
State 

Reference 
year 

Variable 

Less than 
EUR 30 
000 

EUR 30 
000 – 
EUR 100 
000 

EUR 10 
000 – 
EUR 220 
000 

EUR 220 
000 – 
EUR 700 
000 

EUR 700 
000 – 
EUR 2 
000 000 

More 
than EUR 
2 000 000 

Austria 

2013 

Total 
turnover 
generated 
(million 
EUR)* 

Average 
turnover per 
business 
(EUR)** 

6 197 

15 204 

18 652 

44 592 

50 449 

662 169 

10 130 

78 851 

211 469 

522 857 

1 269 
756 

21 177 
885 

*Source: Data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities 

Table 17 – Total turnover generated by businesses in Croatia and estimates of average turnover of 
businesses in different size class 

Member 
State 

Reference 
year 

Variable 

Below 
EUR 6 
550 

EUR 6 
550 to 
EUR 65 
500 

EUR 65 
500 to 
EUR 131 
000 

EUR 131 
000 to 
EUR 655 
000 

EUR 655 
000 to 
EUR 1 
965 250 

More 
than EUR 
1 965 250 

Croatia 

2014 

Total 
turnover 
generated 
(million 
EUR)* 

Average 
turnover per 
business 
(EUR)** 

107 

2 555 

2 314 

7 610 

7 728 

71 630 

1 696 

26 228 

91 407 

281 526 

1 105 
851 

15 156 
683 

*Source: Data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities 

22 | P a g e  

 
 
 
 
Table 18 – Total turnover generated by businesses in Italy and estimates of average turnover of 
businesses in different size class 

Member 
State 

Reference 
year 

Variable 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 100 
000 

EUR 100 
000 – 
EUR 515 
000 

EUR 
515 000 
– EUR 2 
000 000 

More 
than 
EUR 2 
000 000 

Italy 

2013 

Total 
turnover 
generated 
(million 
EUR)* 

Average 
turnover per 
business 
(EUR)** 

783 

47 997 

58 247 

240 224 

305 939 

841 

23 919 

71 455 

218 075 

979 394 

2 636 
502 

18 909 
006 

*Source: Data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities 

Table 19 – Total turnover generated by businesses classified within turnover brackets in Lithuania 
and estimates of average turnover of businesses in different size class 

Member 
State 

Reference 
year 

Variable 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 
100 000 

EUR 
100 000 
– EUR 
500 000 

EUR 
500 000 
– EUR 2 
000 000 

More 
than 
EUR 2 
000 000 

Uniden-
tified 

Lithuania 

2015 

Total 
turnover 
generated 
(million 
EUR)* 

Average 
turnover 
per busi-
ness 
(EUR)** 

12 

547 

897 

5 161 

9 162 

75 130 

N.A 

597 

24 320 

72 547 

225 512  988 160 

13 964 
723 

N.A 

*Source: Data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities 

23 | P a g e  

 
 
 
 
Table 20 – Total turnover generated by businesses classified within turnover brackets in Luxembourg 
and estimates of average turnover of businesses in different size class 

Member State 

Reference 
year 

Variable 

Less than 
EUR 25 000 

EUR 25 000 
– EUR 112 
000 

EUR 112 
000 – EUR 
620 000 

More than 
EUR 620 
000 

Luxembourg  

2014 

Total turnover 
generated 
(million EUR)* 

Average turnover 
per business 
(EUR)** 

81 

744 

4 046 

425 741 

2 975 

61 226 

280 886 

31 996 181 

*Source: Data obtained from surveys to tax authorities 

** Source: Deloitte estimates based on data obtained from surveys to tax authorities 

Data provided by tax authorities who provided the number of VAT-registered businesses only, 

classified within the specified turnover brackets 

Table 21 – Total turnover generated by VAT-registered businesses in Denmark and estimates of 
average turnover of these businesses in different size class 

Member 
State 

Reference 
year 

Variable 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 100 
000 

EUR 100 
000 – 
EUR 515 
000 

EUR 
515 000 
– EUR 2 
000 000 

More 
than 
EUR 2 
000 000 

Denmark 

2014 

Total 
turnover 
generated 
(million 
EUR)* 

Average 
turnover per 
business 
(EUR)** 

65 

2 804 

3 755 

20 196 

37 949 

522 578 

436 

22 017 

72 524 

230 229 

986 820 

24 948 
823 

*Source: Data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities 

24 | P a g e  

 
 
 
 
Table 22 – Total turnover generated by VAT-registered businesses in Poland and estimates of 
average turnover of these businesses in different size class 

Member 
State 

Reference 
year 

Variable 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 100 
000 

EUR 100 
000 – 
EUR 515 
000 

EUR 
515 000 
– EUR 2 
000 000 

More 
than 
EUR 2 
000 000 

Poland 

2015 

Total 
turnover 
generated 
(million 
EUR)* 

Average 
turnover per 
business 
(EUR)** 

145 

15 563 

16 787 

75 144 

105 924 

450 

22 685 

71 272 

221 327 

942 406 

1 040 
733 

19 937 
802 

*Source: Data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities 

Sector of economic activity  

Data  on  the  sector  of  activity  has  not  been  provided  by  all  authorities,  but  is  available  for  Bulgaria, 
Croatia,  Czech  Republic,  Denmark,  Finland,  France,  Hungary,  Ireland,  Italy,  Lithuania34,  Slovakia, 
Slovenia and Spain. This data is used to generate the industry distribution of businesses in different 
turnover  categories  to  understand  in  which  sector  businesses  of  different  sizes  operate.  For  most 
Member  States,  the  industry  classification  is  based  on  the  Nomenclature  of  Economic  Activities 
(NACE) Rev. 2 and businesses are therefore classified within the following groups:  

  A – Agriculture, forestry and fishing 
  B – Mining and quarrying 
  C – Manufacturing 
  D – Electricity, gas, steam and air conditioning supply 
  E – Water supply; sewerage, waste management and remediation activities 
  F – Construction  
  G – Wholesale and retail trade; repair of motor vehicles and motorcycles 
  H – Transportation and Storage 

I – Accommodation and food service activities  

  J – Information and communication 
  K – Financial and insurance activities 
  L – Real estate activities 
  M – Professional, scientific and technical activities 
  N – Administrative and support service activities 
  O – Public administration and defence; compulsory social-security 
  P – Education 
  Q – Human health and social work activities 
  R – Arts, Entertainment and recreation  
  S – Other services activities 

34  The  industry  distribution  is  provided  only  for  the  businesses  that  the  tax  authorities  were  able  to  classify  within  turnover 
brackets 

25 | P a g e  

 
 
 
                                                      
  T  –  Activities  of  households  as  employers;  undifferentiated  goods-  and  services-producing 

activities of households for own use 

  U – Activities of extraterritorial organisations and bodies 

The industry classification is different for the data provided by Denmark and Spain, as some sectors 
are combined. In addition, Croatia and Denmark provided this data within different turnover brackets 
than the ones specified.  

Figure 6 – Distribution of SMEs in Belgium35 by sector of activity and turnover bracket 

35 The tax authorities in Belgium actually provided the data in the following first two brackets: Less than EUR 5 580 and EUR 5 
580 – EUR 50 000. However, considering that the number of businesses with turnover between EUR 5 000 and EUR 5 580 is 
assumed to be negligible, the data is reported in the brackets specified. 

26 | P a g e  

 
 
 
 
 
 
                                                      
Figure 7 – Distribution of SMEs in Bulgaria by sector of activity and turnover bracket 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

34% 

5% 
3% 
5% 
6% 

15% 

7% 

25% 

29% 

7% 
3% 
4% 
5% 

14% 

8% 

30% 

19% 

7% 

6% 

7% 

8% 

9% 

10% 

16% 

16% 

Other

5% 

7% 

8% 

9% 

7% 

3% 

9% 

9% 

8% 

4% 

I - Accommodation and food service
activities

A - Agriculture, forestry and fishing

F - Construction

12% 

15% 

H - Transportation and storage

34% 

36% 

36% 

M - Professional, scientific and
technical activities

C - Manufacturing

G - Wholesale and retail trade; repair of
motor vehicles and motorcycles

Less than
EUR 5 000

EUR 5 001 -
50 000

EUR 50 001 -
100 000

EUR 100 001
- 500 000

EUR 500 001
- 2 000 000

Source: Deloitte estimates based on tax authority data 

Figure 8 – Distribution of SMEs in Croatia by sector of activity and turnover bracket 

 Source: Deloitte estimates based on tax authority data 

27 | P a g e  

 
 
 
 
Figure 9 – Distribution of SMEs in the Czech Republic by sector of activity and turnover bracket 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

24% 

24% 

30% 

31% 

32% 

Other

5% 

9% 

8% 

10% 

7% 

11% 

26% 

5% 

8% 

4% 

11% 

17% 

7% 

24% 

6% 
4% 
7% 

12% 

11% 

11% 

19% 

5% 
2% 

10% 

9% 

8% 

13% 

22% 

2% 
1% 

14% 

6% 

6% 

12% 

27% 

I - Accommodation and food service
activities

S - Other service activities

C - Manufacturing

M - Professional, scientific and
technical activities

L - Real estate activities

F - Construction

G - Wholesale and retail trade; repair of
motor vehicles and motorcycles

Less than
EUR 5 000

EUR 5 001 -
50 000

EUR 50 001 -
100 000

EUR 100 001
- 500 000

EUR 500 001
- 2 000 000

Source: Deloitte estimates based on tax authority data 

Figure 10 – Distribution of SMEs in Denmark by sector of activity and turnover bracket 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

15% 

7% 

8% 

6% 

14% 

9% 

25% 

16% 

15% 

8% 

11% 

10% 

9% 

13% 

19% 

15% 

17% 

2% 
6% 

13% 

8% 

17% 

11% 

26% 

Other

Sector R - S - Personal services

Sector K - L Finance, Insurance, Real
Estate

Sector F Building and Construction

Sector H - G  Transportation,
Information, Communication

Sector A- B  Agriculture, Forestry,
Fishery, Extractive

Sector M - N Professional services

Sector G Trade

Less than EUR 6 700 EUR 6 701 - 670 000 EUR 670 001 - 2 000

000

Source: Deloitte estimates based on tax authority data 

28 | P a g e  

 
 
 
 
 
  
Figure 11 – Distribution of SMEs in Finland by sector of activity and turnover bracket 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

33% 

4% 
4% 
2% 

27% 

12% 

6% 

12% 

37% 

9% 

6% 
2% 
8% 

16% 

10% 

12% 

27% 

26% 

8% 

6% 

10% 

5% 

14% 

18% 

12% 

6% 

6% 

12% 

5% 

12% 

17% 

16% 

23% 

4% 

10% 

9% 

4% 

10% 

16% 

24% 

Other

Q - Human health and social work
activities

C - Manufacturing

H - Transportation and storage

A - Agriculture, forestry and fishing

M - Professional, scientific and
technical activities

F - Construction

G - Wholesale and retail trade; repair of
motor vehicles and motorcycles

Less than
EUR 5 000

EUR 5 001 -
50 000

EUR 50 001 -
100 000

EUR 100 001
- 500 000

EUR 500 001
- 2 000 000

Source: Deloitte estimates based on tax authority data 

Figure 12 – Distribution of SMEs in France by sector of activity and turnover bracket 

 Source: Deloitte estimates based on tax authority data 

29 | P a g e  

 
 
  
 
 
Figure 13 – Distribution of SMEs in Hungary by sector of activity and turnover bracket 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

40% 

5% 
6% 

6% 
5% 

8% 

14% 

31% 

5% 
4% 

13% 

6% 

8% 

18% 

16% 

15% 

27% 

4% 
5% 

7% 

8% 

9% 

16% 

24% 

20% 

4% 
5% 

7% 

11% 

11% 

10% 

32% 

16% 

5% 
5% 
6% 

13% 

10% 

7% 

38% 

Other

N - Administrative and support service
activities

L - Real estate activities

A - Agriculture, forestry and fishing

C - Manufacturing

F - Construction

M - Professional, scientific and
technical activities

G - Wholesale and retail trade; repair of
motor vehicles and motorcycles

Less than
EUR 5 000

EUR 5 001 -
50 000

EUR 50 001 -
100 000

EUR 100 001
- 500 000

EUR 500 001
- 2 000 000

Source: Deloitte estimates based on tax authority data 

Figure 14 – Distribution of SMEs in Ireland by sector of activity and turnover bracket 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

26% 

4% 

11% 

2% 
9% 

15% 

7% 

22% 

4% 
5% 
5% 

13% 

14% 

11% 

19% 

6% 
4% 

9% 

11% 

11% 

16% 

26% 

26% 

24% 

34% 

6% 
4% 
2% 

12% 

12% 

7% 

23% 

25% 

4% 
4% 

10% 

9% 

9% 

31% 

8% 

Other

Q - Human health and social work
activities

H - Transportation and storage

I - Accommodation and food service
activities

M - Professional, scientific and
technical activities

F - Construction

G - Wholesale and retail trade; repair of
motor vehicles and motorcycles

A - Agriculture, forestry and fishing

Less than
EUR 5 000

EUR 5 001 -
50 000

EUR 50 001 -
100 000

EUR 100 001
- 500 000

EUR 500 001
- 2 000 000

Source: Deloitte estimates based on tax authority data 

30 | P a g e  

 
 
  
 
 
 
Figure 15 – Distribution SMEs in Italy by sector of activity and turnover bracket 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

20% 

6% 
5% 

12% 

5% 

11% 

20% 

19% 

5% 

9% 

7% 

7% 

12% 

15% 

17% 

5% 

10% 

6% 

11% 

13% 

10% 

24% 

7% 

6% 

10% 

7% 

14% 

13% 

19% 

21% 

26% 

28% 

17% 

3% 
5% 
4% 

19% 

13% 

5% 

34% 

Less than
EUR 5 000

EUR 5 001 -
50 000

EUR 50 001 -
100 000

EUR 100 001
- 500 000

EUR 500 001
- 2 000 000

Other

L - Real estate activities

I - Accommodation and food service
activities

A - Agriculture, forestry and fishing

C - Manufacturing

F - Construction

M - Professional, scientific and
technical activities

G - Wholesale and retail trade; repair of
motor vehicles and motorcycles

Source:  Deloitte  estimates  based  on  tax  authority  data.  Note:  Italy  provided  the  number  of  businesses  within 
slightly  different  turnover  brackets:  EUR  100  000  to  EUR  515  000  and  EUR  515  000  to  EUR  2  000  000.  The 
estimates are however reported within the brackets specified as the error margin is assumed to be small. 

Figure 16 – Distribution of SMEs in Lithuania by sector of activity and turnover bracket  

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

28% 

6% 
4% 
4% 
7% 

10% 

10% 

25% 

29% 

7% 
4% 
3% 
8% 

8% 

5% 
5% 
2% 
8% 

7% 

14% 

12% 

25% 

5% 
5% 
3% 

10% 

9% 

9% 

31% 

5% 
2% 
3% 

11% 

10% 

5% 

31% 

31% 

32% 

34% 

33% 

Other

L - Real estate activities

I - Accommodation and food service
activities

A - Agriculture, forestry and fishing

C - Manufacturing

F - Construction

M - Professional, scientific and
technical activities

G - Wholesale and retail trade; repair of
motor vehicles and motorcycles

Less than
EUR 5 000

EUR 5 001 -
50 000

EUR 50 001 -
100 000

EUR 100 001
- 500 000

EUR 500 001
- 2 000 000

Source: Deloitte estimates based on tax authority data 

31 | P a g e  

 
 
  
 
 
  
Figure 17 – Distribution of SMEs in Slovakia by sector of activity and turnover bracket 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

32% 

3% 
4% 

12% 

7% 

11% 

15% 

27% 

3% 
7% 
2% 

12% 

13% 

21% 

16% 

15% 

24% 

4% 

12% 

4% 
7% 

12% 

11% 

26% 

21% 

6% 
4% 
5% 

10% 

9% 

12% 

19% 

7% 
1% 
5% 

13% 

7% 

11% 

33% 

37% 

Other

H - Transportation and storage

Q - Human health and social work
activities

L - Real estate activities

C - Manufacturing

M - Professional, scientific and
technical activities

F - Construction

G - Wholesale and retail trade; repair of
motor vehicles and motorcycles

Less than
EUR 5 000

EUR 5 001 -
50 000

EUR 50 001 -
100 000

EUR 100 001
- 500 000

EUR 500 001
- 2 000 000

Source: Deloitte estimates based on tax authority data 

Figure 18 – Distribution of SMEs in Slovenia by sector of activity and turnover bracket 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

23% 

0% 

14% 

32% 

9% 

7% 
1% 

14% 

30% 

5% 

9% 
1% 

11% 

9% 

13% 

19% 

8% 
3% 
5% 

15% 

13% 

17% 

22% 

20% 

26% 

7% 
2% 
3% 

14% 

14% 

20% 

14% 

29% 

4% 
2% 
1% 
10% 

18% 

27% 

9% 

Other

I - Accommodation and food service
activities

Q - Human health and social work
activities

S - Other service activities

F - Construction

C - Manufacturing

G - Wholesale and retail trade; repair of
motor vehicles and motorcycles

M - Professional, scientific and
technical activities

Less than
EUR 5 000

EUR 5 001 -
50 000

EUR 50 001 -
100 000

EUR 100 001
- 500 000

EUR 500 001
- 2 000 000

Source: Deloitte estimates based on tax authority data 

32 | P a g e  

 
 
 
 
 
 
Figure 19 – Distribution of SMEs businesses in Spain by sector of activity and turnover bracket 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

15% 

5% 
4% 
3% 
8% 

16% 

33% 

16% 

6% 
4% 
6% 
3% 

14% 

16% 

26% 

8% 

4% 
6% 

6% 

20% 

15% 

17% 

25% 

24% 

3% 
5% 
5% 

9% 

15% 

14% 

18% 

31% 

5% 
4% 
4% 

13% 

8% 

10% 

14% 

Other

Sector 1 - Farming and fishing

Sector 9 - Social services

Sector 3 - Industry

Sector 10 - Personal services and
leisure

Sector 8 - Services to enterprises

42% 

Sector 4 - Construction and property

Sector 5 - Trade, Reparations,
Transport

Less than
EUR 5 000

EUR 5 001 -
50 000

EUR 50 001 -
100 000

EUR 100 001
- 500 000

EUR 500 001
- 2 000 000

Source: Deloitte estimates based on tax authority data 

Gross and net VAT revenue generated by businesses of different size 

The tax authorities also provided their gross and net revenues generated by businesses in different 
turnover brackets.36 The data was provided in different formats: 

  Some  tax  authorities  were  able  to  provide  the  gross  and  net  VAT  revenue  generated  by 
businesses classified within the specified turnover brackets. This is the case for 15 Member 
States37. In addition, the Netherlands provided the net VAT revenues but did not hold data on 
the gross VAT revenues generated. The data obtained is presented in Table 23.  

  Some tax authorities provided the gross and net VAT revenue, but generated by businesses 
classified  within  turnover  brackets  different  to  the  ones  provided.  This  is  the  case  for  5 
Member States38 and the data provided is presented as received in Table 24 to Table 28. 

36 Gross VAT refers to the VAT declared on outputs by businesses, while net VAT is the amount of revenue the government 
actually collects after businesses recover the VAT paid on their inputs.  
37 Bulgaria, Czech Republic, Estonia, Finland, France, Hungary, Ireland, Latvia, Malta, Slovakia, Slovenia, Spain and Sweden. 
38 Austria, Croatia, Italy, Lithuania and Luxembourg.  

33 | P a g e  

 
 
 
 
 
                                                      
Data provided by tax authorities classified within the specified turnover brackets 

Table 23 – Gross and net VAT revenue generated by businesses of different size (million EUR) 

Member 
State 

Reference 
year 

VAT revenue 
type 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 
– EUR 100 
000 

EUR 100 000 
– EUR 500 
000 

EUR 500 000 
– EUR 2 000 
000 

More 
than 
EUR 2 
000 000 

Gross 

278 

966 

1 424 

7 467 

10 910 

171 488 

Belgium39 

2015 

Net 

-111 

329 

606 

2 670 

2 801 

20 078 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

0% 

1% 

2% 

10% 

11% 

76% 

992 

88 

246 

32 

306 

1 573 

2 637 

17 908 

61 

293 

460 

3 005 

2% 

1% 

2% 

7% 

12% 

76% 

2 751 

207 

362 

44 

433 

95 

2 756 

5 886 

28 547 

611 

1 169 

4 281 

3% 

1% 

1% 

10% 

18% 

67% 

16 

-257 

678 

200 

914 

395 

4 801 

8 755 

86 823 

2 061 

3 381 

19 210 

-1% 

1% 

2% 

8% 

13% 

77% 

8 

-18 

58 

14 

58 

29 

260 

148 

390 

237 

1 835 

1 099 

-1% 

1% 

2% 

10% 

15% 

73% 

34 

-180 

725 

286 

833 

342 

3 880 

6 052 

69 400 

1 380 

1 963 

11 445 

-1% 

2% 

2% 

9% 

13% 

75% 

Gross 

633 

3 545 

5 469 

32 152 

48 925 

538 561 

Net 

211 

2 182 

3 034 

14 484 

20 005 

138 413 

Bulgaria 

2014 

Czech 
Republic 

2014 

Denmark 

2014 

Estonia 

2014 

Finland 

2014 

France 

2014 

39 The tax authorities in Belgium actually provided the data in the following first two brackets: Less than EUR 5 580 and EUR 5 
580 – EUR 50 000. However, considering that the number of businesses with turnover between EUR 5 000 and EUR 5 580 and 
their generated turnover is assumed to be negligible, the data is reported in the brackets specified. 

34 | P a g e  

 
 
                                                      
Member 
State 

Reference 
year 

VAT revenue 
type 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 
– EUR 100 
000 

EUR 100 000 
– EUR 500 
000 

EUR 500 000 
– EUR 2 000 
000 

More 
than 
EUR 2 
000 000 

Hungary 

2015 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

0% 

1% 

2% 

8% 

11% 

78% 

30 

18 

852 

339 

915 

312 

4 045 

5 601 

32 496 

1 200 

1 653 

12 673 

0% 

2% 

2% 

8% 

10% 

78% 

Gross 

12 

189 

341 

2 188 

4 094 

33 628 

Ireland 

2013 

Net 

-0.2 

53 

152 

835 

1 394 

4 685 

Latvia 

2014 

Malta 

2014 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

0% 

1% 

2% 

12% 

19% 

66% 

87 

4 

94 

19 

124 

29 

667 

135 

1 188 

6 734 

209 

1 115 

0% 

1% 

2% 

9% 

14% 

74% 

2 

-6 

34 

14 

34 

14 

163 

71 

255 

106 

843 

314 

-1% 

3% 

3% 

14% 

20% 

61% 

Gross40 

- 

- 

- 

- 

- 

- 

Netherlands 

2015 

Net  

928 

585 

1 408 

4 557 

4 447 

34 955 

Distribution 
of net 
revenue 

2% 

1% 

3% 

10% 

9% 

75% 

Gross 

83 

1 400 

1 150 

3 718 

4 461 

37 638 

Poland 

2015 

Net 

-421 

745 

774 

2 296 

2 369 

21 195 

Distribution 
of net 
revenue 

Gross 

Net 

-2% 

3% 

3% 

8% 

9% 

79% 

1 153 

-533 

277 

14 

360 

68 

1 818 

2 908 

23 373 

357 

496 

1 299 

Slovakia 

2013 

40 The Netherlands did not provide data of the gross VAT revenues generated  

35 | P a g e  

 
 
                                                      
Member 
State 

Reference 
year 

VAT revenue 
type 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 
– EUR 100 
000 

EUR 100 000 
– EUR 500 
000 

EUR 500 000 
– EUR 2 000 
000 

More 
than 
EUR 2 
000 000 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

-31% 

1% 

4% 

21% 

29% 

76% 

18 

-0.1 

141 

56 

216 

88 

947 

295 

1 465 

12 487 

354 

1 594 

0% 

2% 

4% 

12% 

15% 

67% 

Slovenia 

2014 

Gross 

243 

2 771 

1 803 

5 521 

6 503 

51 819 

Spain41 

2013 

Net 

-1 093 

1 833 

1 260 

4 093 

5 090 

40 890 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

-2% 

3% 

2% 

8% 

10% 

79% 

146  

1 294  

1 532  

7 715  

12 935   149 269  

- 439 

337  

649  

2 789  

4 079  

25 591  

-1% 

1% 

2% 

8% 

12% 

78% 

Sweden 

2014 

Source:  Gross  and  Net  VAT  revenue  data  obtained  from  surveys  to  tax  authorities.  Deloitte  estimates  of  the 

distribution of net revenue based on tax authority data.  

Data provided by tax authorities classified within turnover brackets different to the ones 

provided 

Table 24 – Gross and net VAT revenue generated by businesses of different size in Austria (million 
EUR) 

Member 
State 

Reference 
year 

VAT 
revenue 
type 

Less than 
EUR 30 000 

EUR 30 000 
– EUR 100 
000 

EUR 10 000 
– EUR 220 
000 

EUR 220 
000 – EUR 
700 000 

EUR 700 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Gross 

945 

1 753 

2 325 

6 157 

9 492 

147 360 

Austria 

2013 

Net 

670 

1 493 

1 929 

4 832 

7 072 

80 993 

Distribution 
of net 
revenue 

1% 

2% 

2% 

5% 

7% 

83% 

Source:  Gross  and  Net  VAT  revenue  data  obtained  from  surveys  to  tax  authorities.  Deloitte  estimates  of  the 

distribution of net revenue based on tax authority data. 

41 The Spanish tax authority have indicated that the gross VAT generated by businesses under the Special Scheme of Groups 
of  Businesses  is  calculated  after  the  aggregation  of  individual  results  and  can  therefore  not  be  reported  by  turnover  bracket. 
However, they assume for the purpose of this exercise that most businesses belonging to the group are over the EUR 2 000 
000 category and therefore, all the gross VAT revenue generated is allocated to this bracket.  

36 | P a g e  

 
 
 
                                                      
Table 25 – Gross and net VAT revenue generated by businesses of different size in Croatia (million 
EUR) 

Member 
State 

Reference 
year 

VAT 
revenue 
type 

Below EUR 
6 550 

EUR 6 550 
to EUR 65 
500 

EUR 65 500 
to EUR 131 
000 

EUR 131 
000 to EUR 
655 000 

EUR 655 
000 to EUR 
1 965 250 

More than 
EUR 1 965 
250 

Gross 

39 

378 

388 

1 483 

1 556 

14 867 

Croatia 

2014 

Net 

-12 

113 

116 

421 

424 

3 303 

Distribution 
of net 
revenue 

0% 

2% 

2% 

10% 

10% 

76% 

Source:  Gross  and  Net  VAT  revenue  data  obtained  from  surveys  to  tax  authorities.  Deloitte  estimates  of  the 

distribution of net revenue based on tax authority data. 

Table  26  –  Gross  and  net  VAT  revenue  generated  by  businesses  of  different  size  in  Italy  (million 
EUR) 

Member 
State 

Reference 
year 

VAT 
revenue 
type 

Less than 
EUR 5 000 

EUR 5 000 
to EUR 50 
000 

EUR 50 000 
to EUR 100 
000 

EUR 100 
000 to EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Gross 

709 

7 893 

8 991 

35 406 

45 053 

363 031 

Italy 

2013 

Net 

-1 123 

3 563 

3 767 

11 181 

9 794 

59 936 

Distribution 
of net 
revenue 

-1% 

4% 

4% 

13% 

11% 

69% 

Source:  Gross  and  Net  VAT  revenue  data  obtained  from  surveys  to  tax  authorities.  Deloitte  estimates  of  the 

distribution of net revenue based on tax authority data. 

37 | P a g e  

 
 
 
 
 
Table 27 – Gross and net VAT revenue generated by businesses of different size in Lithuania (million 
EUR) 

Member 
State 

Reference 
year 

VAT 
revenue 
type 

Less than 
EUR 5 
000 

EUR 5 
000 to 
EUR 50 
000 

EUR 50 
000 to 
EUR 100 
000 

EUR 100 
000 to 
EUR 500 
000 

EUR 500 
000 – 
EUR 2 
000 000 

More 
than EUR 
2 000 000 

Unidentified 

Gross 

25 

92 

130 

849 

1 495 

11 389 

N.A 

Lithuania 

2013 

Net 

-8 

13 

44 

247 

385 

2 102 

N.A 

Distribution 
of net 
revenue 

-0.4% 

0.4% 

2% 

9% 

14% 

75% 

N.A 

Source:  Gross  and  Net  VAT  revenue  data  obtained  from  surveys  to  tax  authorities.  Deloitte  estimates  of  the 

distribution of net revenue based on tax authority data.  

Table  28  –  Gross  and  net  VAT  revenue  generated  by  businesses  of  different  size  in  Luxembourg 
(million EUR) 

Member State  Reference year 

VAT revenue 
type 

Less than EUR 
25 000 

EUR 25 000 – 
EUR 112 000 

EUR 112 000 – 
EUR 620 000 

More than EUR 
620 000 

Gross 

322 

105 

456 

21 643 

Luxembourg 

2014 

Net 

Distribution of 
net revenue 

75 

2% 

42 

1% 

180 

3 581 

5% 

92% 

Source:  Gross  and  Net  VAT  revenue  data  obtained  from  surveys  to  tax  authorities.  Deloitte  estimates  of  the 

distribution of net revenue based on tax authority data.  

38 | P a g e  

 
 
 
B.2  Data obtained in connection to the SME exemption scheme 

As part of the study, information was collected on the businesses exempted from VAT under the SME 
exemption  scheme,  across  the  8  Member  States  forming  part  of  the  fieldwork  countries  and  for  the 
EU as a whole. The following data was requested from tax authorities:  

  The number of businesses exempted from paying VAT under the SME exemption scheme by 

turnover bracket; 

  The turnover generated by exempted businesses within each turnover bracket; 
  The volume and value of such exempted transactions; and 
  Categorise such sales by nature of supply (goods or services) and within the latter by type of 

supply (B2B or B2C). 

Some information has been provided by tax authorities on the number of businesses exempted from 
paying VAT under the scheme and the turnover they generate. However, none were able to provide 
estimates  of  the  value,  volume  or  type  of  those  transactions.  This  annex  presents  the  estimates 
obtained directly from tax authorities.  

Number of businesses exempted from VAT 

Table  29  below  presents  the  estimates  of  the  number  of  businesses  carrying  out  exempted 
transactions under the SME exemption scheme that have been provided by tax authorities. 

Table 29 – Number of businesses exempted from VAT under the SME exemption scheme 

Member State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 
– EUR 500 
000 

Total 
exempted 

Share in 
number of  
businesses in 
the economy 

Belgium42 

2015 

95 234 

19 098 

Bulgaria 

2014 

55  937 

80 345 

Croatia 

2014 

51 276 

Czech 
Republic 

2014 

351 678 

63 096 

Estonia 

2014 

57 199 

24 070 

- 

- 

- 

- 

- 

France 

2014 

1 798 000 

53 000 

14 000 

Hungary 

2015 

172 376 

147 239 

- 

- 

- 

- 

- 

- 

- 

- 

114 332 

136 282 

51 276 

14% 

42% 

23% 

414 774 

48% 

81 269 

63% 

1 865 000 

23% 

319 615 

36% 

Italy 

2013 

479 787 

479 787 

Lithuania* 

2015 

13 954 

6 578 

3 035 

3 435 

27 002 

9% 

12% 

42 The tax authorities in Belgium actually provided the data in the following first two brackets: Less than EUR 5 580 and EUR 5 
580 – EUR 50 000. However, considering that the number of businesses with turnover between EUR 5 000 and EUR 5 580 and 
their generated turnover is assumed to be negligible, the data is reported in the brackets specified. 

39 | P a g e  

 
 
 
                                                      
 
 
Luxembourg 

2014 

380 

65 

Malta 

2014 

4 904 

5 714 

Portugal 

2015 

541 610 

Slovakia 

2013 

290 108 

233 726 

- 

- 

- 

- 

- 

- 

445 

10 618 

541 610 

523 834 

Slovenia 

2014 

45 872 

55 456 

1 881 

2 768 

105 977 

1% 

21% 

N/A43 

73% 

52% 

United 
Kingdom** 

2014 

2 700 000 

2 700 000 

N/A44 

Source: data obtained from surveys to tax authorities. 

*Because the tax authority in Lithuania did not have information of c. 60% of the businesses identified, the 

estimates reported may be an underestimation of the actual number of exempted businesses.  

**The tax authorities in the United Kingdom have clarified that the number of exempted businesses reported is 

only an estimate.  

Where  tax  authorities  provided  the  number  of  businesses  below  the  threshold  which  are  voluntarily 
registered for VAT, the participation rates of businesses in different size classes  were calculated for 
each Member State.45 The results are reported below.  

Table 30 – Participation rates estimated on tax authority data 

Member State 

Reference 
year 

Less than EUR 
5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 – 
EUR 500 000 

Bulgaria 

Croatia 

Czech 
Republic 

Estonia 

France 

Hungary 

Lithuania 

Luxembourg 

Malta 

Portugal 

Slovakia 

Slovenia 

2014 

2014 

2014 

2014 

2014 

2015 

2015 

2014 

2014 

2015 

2013 

2014 

73% 

72% 

48% 

70% 

79% 

78% 

47% 

69% 

12% 

25% 

92% 

97% 

69% 

69% 

7% 

68% 

32% 

1% 

34% 

81% 

92% 

95% 

- 

- 

- 

- 

9% 

- 

76% 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

71% 

- 

- 

- 

- 

55% 

67% 

Participa-
tion rate 
overall 

72% 

48% 

70% 

76% 

57% 

55% 

54% 

5% 

29% 

95% 

87% 

92% 

43 The tax authorities in Portugal did not provide the overall number of firms in the country. At this point, the share of businesses 
exempted from VAT under the SME exemption scheme has therefore not been calculated.  
44 The tax authorities in the United Kingdom did not provide the overall number of firms in the country. The share of businesses 
exempted from VAT under the SME exemption scheme has therefore not been calculated. 
45 The participation rate is defined as the percentage of businesses being exempt from paying VAT under the scheme out of the 
businesses eligible for it. 

40 | P a g e  

 
 
 
 
                                                      
 
 
Member State 

Reference 
year 

Less than EUR 
5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 – 
EUR 500 000 

United 
Kingdom 

Average 

2015 

74% 

- 

65% 

52% 

- 

- 

Source: Deloitte estimates based on data obtained from surveys to tax authorities. 

Participa-
tion rate 
overall 

74% 

63% 

Turnover generated by VAT-exempt businesses 

Tax authorities have also reported the turnover generated by businesses exempted from VAT under 
the SME exemption scheme. This allowed calculating the percentage of turnover generated by VAT-
exempted  businesses  compared  to  the  total  turnover  generated  by  businesses  in  each  size  class. 
Table 31 below presents those results.  

Table  31  –  Percentage  of  turnover  generated  by  businesses  exempted  from  VAT  under  the  SME 
exemption scheme out of total turnover generated in each size class 

Member 
State 

Referen
ce year 

Less than EUR 
5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 – 
EUR 500 000 

Belgium
46 

2015 

Bulgaria 

2014 

Croatia 

2014 

Czech 
Republic 

Estonia 

France48 

2014 

2014 

2014 

Hungary 

2015 

44% 

77% 

75% 

87% 

N/A 

72% 

N/A47 

4% 

41% 

43% 

33% 

N/A 

27% 

- 

- 

- 

- 

- 

N/A 

- 

- 

- 

- 

- 

- 

- 

- 

Italy 

2013 

12% 

Lithuania 

2015 

38% 

28% 

25% 

13% 

% of turnover 
generated by 
exempted 
businesses 
out of total 
turnover 
generated by 
SMEs 

% of turnover 
generated by 
exempted 
businesses 
out of total 
turnover 
generated by 
all 
businesses 

0.2% 

0.02% 

4% 

2% 

2% 

3% 

N/A 

4% 

1% 

6% 

1% 

0.5% 

0.5% 

1% 

N/A 

1% 

0.2% 

1% 

46 The tax authorities in Belgium actually provided the data in the following first two brackets: Less than EUR 5 580 and EUR 5 
580 – EUR 50 000. However, considering that the number of businesses with turnover between EUR 5 000 and EUR 5 580 and 
their generated turnover is assumed to be negligible, the data is reported in the brackets specified. 
47  The  tax  authority  in  Croatia  did  not  provide  the  turnover  generated  by  businesses  in  these  turnover  brackets,  but  they  did 
provide  the  overall  turnover  generated  by  all  businesses  in  the  country.  The  proportion  of  turnover  generated  by  businesses 
exempted from VAT under the SME exemption scheme compared to the turnover generated by businesses in each size class 
could therefore not be calculated. 
48  The  tax  authorities  in  France  were  only  able  to  provide  turnover  information  for  a  fraction  of  exempted  businesses,  which 
does not give sufficient information to calculate the proportion of turnover this represents out of the overall turnover generated 
by all businesses.  

41 | P a g e  

 
 
 
 
                                                      
Member 
State 

Referen
ce year 

Less than EUR 
5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 – 
EUR 500 000 

Luxembo
urg 

2014 

N/A49 

Malta 

2014 

32% 

Portugal 

2015 

Slovakia 

2013 

Slovenia 

2014 

United 
Kingdom 

2015 

N/A52 

94% 

85% 

N/A50 

22% 

73% 

56% 

- 

- 

- 

- 

- 

- 

- 

- 

9% 

26% 

21% 

Source: Deloitte estimates based on data obtained from surveys to tax authorities. 

% of turnover 
generated by 
exempted 
businesses 
out of total 
turnover 
generated by 
SMEs 

N/A51 

2% 

N/A53 

11% 

15% 

10% 

% of turnover 
generated by 
exempted 
businesses 
out of total 
turnover 
generated by 
all 
businesses 

0.0002% 

0.2% 

N/A54 

2% 

3% 

2% 

49 The tax authorities in Luxembourg did not provide the turnover generated by businesses in these turnover brackets, but they 
did provide the overall turnover generated by all businesses in the country. The proportion of turnover generated by businesses 
exempted from VAT under the SME exemption scheme compared to the turnover generated by businesses in each size class 
could therefore not be calculated.  
50 Ibid 
51 Ibid 
52 The tax authorities in Portugal did not provide the turnover generated by businesses of different sizes or the overall turnover 
generated by businesses as a whole.  
53 Ibid 
54 Ibid 

42 | P a g e  

 
 
 
                                                      
B.3 

Data obtained in connection with taxable cross-border transactions 

The purpose was to analyse the taxable cross-border transactions carried out by firms that are eligible 
for the SME exemption scheme domestically. Whilst no precise data was obtained from tax authorities 
or public sources, some tax authorities were able to provide some insights into those firms voluntarily 
registered for VAT and engaged in cross-border transactions.  

The following information was obtained from tax authorities in Bulgaria, Estonia and Malta. 

Table 32 – Information on cross-border transactions provided by tax authorities  

Bulgaria 

Estonia 

Malta 

Estimated proportion of VAT-registered 
businesses below the SME exemption 
threshold carrying out cross-border 
transactions 

Proportion of total turnover of these 
businesses coming  from cross-border 
supplies 

7% 

4% 

Source: data obtained from surveys to tax authorities  

11% 

61% 

1% (mainly MOSS 
supplies) 

0.006% (mainly 
MOSS supplies) 

The tax authorities in Lithuania55, Luxembourg and Slovenia were able to provide data on the cross-
border transactions of SMEs that are eligible for the SME exemption scheme but are VAT-registered 
and trade cross-border. This information is reported below.  

Table 33 – Cross-border transactions of VAT-registered businesses below the VAT registration 

threshold in Lithuania  

Lithuania 

Less than EUR 5 
000 

EUR 5 000 – EUR 
50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 – 
EUR 500 000 

304 

(5%) 

2 563 

(18%) 

672 

(71%) 

1080 

(79%) 

543 263 

29 270 428 

35 983 705 

219 303 261 

(7%) 

(9%) 

(54%) 

(73%) 

Number of VAT-registered 
businesses eligible for VAT 
exemption and trading cross-
border* (and proportion of these 
compared to VAT-registered 
businesses eligible for SME 
exemption**)  

Turnover from cross-border 
supplies in EUR* (and percentage 
compared to overall turnover 
generated by VAT-registered 
businesses eligible for VAT 
exemption**) 

55 Note that Lithuania was not able to provide information on 60% of their businesses. This data may therefore underestimate 
the actual number of businesses which are VAT-registered, below the threshold and trade cross-border.  

43 | P a g e  

 
 
 
 
 
 
 
                                                      
*Source: data obtained from surveys to tax authorities 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities  

Table 34 – Cross-border transactions of VAT registered businesses below the VAT registration 

threshold in Luxembourg  

Number of VAT registered businesses eligible 
for SME exemption and trading cross-border* 
(and proportion of these compared to VAT-
registered businesses eligible for VAT 
exemption**) 

Turnover from cross-border supplies in EUR* 
(and percentage compared to overall turnover 
generated by VAT-registered businesses 
eligible for SME exemption**) 

Luxembourg 

400  

(5%) 

3 500 000 

(4%) 

*Source: data obtained from surveys to tax authorities  

**Source: Deloitte estimates based on data obtained from surveys to tax authorities  

Table 35 – Cross-border transactions of VAT registered businesses below the VAT registration 

threshold in Slovenia  

Number of VAT registered businesses eligible 
for SME exemption and trading cross-border* 
(and proportion of these compared to VAT-
registered businesses eligible for VAT 
exemption**) 

Percentage of these businesses’ turnover that 
relates to cross-border supplies* 

*Source: data obtained from surveys to tax authorities  

Slovenia 

5 330  

(57%) 

59.21% 

**Source: Deloitte estimates based on data obtained from surveys to tax authorities  

44 | P a g e  

 
 
 
 
 
 
Annex C – Estimation 
methodology  

As mentioned, for the purpose of the study a specific  definition of SMEs  was adopted, which refers 
only  to  businesses  with  an  annual  turnover  not  exceeding  EUR  2  million  (i.e.  micro-businesses, 
according  to  the  EU  definition)56.  Data  was  collected  on  SMEs  according  to  their  annual  turnover, 
while no specific parameters on headcount were considered: 

  EUR 500 001 – EUR 2 000 000; 
  EUR 100 001 – 500 000; 
  EUR 50 001 – 100 000; 
  EUR 5 001 – 50 000; 
  does not exceed EUR 5 000 

The main source used to obtain the estimates required has been the data provided by tax authorities 
across Member States. However, a number of Member States were unable to provide any estimates 
or provided  incomplete  information.  To obtain a  more  comprehensive  picture of  the  EU  as  a  whole, 
some  estimates  were  developed  for  these  Member  States.  Desk  research  was  conducted  to  obtain 
the required information via existing public or private sources. However, this research highlighted the 
lack  of  comprehensive  information  at  the  level  of  granularity  required.  Two  data  sources  were 
identified, covering all 28 Member States: Eurostat and Mint Global.  

  Eurostat’s  data  is  collected  by  National  Statistics  Institutes  across  all  28  Member  States.  It 

reports: 

o  The number of businesses and their generated turnover in the non-financial business 
economy. This is broken down into size classes based on the number of employees. 
However,  Eurostat  excludes  some  sectors  that  may  be  relevant  for  VAT  purposes, 
does  not  classify  businesses  by  turnover  and  does  not  disaggregate  SMEs  further 
than the whole size class of 0-9 employees. 

o  The net VAT revenue collected in all 28 Member States. However it does not report 
gross VAT information and net revenue is reported for Member States as a whole: no 
information is provided for different size classes of businesses. 

  Mint  Global’s  database  is  compiled  by  Bureau  Van  Dijk57  (BvD)  and  contains  financial 
information  on  businesses  identified  by  BvD  worldwide.  This  dataset  can  be  used  to  obtain 
the  number  of  businesses  in  different  turnover  brackets,  their  generated  turnover  and  the 

sector  of  activity  in  which  they  operate  across  all  28  Member  States.  However,  BvD’s 
coverage  is  limited  to  the businesses  they  are  able  to  identify,  and  the  sources available  to 

56 See: http://ec.europa.eu/growth/smes/business-friendly-environment/sme-definition/index_en.htm  
57 See: http://www.bvdinfo.com/en-gb/about-us/overview 

45 | P a g e  

 
 
 
                                                      
them  are  not  consistent  across  countries.  In  addition,  Mint  Global  is  not  able  to  obtain 
turnover  or  industry  information  for  all  businesses  identified.  Hence,  the  number  of 
businesses  which  can  be  classified  within  turnover  brackets  may  not  reflect  all  businesses 
active in each Member State. 

This appendix presents the calculations that were undertaken to obtain these estimates. 

C.1   Data estimated relating to SMEs’ domestic activities 

As part of the study, an overview of the current situation of SMEs across the 28 Member States was 
produced. This Annex presents the calculations undertaken to obtain the following estimates when no 
or incomplete information was received from tax authorities: 

  The number of businesses in each turnover bracket; 

  The revenue generated by businesses in each turnover bracket; 

  The sector of activity of businesses in each turnover bracket; and 

  The gross and net VAT revenue generated by businesses in each turnover bracket. 

Number of businesses in each turnover bracket 

The  following  Member  States  did  not  provide  any  information  on  the  number  of  businesses  in  their 
country: 

  Cyprus 

  Germany 

  Greece 

  Portugal 

  Romania 

For the above Member States, estimates were derived from public sources and insights drawn from 
tax authority estimates in other Member States.  

The following Member States provided some, but incomplete information and adjustments were made 
to the data provided to obtain the estimates at the required level of granularity: 

  Croatia 

Italy 

  Lithuania 

  United Kingdom 

46 | P a g e  

 
 
 
 
The following Member States also provided incomplete information:  

  Austria 

  Luxembourg 

However,  an  analysis  of  the  data  provided  revealed  that  these  Member  States  were  outliers 
compared  to  EU-averages,  and  robust  adjusted  estimates  could  not  be  obtained.  These  are 
presented separately at the end of the section on data estimated relating to SMEs’ domestic activities. 

The calculations are presented in turn below.  

Estimates for which no data was provided from tax authorities 

When  no  data  was  provided  by  Member  States  on  the  number  of  businesses  in  their  countries, 
estimates were derived using Eurostat data, adjusted to obtain the required level of granularity. This 
was done in three steps.  

1)  Obtain  Eurostat’s  estimates  on  the  total  number  of  businesses  in  the  non-financial 

business economy and adjust to account for the excluded sectors  

Eurostat  provides,  for  all  28  Member  States,  the  number  of  businesses  in  the  non-financial 
business economy. However, the following sectors, which may be relevant for VAT purposes, 
are excluded from these estimates.58 

o  A – Agriculture, forestry and fishing 
o  K – Financial and insurance activities 
o  O – Public administration and defence; compulsory social-security 
o  P – Education 
o  Q – Human health and social work activities 
o  R – Arts, Entertainment and recreation  
o  S – Other services activities 
o  T  –  Activities  of  households  as  employers;  undifferentiated  goods-  and  services-

producing activities of households for own use 

o  U – Activities of extraterritorial organisations and bodies 

The  Eurostat  estimates  are  therefore  adjusted  to  account  for  businesses  operating  in  the 
excluded sectors. Some respondent tax authorities provided a breakdown of their businesses 
by  sector  of  activity  according  to  the  NACE  rev.2  classification.59  For  these  Member  States, 
the proportion of these businesses  operating in the excluded sectors above was calculated. 
The  results  show  that  on  average,  34%  of  businesses  operate  outside  of  the  non-financial 
business economy taken into account by Eurostat. An uplift of 34% is therefore applied to the 
Eurostat’s data  to  obtain  an  estimate of  all  businesses operating in  the Member  States  that 
did not provide this information. The resulting estimates are provided below.  

58 http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:Non-financial_business_economy 
59 This is the case for  Belgium,  Bulgaria,  Croatia,  the Czech Republic, Finland, France, Hungary, Ireland, Italy, Slovakia and 
Slovenia. Lithuania also provided this information but was excluded from the calculations, as some of their businesses could 
not be identified. Since it is uncertain in which sectors these unidentified businesses operate, Lithuania is excluded to avoid any 
bias in the results. Denmark and Spain also provided some industry classification for their businesses, however not according 
to the NACE rev.2 classification. They could therefore not be included in the calculations.  

47 | P a g e  

 
 
                                                      
Table 36 – Estimated number of businesses by Member State 

Member State 

Reference year 

Eurostat estimates of 
number of businesses in 
the non-financial 
business economy 

Estimated number of 
businesses in the whole 
economy 

Cyprus 

Germany 

Greece 

Portugal 

Romania 

2012 

2012 

2012 

2013 

2013 

46 139 

61 834  

2 189 737 

2 934 614  

726 581 

776 429 

436 153 

973 740  

1 040 545  

584 518  

Source: Deloitte estimates 

2)  Segment the total number of businesses obtained within turnover brackets 

15  Member  States  provided  a  breakdown  of  all  businesses  in  their  economy  within  the  specified 
turnover  brackets.60  An  EU-average  distribution  of  businesses  can  therefore  be  inferred  from  this 
data.  

The data obtained from Mint Global can also be used to classify businesses within turnover brackets. 
Whilst using this dataset would allow to use the country-specific distributions for the Member States 
where data is missing, it presents some limitations: 

  BvD is unable to identify every business in each Member State, and the amount of coverage 
highly  depends  on  the  information  made  available  to  them.  This  widely  varies  across 
countries  and  implies  that  the  overall  number  of  businesses  identified  may  not  be 
representative of the number of businesses that are currently active 

  Within  each  country,  BvD  is  sometimes  unable  to  obtain  turnover  data  for  each  of  the 
businesses  identified.  In  some  instances,  when  sufficient  information  is  available  on  a 

company’s assets and/or employees, BvD provides an estimate of the company’s turnover. In 
other instances, it simply does not report turnover information 

Desk  research  and  a  consultation  with  a  data  expert  from  BvD  have  shown  that  businesses  with  a 
smaller  turnover  are  the  ones  which  are  the  most  difficult  to  identify,  and  for  which  financial 
information is most difficult to obtain. The distribution of businesses within turnover brackets inferred 
from  Mint  Global  might  therefore  be  biased  towards  the  larger  brackets,  for  which  information  on 
businesses is easier to obtain.  

To  test  the  robustness  of  the  Mint  Global  estimates,  the  distributions  of  the  businesses  identified 
within  turnover  brackets  were  compared  to  the  ones  obtained  from  tax  authorities  in  the  Member 
States that provided this data. The comparison is done in Table 37 below.  

60Belgium, Bulgaria, Czech Republic, Estonia, Finland, France, Hungary, Ireland, Italy, Latvia, Malta, Slovakia, Slovenia, Spain, 
Sweden.  Even  though  Belgium  and  Italy  provided  the  number  of  businesses  in  slightly  different  turnover  brackets  (less  than 
EUR 5 580 instead of EUR 5 000 and EUR 100 000 to EUR 515 000 instead of EUR 500 000 respectively), they are included in 
the calculations as the error margin is assumed to be negligible.  

48 | P a g e  

 
 
 
                                                      
Table  37  –  Statistics  of  the  proportions  of  businesses  in  each  turnover  bracket  from  tax  authorities 
and Mint Global data 

Turnover brackets  

Less than 

EUR 5 000 

EUR 5 000 

EUR 50 000 

EUR 100 

EUR 500 

More than 

– EUR 50 

– EUR 100 

000 – EUR 

000 – EUR 

EUR 2 000 

000 

000 

500 000 

2 000 000 

000 

Tax authority  

Average 

Standard deviation 

Mint Global 

Average 

38% 

31% 

13% 

10% 

9% 

3% 

14% 

4% 

5% 

1% 

20% 

25% 

10% 

29% 

10% 

Standard deviation 

16% 

13% 

3% 

19% 

5% 

Source: Deloitte estimates based on data obtained from tax authorities and Mint Global 

3% 

1% 

6% 

3% 

As shown in the table above, the estimates obtained from Mint Global underestimate on average the 
proportion of businesses in the lower bracket and overestimates the proportion of firms in the higher 
brackets compared to the tax authority estimates. In addition, the estimates obtained from Mint Global 
are more volatile across countries compared to what was obtained from tax authorities.  

Given the results presented above, an EU-average distribution of businesses within turnover brackets 
is preferred to the country specific estimates provided by Mint Global data. This is therefore applied to 
the estimated number of businesses in each Member State for which no data from tax authorities was 
received. The resulting estimates are presented below.   

49 | P a g e  

 
 
 
 
 
 
Table 38 – Estimated number of businesses by turnover bracket and Member State 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 
000 – EUR 
100 000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Share of 
SMEs 

Cyprus 

2012 

23 506  

19 387  

5 641  

8 673  

3 049  

1 578  

97% 

Germany 

2012 

1 115 

606  

920 093  

267 739  

411 598  

144 709  

74 869  

97% 

Greece 

Portugal 

Romania 

2012 

370 172  

305 298  

88 839  

136 573  

48 016  

24 842  

97% 

2013 

395 568  

326 243  

94 934  

145 943  

51 310  

26 547  

97% 

2013 

222 207  

183 265  

53 328  

81 982  

28 823  

14 912  

97% 

Source: Deloitte estimates 

Estimates for which some data was provided by tax authorities which required adjustments 

Some  Member  States  provided  the  number  of  businesses  in  their  countries,  but  adjustments  were 
required to obtain these estimates in the desired level of granularity. This includes: 

1)  Adjustments when businesses were provided in turnover classifications different to the ones 

specified. This is the case for Croatia, Italy and Lithuania.  

2)  Adjustments when the number of VAT-registered businesses  only was  provided. This is  the 

case for Denmark and Poland.  

3)  Adjustments  when  the  number  of  VAT-registered  businesses  only  were  provided,  and  in  a 
different turnover classification to the one specified. This is the case for the United Kingdom.  

Each adjustment and the resulting estimates are presented below.  

1)  Adjustments  when  businesses  were  provided  in  turnover  classifications  different  to 

the ones specified. 

Two  approaches  were  used  to  adjust  the  estimates  obtained  when  the  required  level  of 
granularity was not provided. 

If  the  number  of  businesses  were  provided  in  turnover  brackets  that  were 
slightly  different  to  the  ones  specified,  Mint  Global  was  used  to  redistribute 
businesses  in  the  desired  size  classes.  For  example,  Croatia  provided  the 
number  of  businesses  with  turnover  below  EUR  6  550,  whilst  the  desired 
turnover bracket is below EUR 5 000. Mint Global data provides the proportion 
of businesses: 

o  With turnover below EUR 5 000 

o  With turnover between EUR 5 000 and EUR 6 550 

50 | P a g e  

 
 
 
 
 
This allows redistributing the businesses provided by Croatia within the relevant 
turnover brackets. Mint Global estimates on the distribution of businesses for a 
country  as  a  whole  are  biased  towards  larger  businesses,  as  these  are  more 
easily identified. However, there is no evidence that this bias also exists within 
specific  size  classes,  as  businesses  with  EUR  6  000  turnover  should  not  be 
more difficult to identify than businesses with EUR 3 000 turnover. Therefore, for 
the purpose of this exercise, Mint Global estimates are used. This methodology 
is used for Croatia and Italy.  

  When  tax  authorities  provided  a  number  of  businesses  that  could  not  be 
classified  within  turnover  brackets,  an  EU  average  distribution  was  applied  to 
distribute  these  businesses  in  different  size  classes.  This  methodology  is 
applied to Lithuania.61 

The estimates provided by tax authorities and the estimates adjusted to the relevant turnover 
brackets are presented for each Member State below.  

  Croatia 

Table 39 – Number of businesses in different size classes provided by the tax authorities in Croatia 

Member 
State 

Reference 
year 

Less than 
EUR 6 550 

EUR 6 550 – 
EUR 65 500 

EUR 65 500 
– EUR 131 
000 

EUR 131 
000 – EUR 
655 000 

EUR 655 
000 – EUR 
1 965 250 

More than 
EUR 1 965 
250 

Croatia 

2014 

63 224 

97 423 

25 311 

27 030 

6 988 

4 726 

Source: Data obtained from surveys to tax authorities  

Table 40 – Estimates of the number of businesses in Croatia by turnover brackets and distribution of 
businesses by turnover brackets 

Member 
State 

Reference 
year 

Variable 

Less than 
EUR 5 
000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 100 
000 

EUR 100 
000 – 
EUR 500 
000 

EUR 500 
000 – 
EUR 2 
000 000 

More 
than 
EUR 2 
000 000 

Croatia 

2014 

Number of 
businesses 

Distribution 
of 
businesses 

Source: Deloitte estimates  

Italy 

58 515 

88 097 

29 773 

33 419 

10 238 

4 660 

26% 

39% 

13% 

15% 

5% 

2% 

61 While a distribution amongst size classes can be computed for the businesses provided by Lithuania within identified turnover 
brackets,  this  distribution  may  be  biased  towards  larger  businesses,  as  it  is  more  difficult  to  identify  the  turnover  of  smaller 
ones.  In  fact  when  comparing  the  EU  average  distribution  of  businesses  to  the  one  calculated  in  Lithuania,  only  46%  of 
businesses  in  Lithuania  have  less  than  EUR  50  000  turnover  compared  to  71%  in  the  rest  of  the  EU.  The  EU  average 
distribution is therefore applied to the unidentified businesses to avoid getting biased estimates.  

51 | P a g e  

 
 
 
 
 
 
                                                      
Table 41 – Number of businesses in different size classes provided by the tax authorities in Italy 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 
– EUR 100 
000 

EUR 100 
000 – EUR 
515 000 

EUR 515 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Italy 

2013 

930 383 

2 006 675 

815 155 

1 101 570 

312 376 

139 431 

Source: Data obtained from surveys to tax authorities  

Table  42  –  Estimates  of  the  number  of  businesses  in  Italy  by  turnover  brackets  and  distribution  of 
businesses by turnover brackets 

Member 
State 

Reference 
year 

Variable 

Less than 
EUR 5 
000 

EUR 5 000 
– EUR 50 
000 

EUR 50 
000 – 
EUR 100 
000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – 
EUR 2 
000 000 

More 
than 
EUR 2 
000 000 

930 383 

2 006 675 

815 155 

1 098 160 

315 786 

139 431 

17% 

38% 

15% 

21% 

6% 

3% 

Italy 

2013 

Number of 
businesses 

Distribution 
of 
businesses 

Source: Deloitte estimates  

  Lithuania 

Table 43 – Number of businesses in each size class in Lithuania 

Member 
State 

Reference 
year 

Less 
than EUR 
5 000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 100 
000 

EUR 100 
000 – 
EUR 500 
000 

EUR 500 
000 – 
EUR 2 
000 000 

More 
than EUR 
2 000 000 

Unidentified 

Lithuania 

2015 

20 467 

22 505 

12 361 

22 887 

9 272 

5 380 

141 503 

Source: Data obtained from surveys to tax authorities 

52 | P a g e  

 
 
 
 
 
 
Table 44 – Estimates of the number of businesses in Lithuania by turnover brackets and distribution 
of businesses by turnover brackets 

Member 
State 

Reference 
year 

Variable 

Less 
than EUR 
5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 
000 – 
EUR 100 
000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – 
EUR 2 
000 000 

More 
than 
EUR 2 
000 000 

Lithuania 

2015 

Number of 
businesses 

Distribution 
of 
businesses 

Source: Deloitte estimates  

74 259  

66 871  

25 271  

42 734  

16 250  

8 990  

32% 

28% 

11% 

18% 

7% 

4% 

2)  Adjustments when tax authorities  provided the  number of VAT-registered businesses 

only 

The  tax  authorities  in  Denmark  and  Poland  provided  the  number  of  VAT-registered 
businesses in their countries, within the relevant turnover brackets. However, both Denmark 
and  Poland  offer  the  SME  exemption  scheme.  The  businesses  taking  advantage  of  the 
scheme are therefore not VAT-registered and are not accounted for in the numbers provided. 
Since the thresholds to be eligible for the scheme are DKK 50 000 in Denmark (equivalent to 
about EUR 6 700) and PLN 150 000 in Poland (equivalent to about EUR 35 000), the number 
of  businesses  provided  by  tax  authorities  in  the  lower  turnover  brackets  underestimate  the 
actual  number  of  active  businesses.  In  order  to  account  for  the  businesses  exempted  from 
VAT registration, the following adjustments are made: 

  The number of VAT-registered businesses with turnover below the threshold is estimated 
in both countries using data from Mint Global. For example, in Denmark VAT-registered 
businesses  with  turnover  between  EUR  5  000  and  EUR  50  000  are  redistributed  using 
Mint Global information within: 

o  EUR 5 000 to EUR 6 700; and 

o  EUR 6 700 to EUR 50 000. 

  The  EU  average  participation  rate  to  the  SME  exemption  scheme  from  eligible 
businesses, obtained from the data collected from tax authorities, is used to estimate the 
number  of  unregistered  businesses.  For  example,  if  10  000  businesses  are  VAT-
registered, are below the threshold, and the participation rate to the scheme is assumed 
to  be  40%,  these  10  000  businesses  represent  only  60%  of  all  eligible  businesses. 
Hence, the number of unregistered businesses would be assumed to be 15 000.  

The  numbers  provided  by  the  tax  authorities  in  Denmark  and  Poland,  and  the  resulting 
estimates are presented below.   

53 | P a g e  

 
 
 
 
 
  Denmark 

Table 45 – Total number of VAT-registered businesses in different size classes in Denmark 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 
– EUR 100 
000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Denmark 

2014 

149 935 

127 370 

51 772 

87 721 

38 456 

20 946 

Source: Data obtained from surveys to tax authorities 

Table 46 – Estimates of the number of businesses in Denmark by turnover brackets and distribution 
of businesses by turnover brackets 

Member 
State 

Reference 
year 

Variable 

Less 
than EUR 
5 000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 100 
000 

EUR 100 
000 – 
EUR 500 
000 

EUR 500 
000 – 
EUR 2 
000 000 

More 
than EUR 
2 000 000 

Number of 
businesses 

Distribution 
of 
businesses 

Denmark 

2014 

Source: Deloitte estimates  

  Poland 

401 571 

145 091 

51 772 

87 721 

38 456 

20 946 

54% 

19% 

7% 

12% 

5% 

3% 

Table 47 – Total number of VAT-registered businesses in different size classes in Poland 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 
– EUR 100 
000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Poland 

2015 

322 059 

686 062 

235 538 

339 517 

112 397 

52 199 

Source: Data obtained from surveys to tax authorities 

54 | P a g e  

 
 
 
 
 
 
 
Table 48 – Estimates of the number of businesses in Poland by turnover brackets and distribution of 
businesses by turnover brackets 

Member 
State 

Reference 
year 

Variable 

Less than 
EUR 5 
000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 100 
000 

EUR 100 
000 – 
EUR 500 
000 

EUR 500 
000 – 
EUR 2 
000 000 

More 
than EUR 
2 000 000 

Number of 
businesses 

862 572 

1 516 

451 

235 538 

339 517 

112 397 

52 199 

Distribution 
of busi-
nesses 

28% 

49% 

7% 

11% 

3% 

2% 

Poland 

2015 

Source: Deloitte estimates  

3)  Adjustments when tax authorities provided the  number of VAT-registered businesses 

only, and in a different turnover classification to the one specified.  

This is the case only for the United Kingdom. In addition to not classifying businesses in the 
relevant turnover brackets, about 3% of businesses could not be classified at all. The number 
of VAT-registered businesses provided by the tax authorities in the UK is presented below.  

Table 49 – Number of VAT-registered businesses in each size class in the United Kingdom 

Member 
State 

Referenc
e year 

EUR 0 

EUR 1 -  
EUR 124 
000 

EUR 124 
000 – 
EUR 229 
000 

EUR 229 
000 – 
EUR 458 
400 

EUR 458 
400 – 
EUR 764 
000 

EUR 764 
000 – 
EUR 1 
528 000 

EUR 1 
528 000 
– EUR 15 
280  000 

More 
than 
EUR 15 
280 000 

Unidentif
ied 

United 
Kingdom 

2015 

226 320 

702 100 

352 280 

290 160 

144 850 

137 210 

170 760 

30 810 

73 580 

Source: Data obtained from surveys to tax authorities.  

The  following  adjustments  are  made  in  order  to  account  for  the  unregistered  businesses,  to 
redistribute  the  businesses  provided  within  the  specified  turnover  brackets,  and  to  distribute  the 
unidentified businesses within size classes: 

  The  tax  authorities  in  the  United  Kingdom  estimated  that  about  2  700  000  businesses 
took advantage of the SME exemption scheme and are therefore not registered for VAT 
purposes.  The  threshold  for  registration  in  the  UK  was  GBP  81  000  in  2015,  which  is 
equivalent  to  about  EUR  124  000.  Therefore,  2  700  000  additional  businesses  are 
assumed to fall within the EUR 0 to EUR 124 000 bracket.62  

  Mint Global data is then used to estimate the number of businesses with turnover below 

and above EUR 100 000. 

  The average distribution of businesses within the relevant turnover brackets based on the 

data obtained from tax authorities is used to redistribute businesses: 

62 Because the threshold for VAT registration in the scheme does not refer directly to a business’ turnover in the UK, but rather 
to the taxable turnover which is made from domestic supplies only, it is possible that some of these 2 700 000 businesses have 
turnover higher than EUR 124 000, resulting in a slight overestimation of the businesses in the lower bracket.  

55 | P a g e  

 
 
 
 
                                                      
o  Estimated  with  less  than  EUR  100  000  of  turnover  between  the  following 

brackets: 

  Less than EUR 5 000 
  EUR 5 000 to EUR 50 000 
  EUR 50 000 to EUR 100 000 

o  Estimated  with  more  than  EUR  100  000  of  turnover  between  the  following 

brackets: 

  EUR 100 000 to EUR 2 000 000 
  More than EUR 2 000 000  

  Finally,  the  EU  average  distribution  of  businesses  is  used  to  classify  the  unidentified 

businesses within size classes.  

The  resulting  estimates  of  the  total  number  of  businesses  in  the  United  Kingdom,  classified 
within turnover brackets are presented below.  

Table  50  –  Estimates  of  the  number  of  businesses  in  the  United  Kingdom  and  distribution  of 
businesses by turnover brackets 

Member State 

Reference 
year 

Variable 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 000 
– EUR 100 
000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

United 
Kingdom 

2015 

Source: Deloitte estimates  

Number of 
businesses 

Distribution 
of busi-
nesses 

1 818 842   1 239 792  

359 647  

944 758  

301 275  

163 756  

38% 

26% 

7% 

20% 

6% 

3% 

Turnover generated by businesses in each turnover bracket 

Similarly  to  the  number  of  businesses,  turnover  estimates  had  to  be  computed  for  Member  States 
which did not provide this information, and adjustments had to be made for the estimates provided by 
tax authorities where the information was incomplete or lacked granularity.  

The  following  Member  States  did  not  provide  any  information  on  the  turnover  generated  by 
businesses in their country: 

  Cyprus 

  Germany 

  Greece 

  Portugal 

  Romania 

  United Kingdom 

For  the  above  countries,  estimates  were  derived  from  estimates  on  the  number  of  businesses  and 

insights  on  a  business’s  average  turnover  derived  from  tax  authority  estimates  in  other  Member 
States.  

56 | P a g e  

 
 
 
The  following  Member  States  provided  incomplete  information,  and  adjustments  were  made  to  the 
data provided to obtain the estimates at the required level of granularity: 

  Croatia 

  Denmark 

Italy 

  Lithuania 

  Poland 

The following Member States also provided incomplete information:  

  Austria 

  Luxembourg 

However,  an  analysis  of  the  data  provided  revealed  that  these  countries  were  outliers  compared  to 
EU-averages, and robust adjusted estimates could not be obtained. These are presented separately 
at the end of section C.1.  

The calculations are presented in turn below.  

Estimates for which no data was provided from tax authorities 

When  no  data  was  provided  by  Member  States  on  the  turnover  generated  by  businesses  in  their 
countries, estimates were derived using: 

  The number of businesses in each size class estimated previously; and 

  The  average  turnover  generated  by  businesses  in  each  size  class,  derived  from  the 

estimates provided by other Member States.  

While Mint Global data can be used to infer country specific estimates of the average turnover of the 
businesses identified, a comparison of the estimates obtained to the ones provided by tax authorities 
showed  that  Mint  Global  data  often  over-  or  underestimates  the  data  provided  directly  by  Member 
States. The differences can be significant, especially in the lower turnover brackets.63 

In addition, apart from the largest turnover bracket the estimates obtained from tax authorities show 
that  the  average  turnover  in  each  size  class  does  not  vary  significantly  across  Member  State.  The 
average  turnover  in  each  size  class  estimated  from  the  Member  States  which  provided  this  data  is 
therefore deemed more robust to apply to the Member States where no data has been provided.  

The  average  and  standard  deviation  of  the  average  turnover  of  businesses  in  each  size  class  is 
presented below. 

Table 51 – Statistics of the distribution across Member States of the average turnover per business in 
each size class (in EUR)64 

Variable 

Less than EUR 
5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 – 
EUR 500 000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

63 For example, Mint Global estimates the average turnover of a business with less than EUR 5 000 of turnover to be EUR 3 
500 in the Czech Republic, compared to a value of EUR159 derived from the data obtained from tax authorities.  
64  Estimates  are  based  on  Belgium,  Bulgaria,  Czech  Republic,  Estonia,  Finland,  France,  Hungary,  Ireland,  Latvia,  Malta, 
Netherlands, Slovakia, Slovenia, Spain, Sweden. Even though Belgium and Italy provided the number of businesses in slightly 
different turnover brackets (Less than EUR 5 580 instead of EUR 5 000 and EUR 100 000 to EUR 515 000 instead of EUR 500 
000 respectively), they are included in the calculations as the error margin is assumed to be negligible 

57 | P a g e  

 
 
 
 
                                                      
Variable 

Less than EUR 
5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 – 
EUR 500 000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

Average across 
Member States 

Standard 
deviation across 
Member States 

879  

21 069  

71 716  

224 387  

975 425  

20 215 627  

454  

2 074  

594  

5 994  

9 080  

7 134 252  

Source: Deloitte estimates based on data obtained from surveys to tax authorities 

The  resulting  estimates  of  total  turnover  generated  by  businesses  in  different  size  class  for  the 
Member States which did not provide this data are presented below. 

Table 52 – Estimated generated turnover by SMEs of different size, by Member State (in million EUR) 

Member State 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 
– EUR 500 
000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

Cyprus 

Germany 

Greece 

Portugal 

Romania 

United 
Kingdom 

21  

408  

405  

1 946  

2 974  

31 891  

980  

19 386  

19 201  

92 357  

141 153  

1 513 523  

325  

6 432  

6 371  

30 645  

46 836  

502 205  

348  

6 874  

6 808  

32 748  

50 049  

536 659  

195  

3 861  

3 824  

18 396  

28 115  

301 464  

1 598  

26 122  

25 792  

211 992  

293 871  

3 310 430  

Source: Deloitte estimates 

Estimates for which some data was provided by tax authorities which required adjustments 

Similarly to the estimates on the number of businesses, some Member States provided the turnover 
generated by businesses in their countries, but adjustments were required to obtain these estimates 
in the desired level of granularity. This includes: 

1)  Adjustments  when  businesses  and  their  turnover  were  provided  in  turnover  classifications 

different to the ones specified. This is the case for Croatia, Italy, and Lithuania.  

2)  Adjustments when the number of VAT-registered businesses  only was  provided. This is  the 

case for Denmark and Poland.  

Each adjustment and the resulting estimates are presented below.  

1)  Adjustments  when  businesses  and  their  turnover  were  provided 

in  turnover 

classifications different to the ones specified. 

58 | P a g e  

 
 
 
 
A similar approach is undertaken to adjust the turnover generated by businesses compared to 
the adjustments made to the number of businesses. 

  When the number of businesses were provided in turnover that were slightly different 

to the ones specified, the following adjustments were made: 

o  From  previous  estimations,  the  number  of  businesses  falling  out  of  the 
relevant brackets was calculated. For example, Croatia provided the number 
of businesses with turnover below EUR 6 550, and Mint Global was used to 
estimate the number of these businesses with turnover between EUR 5 000 
and EUR 6 550 which should be redistributed. 

o  To also redistribute the turnover generated by these businesses, the average 
turnover of these businesses is assumed to be the mid-point between the two 
thresholds. For example, in the case of Croatia, the average turnover of the 
businesses which should  be redistributed to the EUR 5 000  to EUR  50 000 
bracket is assumed to be EUR 5 775, the average of EUR 5 000 and EUR 6 
550.  

The  same  exercise  is  used  for  other  turnover  brackets  and  Member  States.  This 
methodology is used for the estimates provided by Croatia and Italy. 

  When  tax  authorities  provided  a  number  of  businesses  that  could  not  be  classified 
within  turnover  brackets,  which  is  the  case  in  Lithuania,  the  following  adjustments 
were made: 

o  The  distribution  of  these  businesses  within  turnover  bracket  was  previously 

estimated.  

o  The  total  turnover  is  computed  using  the  average  turnover  of  Lithuanian 
businesses  in  each  turnover  bracket,  based  on  the  information  that  the  tax 
authorities were able to provide, and number of businesses above.  

The estimates provided by tax authorities and the estimates adjusted to the relevant turnover 
brackets are presented for each Member State below.  

59 | P a g e  

 
 
 
 
  Croatia 

Table 53 – Turnover generated by businesses of different size classes provided by the tax authorities 
in Croatia (in million EUR) 

Member 
State 

Reference 
year 

Less than 
EUR 6 550 

EUR 6 550 – 
EUR 65 500 

EUR 65 500 
– EUR 131 
000 

EUR 131 
000 – EUR 
655 000 

EUR 655 
000 – EUR 
1 965 250 

More than 
EUR 1 965 
250 

Croatia 

2014 

107 

2 555 

2 314 

7 610 

7 728 

71 630 

Source: Data obtained from surveys to tax authorities  

Table 54 – Estimates of turnover generated by businesses in Croatia by turnover brackets (in million 
EUR) 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 
– EUR 100 
000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 2 
000 000 

More than 
EUR 2 000 
000 

Croatia 

2014 

80 

1 772 

2 018 

6 877 

9 697 

71 500 

Source: Deloitte estimates  

Italy 

Table 55 – Turnover generated by businesses of different size classes provided by the tax authorities 
in Italy (in million EUR) 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 
– EUR 100 
000 

EUR 100 
000 – EUR 
515 000 

EUR 515 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Italy 

2013 

783 

47 997 

58 247 

240 224 

305 939 

2 636 502 

Source: Data obtained from surveys to tax authorities  

60 | P a g e  

 
 
 
 
 
 
 
 
Table  56  –  Estimates  of  turnover  generated  by  businesses  in  Italy  by  turnover  brackets  (in  million 
EUR) 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 
– EUR 100 
000 

EUR 100 
000 – EUR 
515 000 

EUR 515 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Italy 

2013 

783 

47 997 

58 247 

238 494 

307 670 

2 636 502 

Source: Deloitte estimates  

  Lithuania 

Table 57 – Turnover generated by businesses of different size classes provided by the tax authorities 
in Lithuania (in million EUR) 

Member 
State 

Reference 
year 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 
100 000 

EUR 
100 000 
– EUR 
500 000 

EUR 
500 000 
– EUR 2 
000 000 

More 
than 
EUR 2 
000 000 

Unidentified 

Lithuania 

2015 

12 

547 

897 

5 161 

9 162 

75 130 

N/A 

Source: Data obtained from surveys to tax authorities 

Table 58 – Estimates of turnover generated by businesses in Lithuania by turnover brackets (in million 
EUR) 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 
– EUR 100 
000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Lithuania 

2015 

44  

1 626  

1 833  

9 637  

16 058  

125 543  

Source: Deloitte estimates  

2)  Adjustments when tax authorities provided the  number of VAT-registered businesses 

only 

Tax  authorities  in  Denmark  and  Poland  provide  the  number  of,  and  hence  the  turnover 
generated by, VAT-registered businesses only. The turnover generated by all businesses in 
the  economy  is  therefore  underestimated  by  these  estimates.  In  order  to  account  for  this 
turnover, the following adjustments are made: 

  The number of businesses which are not VAT-registered were previously estimated. 

  They  are  combined  with  the  average  turnover  per  business  calculated  on  VAT-
registered businesses in each size class, in Denmark and Poland, to obtain the total 
turnover generated.  

61 | P a g e  

 
 
 
 
 
 
The numbers provided by the tax authorities in Denmark and Poland, and the resulting estimates are 
presented below.   

  Denmark 

Table  59  –  Turnover  generated  by  VAT-registered  businesses  of  different  size  classes  provided  by 
the tax authorities in Denmark (in million EUR) 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 000 
– EUR 100 
000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Denmark 

2014 

65 

2 804 

3 755 

20 196 

37 949 

522 578 

Source: Data obtained from surveys to tax authorities 

Table  60  –  Estimates  of  turnover  generated  by  all  businesses  in  Denmark  by  turnover  brackets  (in 
million EUR) 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 000 
– EUR 100 
000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Denmark 

2014 

175 

2 908 

3 755 

20 196 

37 949 

522 578 

Source: Deloitte estimates  

  Poland 

Table 61 – Turnover generated by VAT-registered businesses of different size classes provided by 
the tax authorities in Poland (in million EUR) 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 000 
– EUR 100 
000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Poland 

2015 

145 

15 563 

16 787 

75 144 

105 924 

1 040 733 

Source: Data obtained from surveys to tax authorities 

Table  62  –  Estimates  of  turnover  generated  by  all  businesses  in  Poland  by  turnover  brackets  (in 
million EUR) 

Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 000 
– EUR 100 
000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

62 | P a g e  

 
 
 
 
 
Member 
State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 000 
– EUR 100 
000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Poland 

2015 

388 

32 171 

16 787 

75 144 

105 924 

1 040 733 

Source: Deloitte estimates  

Net and gross VAT revenues generated by businesses in each turnover bracket 

Estimates  of  the  net  and  gross  VAT  revenue  generated  by  businesses  of  different  size  had  to  be 
computed for Member States which did not provide this information, and adjustments had to be made 
for  the  estimates  provided  by  tax  authorities  where  the  information  was  incomplete  or  lacked 
granularity.  

The following Member States did not provide any information on their VAT revenues: 

  Cyprus 

  Germany 

  Greece 

  Portugal 

  Romania 

  United Kingdom 

For  the  above  countries,  estimates  were  derived  from  Eurostat  dataset  on  the  overall  net  VAT 
revenues  generated  in  each  country,  and  insights  on  how  revenues  are  distributed  amongst  size 
classes of businesses from the tax authority data received in other Member States.  

The following Member States provided incomplete information, and in some cases adjustments were 
made to the data provided to obtain the estimates at the required level of granularity: 

  Croatia 

Italy 

  Lithuania 

  Netherlands 

The following Member States also provided incomplete information:  

  Austria 

  Luxembourg 

However,  an  analysis  of  the  data  provided  revealed  that  these  Member  States  were  outliers 
compared  to  EU-averages,  and  robust  adjusted  estimates  could  not  be  obtained.  These  are 
presented separately at the end of the section C.1.  

The calculations are presented in turn below.  

63 | P a g e  

 
 
 
 
 
Estimates for which no data was provided from tax authorities 

When  no  data  was  provided  by  Member  States  on  the  VAT  revenues  generated  by  businesses  in 
their countries, estimates were derived using Eurostat’s dataset on the net VAT revenue generated by 
Member  States. However, the dataset does  not disaggregate the net VAT revenue by different size 
class of businesses, and does not provide gross VAT revenue information. In  order to distribute the 
revenue and account for gross VAT revenue, the following methodology was used: 

  The net VAT revenue generated by each Member State is obtained from Eurostat dataset 

  The data obtained from tax authorities Member State which provided data to the desired level 

of granularity is used to: 

o  Infer  a  net/gross  VAT  revenue  ratio  (the  amount  of  net  VAT  revenue  which  is 
collected  for  every  1  EUR  of  gross  VAT  output  declared).  The  average  ratio  across 
Member  States  which  provided  this  data  is  used  to  calculate  the  overall  gross  VAT 
revenues generated for other Member States.  

o  Distribute  the  net  and  gross  VAT  revenues  amongst  businesses  of  different  size 
based on the average distribution observed on Member States across the EU which 
provided this data.   

On  average  across  EU  Member  States,  EUR  0.28  of  VAT  revenue  is  collected  for  every  1  EUR  of 
gross  VAT  output  declared.65  The  net  VAT  revenue  obtained  from  Eurostat  is  therefore  uplifted  to 
obtain estimates of the gross VAT revenue generated in each Member State for which no data was 
obtained. These estimates are presented below.  

65  Estimates  are  based  on  Belgium,    Bulgaria,  Czech  Republic,  Denmark,  Estonia,  Finland,  France,  Hungary,  Ireland,  Italy, 
Latvia, Malta, Poland, Slovakia, Slovenia, Spain, Sweden. 

64 | P a g e  

 
 
 
     
                                                      
Table 63 – Net VAT revenue by Member State (in million EUR) 

Member State 

Reference year 

Eurostat estimates of 
the net VAT revenue 
generated in each 
Member State 

Estimates of the gross 
VAT revenue 
generated in each 
Member State 

Cyprus 

Germany 

Greece 

Portugal 

Romania 

United Kingdom 

2014 

2014 

2014 

2014 

2014 

2014 

1 512 

5 396  

203 081 

724 703  

12 676 

14 672 

11 650 

45 235  

52 358  

41 572  

154 146 

550 075  

Source: Eurostat estimates of net VAT revenues and Deloitte estimates of gross VAT revenues 

The distributions of net and gross VAT revenues generated by businesses of different size, observed 
across Member States in the EU, are presented below.  

Table  64  –  Statistics  of  the  distribution  of  net  and  gross  VAT  revenues  generated  by businesses  of 
different size across the EU66 

Variable 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 
– EUR 100 
000 

EUR 100 000 
– EUR 500 
000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

Average 
distribution of net 
VAT revenues 

Standard deviation 
of the distribution 
of net VAT 
revenues 

Average 
distribution of 
gross VAT 
revenues 

Standard deviation 
of the distribution 
of gross VAT 
revenues 

-2% 

2% 

3% 

10% 

14% 

73% 

7% 

1% 

1% 

3% 

5% 

5% 

1% 

1% 

1% 

7% 

11% 

79% 

2% 

1% 

1% 

2% 

3% 

7% 

Source: Deloitte estimates based on data obtained from surveys to tax authorities 

66  Estimates  are  based  on  Belgium,  Bulgaria,  Czech  Republic,  Denmark,  Estonia,  Finland,  France,  Hungary,  Ireland,  Latvia, 
Malta,  Poland,  Slovakia,  Slovenia,  Spain,  Sweden.  Even  though  Belgium  and  Italy  provided  the  number  of  businesses  in 
slightly different turnover brackets (Less than EUR 5 580 instead of EUR 5 000 and EUR 100 000 to EUR 515 000 instead of 
EUR 500 000 respectively), they are included in the calculations as the error margin is assumed to be negligible. 

65 | P a g e  

 
 
                                                      
As  shown  in  the  table  above,  while  there  is  some  variation  of  the  proportion  of  net  VAT  revenue 
generated  by  businesses  with  less  than  EUR  5  000  of  turnover  across  countries,  the  overall 
distribution of net and gross VAT revenues is comparable across Member States.  

The  average  distribution  is  therefore  applied  to  the  country-level  estimates  of  net  and  gross  VAT 
revenues for Member  States which did not provide this data. The resulting estimates are presented 
below.  

Table 65 – Estimates of the net VAT revenue generated turnover by businesses of different size, by 
Member State (in million EUR) 

Member State 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 
– EUR 500 
000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

Cyprus 

Germany 

Greece 

Portugal 

Romania 

United 
Kingdom 

- 29 

25  

37  

155  

213  

1 110  

- 3 917 

3 405  

4 932  

20 870  

28 636  

149 154  

- 245  

213  

308  

1 303  

1 787  

9 310  

- 283 

246  

356  

1 508  

2 069  

10 776  

- 225 

195  

283  

1 197  

1 643  

8 556  

- 2 973 

2 584  

3 744  

15 841  

21 736  

113 213  

Source: Deloitte estimates 

66 | P a g e  

 
 
 
 
Table 66 – Estimates of the gross VAT revenue generated turnover by businesses of different size, by 
Member State (in million EUR) 

Member State 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 
– EUR 500 
000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

Cyprus 

Germany 

Greece 

Portugal 

Romania 

United 
Kingdom 

56  

76  

81  

369  

573  

4 240  

7 462  

10 249  

10 837  

49 600  

77 016  

569 540  

466  

539  

640  

740  

676  

3 096  

4 807  

35 550  

783  

3 583  

5 564  

41 148  

428  

588  

622  

2 845  

4 418  

32 671  

5 664  

7 779  

8 225  

37 648  

58 458  

432 301  

Source: Deloitte estimates 

Estimates for which some data was provided by tax authorities which required adjustments 

Similarly to the estimates on the number of businesses and their generated turnover, some Member 
States provided the VAT revenues generated by businesses in their countries but not at the desired 
level of granularity. This included: 

1)  Estimates of net and gross VAT revenues provided in Croatia and Italy, which were classified 

in turnover brackets different to the ones specified.  

2)  Estimates  of  the  net  and  gross  VAT  revenues  provided  in  Lithuania,  but  only  for  the 

businesses whose turnover could be identified.  

In  some cases, some  adjustments  were  made  to  redistribute  the  VAT  revenues  in  the  relevant  size 
classes, or to estimate the revenue generated by unclassified businesses. The calculations made and 
resulting estimates are presented below.  

1)  Estimates provided in different turnover brackets  

The tax authorities in Croatia and Italy provided the net and gross VAT revenues generated 
by businesses classified in slightly different turnover brackets than the ones specified. Whilst 
the  number  of  businesses  falling  outside  of  the  desired  brackets  were  previously  estimated 
(for e.g. Croatia provided the number of businesses between EUR 0 and EUR 6 550, and the 
number of these falling in the EU R 5 000 to EUR 6 550 was estimated), no information allows 
for estimation of how much VAT contribution these specific businesses bring. Adjustments are 
therefore not possible to redistribute the revenues in the relevant size classes.  

The VAT revenues for the Member State as a whole could be redistributed into different size 
classes  based  on  the  EU-average  distribution.  However,  given  that  the  thresholds  for  the 

67 | P a g e  

 
 
 
 
brackets  only  slightly  differ  from  the  ones  specified  (for  e.g.  Italy  gave  the  revenues  for  the 
EUR  100  000  –  EUR  515  000  bracket  instead  of  EUR  500  000),  it  is  preferred  to  use  the 
information  provided  and  assume  they  correspond  to  the  desired  brackets.  The  specific 
estimates are presented below for these two Member States.   

2)  Estimates provided by tax authorities for businesses with identified turnover only 

The tax authorities in Lithuania did not provide estimates of the VAT revenues generated by 
the  businesses  with  unidentified  turnover.  In  order  to  account  for  these  businesses’ 
contribution to VAT revenues, the following adjustments are made: 

  The unidentified businesses were previously distributed in each turnover bracket. 

  However, not  all  of  these businesses  contribute  to VAT  revenues,  as  some may  be 
exempted  from  paying  VAT  under  the  SME  exemption  scheme.  The  proportions  of 
these  estimated  to  be  exempted  from  paying  VAT  were  therefore  calculated.  The 
calculations are presented in Section C.2, data estimated in connection with the SME 
exemption scheme. The estimated number of VAT-registered businesses in each size 
class for which VAT revenues must be accounted can therefore be obtained.  

  For  each  size  class,  the  average  net  and  gross  VAT  revenue  generated  by  a  VAT-
registered  business  was  calculated  based  on  the  data  obtained  from  the  tax 
authorities in Lithuania. 

  The estimated average revenue, both gross and net, are multiplied with the estimated 
number  of  VAT-registered  businesses  in  each  size  class  to  obtain  the  overall  VAT 
revenues generated by businesses previously unidentified.  

3)  Estimates provided by tax authorities on net VAT revenues only 

The  tax  authorities  in  the  Netherlands  only  provided  estimates  of  the  net  VAT  revenues 
generated by businesses in different size classes. No estimates of gross VAT revenues were 
provided. These estimates were calculated in the following way: 

  The  net  VAT  revenue  generated  by  the  Netherlands  overall  is  taken  from  the  data 

provided by tax authorities  

  The  data  obtained  from  tax  authorities  Member  State  which  provided  data  to  the 

desired level of granularity is used to: 

o  Data  obtained  from  other  tax  authorities  is  used  to  infer  that  on  average 
across EU countries, EUR 0.29 of VAT revenue is collected for every 1 EUR 
of gross VAT output declared.67 The net VAT revenue obtained from the tax 
authority in the Netherlands is therefore uplifted to obtain an estimate of the 
gross VAT revenue generated.  

o  The  overall  gross  VAT  revenue  is  distributed  amongst  businesses  of 
different size based on the average distribution observed on Member States 
across the EU which provided this data.  This distribution was presented in 

67 Estimates are based on Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Hungary, Ireland, Italy, Latvia, Malta, 
Poland, Slovakia, Slovenia, Spain, Sweden. 

68 | P a g e  

 
 
                                                      
Table  64  –  Statistics  of  the  distribution  of  net  and  gross  VAT  revenues 
generated by businesses of different size across the EU. 

The data provided by tax authorities and the resulting estimates following adjustments are presented 
below.   

  Croatia 

Table  67  –  VAT  revenues  generated  by  businesses  of  different  size  classes  provided  by  the  tax 
authorities in Croatia (in million EUR) 

Member 
State 

Reference 
year 

Variable 

Less than 
EUR 6 550 

EUR 6 550 
– EUR 65 
500 

EUR 65 
500 – EUR 
131 000 

EUR 131 
000 – 
EUR 655 
000 

EUR 655 
000 – EUR 
1 965 250 

More than 
EUR 1 965 
250 

Croatia 

2014 

Net VAT 

revenue 

Gross 

VAT 

revenue 

- 12 

113 

116 

421 

424 

3 303 

39 

378 

388 

1 483 

1 556 

14 867 

Source: Data obtained from surveys to tax authorities  

Table  68  –  VAT  revenues  generated  by  businesses  of  different  size  classes  provided  by  the  tax 
authorities in Croatia (in million EUR) 

Member 
State 

Reference 
year 

Variable 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 
000 – EUR 
100 000 

EUR 100 
000 – 
EUR 500 
000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Croatia 

2014 

Net VAT 

revenue 

Gross 

VAT 

revenue 

Source: Deloitte estimates 

- 12 

113 

116 

421 

424 

3 303 

39 

378 

388 

1 483 

1 556 

14 867 

69 | P a g e  

 
 
 
 
 
 
 
Italy 

Table  69  –  VAT  revenues  generated  by  businesses  of  different  size  classes  provided  by  the  tax 
authorities in Italy (in million EUR) 

Member 
State 

Reference 
year 

Variable 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 
000 – EUR 
100 000 

EUR 100 
000 – 
EUR 515 
000 

EUR 515 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Italy 

2013 

Net VAT 

revenue 

Gross 

VAT 

revenue 

- 1 123 

3 563 

3 767 

11 181 

9 794 

59 936 

709 

7 893 

8 991 

35 406 

45 053 

363 031 

Source: Data obtained from surveys to tax authorities  

Table  70  –  VAT  revenues  generated  by  businesses  of  different  size  classes  provided  by  the  tax 
authorities in Italy (in million EUR) 

Member 
State 

Reference 
year 

Variable 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 
000 – EUR 
100 000 

EUR 100 
000 – 
EUR 500 
000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Italy 

2013 

Net VAT 

revenue 

Gross 

VAT 

revenue 

Source: Deloitte estimates 

- 1 123 

3 563 

3 767 

11 181 

9 794 

59 936 

709 

7 893 

8 991 

35 406 

45 053 

363 031 

70 | P a g e  

 
 
 
 
 
 
 
 
  Lithuania 

Table  71  –  VAT  revenues  generated  by  businesses  of  different  size  classes  provided  by  the  tax 
authorities in Lithuania (in million EUR) 

Member 
State 

Reference 
year 

Variable 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 
50 000 

EUR 
50 000 
– EUR 
100 
000 

EUR 
100 
000 – 
EUR 
500 
000 

EUR 
500 
000 – 
EUR 2 
000 
000 

More 
than 
EUR 2 
000 
000 

Unidentified 

Lithuania 

2015 

Net VAT 

revenue 

Gross 

VAT 

revenue 

- 8 

13 

44 

247 

385 

2,102 

25 

92 

130 

849 

1,495 

11,389 

N/A 

N/A 

Source: Data obtained from surveys to tax authorities 

Table 72 – Estimates of the VAT revenues generated by businesses in Lithuania by turnover brackets 
(in million EUR) 

Member 
State 

Reference 
year 

Variable 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 100 
000 

EUR 100 
000 – 
EUR 500 
000 

EUR 500 
000 – 
EUR 2 
000 000 

More 
than 
EUR 2 
000 000 

Net VAT 

revenue 

Gross VAT 

revenue 

Lithuania 

2015 

Source: Deloitte estimates  

- 37 

31  

106  

499  

703  

3 603  

118  

212  

311  

1 715  

2 726  

19 524  

71 | P a g e  

 
 
 
 
 
 
  Netherlands 

Table 73 – Net VAT revenues generated by businesses of different size classes provided by the tax 
authorities in the Netherlands (in million EUR) 

Member 
State 

Reference 
year 

Variable 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 100 
000 

EUR 100 
000 – 
EUR 500 
000 

EUR 500 
000 – 
EUR 2 
000 000 

More 
than 
EUR 2 
000 
000 

Netherlands 

2015 

Net VAT 

revenue 

- 928 

585 

1 408 

4 557 

4 447 

34 955 

Source: Data obtained from surveys to tax authorities 

Table  74  –  Estimates  of  the  gross  VAT  revenues  generated  by  businesses  in  the  Netherlands  by 
turnover brackets (in million EUR) 

Member 
State 

Reference 
year 

Variable 

Less 
than 
EUR 5 
000 

EUR 5 
000 – 
EUR 50 
000 

EUR 50 
000 – 
EUR 
100 000 

EUR 
100 000 
– EUR 
500 000 

EUR 
500 000 
– EUR 2 
000 000 

More 
than 
EUR 2 
000 000 

1 723  

2 366  

2 502  

11 450  

17 778  

131 473  

Netherlands 

2015 

Gross VAT 

revenue 

Source: Deloitte estimates  

Austria and Luxembourg 

The  tax  authorities  in  Austria  and  Luxembourg  provided  data  on  the  number  of  businesses  in  their 
Member States, their generated turnover and contributions to gross and net VAT revenues. However, 
these were provided in different turnover brackets than the ones specified, as shown in Annex B. An 
analysis  of  the  data  has  however  revealed  that  the  characteristics  of  businesses  in  these  two 
countries were significantly different from EU averages: 

  The  average  turnover  of  businesses  in  Austria  with  less  than  EUR  100  000  of  turnover  is 
higher than the average observed in other EU countries, at EUR 27 000 compared to EUR 17 
000.68 

  Similarly in Luxembourg, while the classifications provided by the tax authorities do not allow 

for a direct comparison with other Member States, the data shows that: 

o  The  average  turnover  of  businesses  with  more  than  EUR  620  000  of  turnover  in 

Luxembourg is around EUR 31 000 000; and 

o  The  average  turnover  of  businesses  in  other  EU  Member  States69  with  more  than 

EUR 2 000 000 of turnover is around EUR 22 000 000. 

68 Deloitte estimates based on data obtained from surveys to tax authorities.  

72 | P a g e  

 
 
 
 
 
                                                      
This  shows  that  very  large  businesses  in  Luxembourg  have  on  average,  a  higher  turnover 
than similar businesses elsewhere in the EU.  

Attempts to adjust the estimates provided by Austria and Luxembourg to classify businesses and their 
generated  turnover  within  the  required  turnover  brackets  led  to  implausible  results:  businesses  in 
some turnover brackets were estimated to have an average turnover higher than the upper bound of 
the bracket. 

It  was  therefore  concluded  that  estimates  could  not  be  adjusted  for  these  two  Member  States,  and 
they  are  excluded  from  the  EU-wide  numbers  provided  in  the  main  body  of  the  report.  However, 
according to Eurostat estimates, SMEs in Austria and Luxembourg combined represent only 1% of all 
SMEs  in the EU.70 The EU-wide estimates are therefore considered robust, despite the exclusion of 
these two Member States.  

C.2   Data estimated in connection to the SME exemption scheme 

As part of the study, information was collected on the businesses exempted from VAT under the SME 
exemption  scheme,  across  the  8  Member  States  forming  part  of  the  fieldwork  countries  and  for  the 
EU as a whole, with the aim of obtaining the following estimates:  

  The number of businesses exempted from paying VAT under the SME exemption scheme; 
  The turnover generated by exempted businesses; 
  The volume and value of such exempted transactions; and 
  Categorise such sales by nature of supply (goods or services) and within the latter by type of 

supply (B2B or B2C). 

Some Member States were able to provide estimates of the number of exempted businesses under 
the scheme in their country and the turnover they generate. In addition, most of these Member States 
also provided the number of eligible businesses who opt out of the scheme and follow the common 
regime. This data was used to derive estimates on the number of exempted businesses when no data 
was provided by tax authorities. 
However,  no  tax  authorities  were  able  to  provide  information  on  the  volume,  value  or  type  of 
exempted transactions so no estimates were derived for these data points.  

Number of exempted businesses  

Estimates on the number of exempted businesses were derived for the following Member States71: 

  Austria 
  Cyprus 
  Denmark   
  Finland 
  Germany 
  Greece 

69 Deloitte estimates based on data obtained from surveys to tax authorities, excluding Austria who was also an outlier. 
70 Estimates based on SMEs defined as businesses with 0-9 employees for the purpose of this calculation.  
71  The  Netherlands,  Spain  and  Sweden  also  did  not  provide  this  information,  however  the  SME  exemption  scheme  is  not 
available in these countries so they are disregarded in this section.  

73 | P a g e  

 
 
 
                                                                                                                                                                     
 
Ireland 
  Latvia 
  Lithuania 
  Poland 
  Romania 

The following methodology is used to derive the relevant estimates: 

1)  Estimate the number of eligible businesses. 

2)  Estimate the take-up rate of the scheme. 

3)  Multiply  the  two  to  obtain  the  number  of  exempted  businesses  under  the  SME  exemption 

scheme.  

74 | P a g e  

 
 
 
Each point is presented in turn below.  

1)  Estimate the number of eligible businesses 

The  number  of  eligible  businesses  was  assumed  to  be  equal  to  the  number  of  businesses 
whose total turnover falls below the SME exemption threshold in each country.72 The number 
of businesses whose turnover falls within the following brackets was previously estimated:  

  Less than EUR 5 000 
  EUR 5 000 to EUR 50 000 
  EUR 50 000 to EUR 100 000 
  EUR 100 000 to EUR 500 000 
  EUR 500 000 to EUR 2 000 000 
  More than EUR 2 000 000 

However, the thresholds for eligibility to the SME exemption scheme across Member States 
often fall within these brackets, and the number of eligible businesses is therefore not directly 
obtainable. When this was the case, data obtained from Mint Global was used to estimate the 
proportion  of  businesses  below  and  above  the  threshold  within  a  certain  bracket.  For 
example: 

  The threshold for the SME exemption scheme in Estonia is EUR 16 000. 
  56 818 and 40 393 businesses were estimated as having turnover respectively below 

EUR 5 000 and between EUR 5 000 and EUR 50 000 in Estonia.  

  From the businesses identified by Mint Global in Estonia as having turnover between 

EUR 5 000 and EUR 50 000, 50% have turnover below EUR 16 000. 

  The overall number of eligible businesses is therefore estimated to be 76 970. 

2)  Estimate the take-up rate of the scheme 

12  Member  States  provided  sufficient  information  to  infer  the  take-up  rate  of  the  SME 
exemption  scheme,  which  is  defined  as  the  percentage  of  eligible  businesses  taking 
advantage  of  the scheme and  not  paying  VAT.73  The  data  provided  shows  that  on  average, 
63% of eligible businesses take advantage of the scheme. This take-up rate is applied to the 
number  of  eligible  businesses  estimated  in  Member  States  that  did  not  provide  this 
information,  to  obtain  the  number  of  businesses  exempted  from  paying  VAT  under  the 
scheme.  

3)  Multiply  1)  and  2)  to  obtain  the  number  of  exempted  businesses  under  the  SME 

exemption scheme.  

The estimates obtained are presented below.  

72  The  VAT  exemption  thresholds  are  taken  as  per  January  2016,  whereas  the  underlying  economical  figures  date  from 
previous years.  
73  These  Member  States  are  Bulgaria,  Croatia,  Czech  Republic,  Estonia,  France,  Hungary,  Lithuania,  Luxembourg,  Malta, 
Portugal, Slovakia, Slovenia and the United Kingdom.  

75 | P a g e  

 
 
 
                                                      
Table 75 – Estimated number of eligible businesses, take-up rates and exempted businesses under 
the SME exemption scheme 

Member State 

Estimated number of 
eligible businesses to the 
SME exemption scheme 

Estimated take-up rate 
of the scheme  

Estimated number of 
exempted businesses 
under the SME 
exemption scheme 

Austria 

Cyprus 

Denmark 

Finland 

Germany 

Greece 

Ireland 

Latvia 

Lithuania 

Poland 

Romania 

611 793  

63% 

34 031                                   

63% 

413 599  

330 126  

1 485 023  

408 473  

268 628  

92 469  

97 802  

1 956 217  

405 472  

63% 

63% 

63% 

63% 

63% 

63% 

63% 

63% 

63% 

383 367  

21 325  

259 173  

206 867  

930 559  

255 961  

168 330  

57 944  

52 840  

1 225 823  

254 080  

Source: Deloitte estimates 

This methodology presents however some caveats: 

  Some Member States have multiple thresholds, depending on the sector of activity of the type 
of  supplies  that  the  turnover  relates  to.  However,  such  information  is  not  available  for  the 
businesses  identified.  In  this  situation,  a  single  threshold  constituting  of  the  average  of  the 
thresholds in place was considered.74 

  The thresholds for eligibility are usually not based on turnover alone, but may also take into 
account the level of domestic taxable supplies or sometimes, employee costs. This data is not 
available, so the estimates based on total turnover are subject to some uncertainty and may 
either overestimate (if additional conditions such as employee cost apply) or underestimate (if 
the  threshold  is  based  on  a  turnover  below  the  total  turnover)  the  number  of  eligible 
businesses.  

74 This is the case in Ireland, where two thresholds of EUR 37 500 and EUR 75 000 exist.  

76 | P a g e  

 
 
 
                                                      
To test the extent to which the above challenges would lead to inaccurate estimates, the number of 
eligible businesses was estimated for Member States that already provided this information, using the 
methodology  described  above.  This  analysis  suggests  that  while  there  is  some  variability  in  the 
resulting estimates, there is no systemic over- or underestimation.  

Turnover generated by exempted businesses 

Estimates on the turnover generated by exempted businesses were derived for the following Member 
States75:  

  Austria 
  Cyprus 
  Denmark 
  Finland 
  Germany 
  Greece 
Ireland 
  Latvia 
  Lithuania 
  Poland 
  Romania 

The following methodology is used to derive the relevant estimates: 

1)  Estimate the number of businesses exempted under the SME exemption scheme. 

2)  Estimate the average turnover of an exempted business in each size class. 

3)  Multiply  the  two  to  obtain  the  turnover  generated  by  exempted  businesses  under  the  SME 

exemption scheme.  

Each step is presented in turn below.  

1)  Estimate the number of businesses exempted under the SME exemption scheme 

These 

estimates  were 

calculated 

as 

part 

of 

the 

previous 

step.  See 

75 The Netherlands, Spain and Sweden also did not provide this information, however the SME VAT exemption scheme is not 
available in these countries so they are disregarded in this section.  

77 | P a g e  

 
 
 
                                                      
Table 75 for the results obtained.  

2)  Estimate the average turnover of an exempted business 

While  the  average  turnover  of  businesses  in  each  size  class  were  previously  estimated, 
these  estimates  cannot  directly  be  used  for  exempted  businesses  as  the  thresholds  for 
eligibility to the scheme often fall within turnover brackets. For example, the average turnover 
of businesses in Germany was estimated to be: 

  EUR 812 for a business with turnover below EUR 5 000; and 
  EUR 21 220 for a business with turnover between EUR 5 000 and EUR 50 000. 
However,  the  threshold  for  eligibility  to  the  SME  exemption  scheme  in  Germany  is  EUR  17 
500. Hence, exempted businesses which have a turnover between EUR 5 000 and EUR 50 
000 are most likely to have, on average, a turnover lower than EUR 20 802. 

As no data provided allowed for estimation of the average turnover of an exempted business 
whose turnover is in the bracket where the threshold falls, the mid-point of the lower end of 
the  bracket  and  the  threshold  is  used  instead.  For  example,  the  turnover  of  an  exempted 
business in Germany whose turnover is between EUR 5 000 and EUR 50 000 is assumed to 
be EUR 11 250, the average of EUR 5 000 and EUR 17 500. 

While  the  robustness  of  these  estimates  cannot  be  tested,  the  data  has  shown  that  on 
average, the average turnover of a business is slightly below the mid-point in a given bracket 
(see Table 76 for the country specific estimates). Therefore, the above methodology is likely 
to lead to a slight overestimation of the turnover generated by exempted businesses.  

3)  Multiply 1) and 2) to obtain the turnover generated by exempted businesses 

The estimates obtained are presented below. 

Table 76 – Estimated number of businesses exempted under the SME exemption scheme and their 
generated turnover76 

Member State 

Estimated number of 
exempted under the SME 
exemption scheme 

Estimated total 
turnover generated by 
exempted businesses 
(million EUR) 

Threshold for the SME 
exemption scheme 
(EUR) 

Austria 

Cyprus 

Denmark 

Finland 

Germany 

383 367  

3 883  

21 325  

259 173  

206 867  

930 559  

81  

154  

201  

3 219  

30 000 

15 600 

6 700* 

10 000 

17 500 

78 | P a g e  

 
 
 
                                                      
 
 
Member State 

Estimated number of 
exempted under the SME 
exemption scheme 

Estimated total 
turnover generated by 
exempted businesses 
(million EUR) 

Threshold for the SME 
exemption scheme 
(EUR) 

Greece 

Ireland 

Latvia 

Lithuania 

Poland 

Romania 

255 961  

168 330  

57 944  

52 840  

384  

2 727  

529  

612  

10 000 

56 250** 

50 000 

45 000 

1 225 823  

13 949  

35 000* 

254 080  

2 542  

50 000* 

Source: Deloitte estimates 

Note: *Average of the different thresholds applicable in Ireland 

** The thresholds given in the local currency are the following: DKK 50 000 for Denmark, PLN 150 000 for Poland 

and ROL 220 000 for Romania.  

79 | P a g e  

 
 
 
 
Annex D – Country specific 
estimates 

This Annex presents the country specific estimates for each data point presented in Annexes A and 
B. The estimates were obtained either: 

  Directly from tax authorities, as presented in Annex B; or 

  Through calculations based on a combination of public sources and insights obtained from tax 

authority data, as presented in Annex C. 

D.1 Consolidation of data related to SMEs’ domestic activities  

Number of businesses in each turnover bracket 

Table 77 – Number of businesses in each turnover bracket and share of SMEs, by Member State 

Member 
State 

Referenc
e year 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 
000 – EUR 
100 000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Share of 
SMEs 

Belgium* 

2015 

193 749  

221 452  

113 661  

210 550  

69 597  

37 828  

96% 

Bulgaria* 

2014 

76 575  

142 937  

31 069  

48 510  

17 985  

8 044  

98% 

Croatia** 

2014 

58 515  

88 097  

29 773  

33 419  

10 238  

4 660  

98% 

Cyprus** 

2012 

23 506  

19 387  

5 641  

8 673  

3 049  

1 578  

97% 

Czech 
Republic* 

2014 

574 794  

119 672  

38 149  

78 477  

39 888  

21 270  

98% 

Denmark** 

2014 

401 571  

145 091  

51 772  

87 721  

38 456  

20 946  

97% 

Estonia* 

2014 

56 818  

40 393  

8 843  

14 183  

5 493  

2 808  

98% 

Finland* 

2014 

300 128  

130 025  

54 202  

81 144  

29 314  

15 443  

97% 

France* 

2014 

Germany** 

2012 

4 739 
000  

1 115 
606  

1 097 
000  

657 000  

1 175 
000  

364 000  

168 000  

98% 

920 093  

267 739  

411 598  

144 709  

74 869  

97% 

80 | P a g e  

 
 
Member 
State 

Referenc
e year 

Less than 
EUR 5 000 

EUR 5 000 
– EUR 50 
000 

EUR 50 
000 – EUR 
100 000 

EUR 100 
000 – EUR 
500 000 

EUR 500 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Share of 
SMEs 

Greece** 

2012 

370 172  

305 298  

88 839  

136 573  

48 016  

24 842  

97% 

Hungary* 

2015 

382 308  

339 193  

61 379  

76 974  

27 715  

12 267  

99% 

Ireland* 

2013 

87 854  

171 862  

51 948  

77 933  

24 547  

14 189  

97% 

Italy** 

2013 

930 383  

2 006 
675  

815 155  

1 098 
160  

315 786  

139 431  

97% 

Latvia* 

2014 

56 467  

36 002  

9 912  

16 062  

6 853  

3 509  

97% 

Lithuania** 

2015 

74 259  

66 871  

25 271  

42 734  

16 250  

8 990  

96% 

Malta* 

2014 

19 312  

17 017  

4 035  

6 739  

2 845  

1 737  

97% 

Nether-
lands* 

2013 

649 216  

535 521  

236 309  

346 139  

108 555  

59 681  

97% 

Poland** 

2015 

862 572  

1 516 
451  

235 538  

339 517  

112 397  

52 199  

98% 

Portugal** 

2015 

395 568  

326 243  

94 934  

145 943  

51 310  

26 547  

97% 

Romania** 

2013 

222 207  

183 265  

53 328  

81 982  

28 823  

14 912  

97% 

Slovakia* 

2013 

314 810  

287 217  

37 911  

49 354  

17 900  

9 354  

99% 

Slovenia* 

2014 

55 892  

85 799  

19 329  

28 333  

9 430  

5 141  

97% 

Spain* 

2013 

1 386 
101  

1 912 
163  

432 716  

509 903  

159 172  

74 234  

98% 

Sweden* 

2014 

620 552  

297 864  

110 382  

182 816  

69 064  

35 783  

97% 

United 
Kingdom** 

2015 

1 818 
842  

1 239 
792  

359 647  

944 758  

301 275  

163 756  

97% 

*Data obtained from surveys to tax authorities, see Annex B. 

 **Deloitte estimates, see Annex C for details. 

Table  78 – Number  of businesses  in the turnover  bracket provided by tax authorities in Austria and 
share of SMEs 

Member 
State 

Reference 
year 

Less than 
EUR 30 
000 

EUR 30 
000 – 
EUR 100 
000 

EUR 10 
000 – 
EUR 220 
000 

EUR 220 
000 – 
EUR 700 
000 

EUR 700 
000 – 
EUR 2 
000 000 

More than 
EUR 2 000 
000 

Share of 
SMEs 

Austria 

2013 

611 793 

192 826 

88 201 

85 286 

39 731 

31 267 

97% 

81 | P a g e  

 
 
Source: Data obtained from surveys to tax authorities 

Table 79 – Number of businesses in the turnover bracket provided by tax authorities in Luxembourg  

Member State 

Reference 
year 

Variable 

Less than 
EUR 25 000 

EUR 25 000 – 
EUR 112 000 

EUR 112 000 – 
EUR 620 000 

More than 
EUR 620 000 

Luxembourg 

2014 

Number of 
businesses* 

27 160 

12 149 

14 404 

13 306 

Source: Data obtained from surveys to tax authorities 

Table 80 – Proportion of businesses in each size class compared to the total number of businesses, 
by Member State 

Member State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 
– EUR 100 
000 

EUR 100 000 
– EUR 500 
000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

Belgium* 

2015 

23% 

26% 

13% 

25% 

Bulgaria* 

2014 

24% 

44% 

10% 

15% 

Croatia* 

2014 

26% 

39% 

13% 

15% 

Cyprus** 

2012 

38% 

31% 

Czech 
Republic* 

2014 

66% 

14% 

Denmark* 

2014 

54% 

19% 

Estonia* 

2014 

44% 

31% 

Finland* 

2014 

49% 

21% 

France* 

2014 

58% 

13% 

Germany** 

2012 

38% 

31% 

Greece** 

2012 

38% 

31% 

Hungary* 

2015 

42% 

38% 

9% 

4% 

7% 

7% 

9% 

8% 

9% 

9% 

7% 

14% 

9% 

12% 

11% 

13% 

14% 

14% 

14% 

9% 

Ireland* 

2013 

21% 

40% 

12% 

18% 

Italy* 

2013 

18% 

38% 

15% 

21% 

8% 

6% 

5% 

5% 

5% 

5% 

4% 

5% 

4% 

5% 

5% 

3% 

6% 

6% 

4% 

2% 

2% 

3% 

2% 

3% 

2% 

3% 

2% 

3% 

3% 

1% 

3% 

3% 

82 | P a g e  

 
 
 
 
Member State 

Reference 
year 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 
– EUR 100 
000 

EUR 100 000 
– EUR 500 
000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

Latvia* 

2014 

44% 

28% 

8% 

12% 

Lithuania* 

2015 

32% 

29% 

11% 

18% 

Malta* 

2014 

37% 

33% 

8% 

13% 

Nether-
lands* 

2013 

34% 

28% 

12% 

18% 

Poland* 

2015 

28% 

49% 

Portugal** 

2015 

38% 

31% 

Romania** 

2013 

38% 

31% 

Slovakia* 

2013 

44% 

40% 

Slovenia* 

2014 

27% 

42% 

8% 

9% 

9% 

5% 

9% 

11% 

14% 

14% 

7% 

14% 

Spain* 

2013 

31% 

43% 

10% 

11% 

Sweden* 

2014 

47% 

23% 

United 
Kingdom* 

2015 

38% 

26% 

8% 

7% 

14% 

20% 

5% 

7% 

6% 

6% 

4% 

5% 

5% 

2% 

5% 

4% 

5% 

6% 

*Deloitte estimates based on data obtained from surveys to tax authorities see Annex B.  

**Deloitte estimates, see Annex C for details. 

3% 

4% 

3% 

3% 

2% 

3% 

3% 

1% 

3% 

2% 

3% 

3% 

83 | P a g e  

 
 
Turnover generated by businesses in each turnover bracket 

Table 81 – Total turnover generated from businesses in each turnover bracket (million EUR) 

Member State 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 – 
EUR 500 000 

EUR 500 000 – 
EUR 2 000 000 

More than 
EUR 2 000 000 

Belgium* 

239  

5 215  

8 266  

46 408  

67 655  

1 199 008  

Bulgaria* 

144  

2 688  

2 227  

10 872  

17 541  

113 544  

Croatia** 

Cyprus** 

Czech 
Republic* 

80  

21  

91  

1 772  

2 018  

6 877  

9 697  

71 500  

408  

405  

1 946  

2 974  

31 891  

2 538  

2 762  

18 641  

39 412  

183 362  

Denmark** 

175  

2 908  

3 755  

20 196  

37 949  

522 578  

Estonia* 

Finland* 

54  

95  

742  

640  

3 248  

5 411  

34 620  

2 956  

3 888  

18 058  

28 585  

352 579  

France* 

615  

26 339  

47 645  

263 319  

347 847  

4 040 157  

Germany** 

980  

19 386  

19 201  

92 357  

141 153  

1 513 523  

Greece** 

325  

6 432  

6 371  

30 645  

46 836  

502 205  

Hungary* 

382  

6 257  

4 354  

18 009  

26 766  

239 224  

Ireland* 

92  

3 787  

3 718  

17 145  

24 057  

529 427  

Italy** 

783  

47 997  

58 247  

238 494  

307 670  

2 636 502  

Latvia* 

Lithuania** 

Malta* 

Nether-
lands* 

25  

44  

11  

819  

712  

3 706  

6 689  

41 523  

1 626  

1 833  

9 637  

16 058  

125 543  

329  

289  

1 538  

2 811  

29 384  

468  

12 016  

16 996  

74 733  

105 157  

1 511 135  

Poland** 

388  

32 171  

16 787  

75 144  

105 924  

1 040 733  

84 | P a g e  

 
 
Member State 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 – 
EUR 500 000 

EUR 500 000 – 
EUR 2 000 000 

More than 
EUR 2 000 000 

Portugal** 

348  

6 874  

6 808  

32 748  

50 049  

536 659  

Romania** 

195  

3 861  

3 824  

18 396  

28 115  

301 464  

Slovakia* 

372  

5 027  

2 678  

11 062  

17 547  

169 012  

Slovenia* 

72  

1 835  

1 381  

6 189  

9 267  

89 164  

Spain* 

1 746  

37 304  

30 592  

110 915  

152 749  

1 759 000  

Sweden* 

650  

6 285  

7 932  

41 232  

67 320  

748 165  

United 
Kingdom** 

1 598  

26 122  

25 792  

211 992  

293 871  

3 310 430  

*Data obtained from surveys to tax authorities, see Annex B.  

**Deloitte estimates, see Annex C for details. 

Table 82 – Total turnover generated from businesses in Austria in the turnover brackets provided by 
the tax authorities (million EUR) 

Member 
State 

Reference 
year 

Less than 
EUR 30 000 

EUR 30 000 
– EUR 100 
000 

EUR 10 000 
– EUR 220 
000 

EUR 220 
000 – EUR 
700 000 

EUR 700 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Austria 

2013 

6 197 

15 204 

18 652 

44 592 

50 449 

662 169 

Source: Data obtained from surveys to tax authorities 

85 | P a g e  

 
 
 
 
Table  83  –  Total  turnover  generated  from  businesses  in  Luxembourg  in  the  turnover  brackets 
provided by the tax authorities (million EUR) 

Member State 

Reference year 

Less than EUR 
25 000 

EUR 25 000 – 
EUR 112 000 

EUR 112 000 – 
EUR 620 000 

More than EUR 
620 000 

Luxembourg  

2014 

81 

744 

4 046 

425 741 

Source: Data obtained from surveys to tax authorities 

Table 84 – Estimated average turnover generated from businesses in each turnover bracket (EUR) 

Member State 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 – 
EUR 500 000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

Belgium* 

1 233  

23 547  

72 724  

220 413  

972 100  

31 696 311  

Bulgaria* 

1 880  

18 805  

71 695  

224 111  

975 303  

14 115 406  

Croatia* 

1 368  

20 113  

67 795  

205 768  

947 186  

15 343 270  

Cyprus** 

Czech 
Republic* 

879  

21 069  

71 716  

224 387  

975 425  

20 215 627  

159  

21 208  

72 411  

237 534  

988 069  

8 620 687  

Denmark* 

436  

20 044  

72 524  

230 229  

986 820  

24 948 823  

Estonia* 

950  

18 370  

72 374  

229 007  

985 072  

12 329 060  

Finland* 

317  

22 732  

71 735  

222 548  

975 120  

22 831 018  

France* 

130  

24 010  

72 519  

224 101  

955 624  

24 048 554  

Germany** 

879  

21 069  

71 716  

224 387  

975 425  

20 215 627  

Greece** 

879  

21 069  

71 716  

224 387  

975 425  

20 215 627  

Hungary* 

999  

18 446  

70 934  

233 966  

965 773  

19 501 434  

Ireland* 

1 042  

22 036  

71 579  

220 002  

980 026  

37 312 474  

Italy* 

841  

23 919  

71 455  

217 176  

974 298  

18 909 006  

Latvia* 

451  

22 754  

71 873  

230 744  

976 119  

11 833 257  

86 | P a g e  

 
 
 
Member State 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 – 
EUR 500 000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

Lithuania* 

597  

24 320  

72 547  

225 512  

988 160  

13 964 723  

Malta* 

565  

19 346  

71 572  

228 160  

988 141  

16 916 638  

Netherlands* 

721  

22 437  

71 922  

215 906  

968 702  

25 320 209  

Poland* 

450  

21 215  

71 272  

221 327  

942 406  

19 937 802  

Portugal** 

879  

21 069  

71 716  

224 387  

975 425  

20 215 627  

Romania** 

879  

21 069  

71 716  

224 387  

975 425  

20 215 627  

Slovakia* 

1 180  

17 503  

70 643  

224 134  

980 284  

18 068 465  

Slovenia* 

1 284  

21 387  

71 457  

218 437  

982 682  

17 343 786  

Spain* 

1 260  

19 509  

70 699  

217 521  

959 649  

23 695 344  

Sweden* 

1 047  

21 100  

71 860  

225 540  

974 750  

20 908 381  

United 
Kingdom** 

879  

21 069  

71 716  

224 387  

975 425  

20 215 627  

*Deloitte estimates based on data obtained from surveys to tax authorities see Annex B.  

**Deloitte estimates, see Annex C for details. 

Table  85  –  Average  turnover  from  businesses  of  different  size  in  Austria  in  the  turnover  brackets 
provided by the tax authorities (EUR) 

Member 
State 

Reference 
year 

Less than 
EUR 30 000 

EUR 30 000 
– EUR 100 
000 

EUR 10 000 
– EUR 220 
000 

EUR 220 
000 – EUR 
700 000 

EUR 700 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Austria 

2013 

10 130 

78 851 

211 469 

522 857 

1 269 756 

21 177 
885 

Source: Deloitte estimates based on data obtained from surveys to tax authorities 

Table 86 - Average turnover from businesses of different size in Luxembourg in the turnover brackets 
provided by the tax authorities (EUR) 

Member State 

Reference year 

Less than EUR 
25 000 

EUR 25 000 – 
EUR 112 000 

EUR 112 000 – 
EUR 620 000 

More than EUR 
620 000 

87 | P a g e  

 
 
 
 
Member State 

Reference year 

Less than EUR 
25 000 

EUR 25 000 – 
EUR 112 000 

EUR 112 000 – 
EUR 620 000 

More than EUR 
620 000 

Luxembourg  

2014 

2 975 

61 226 

280 886 

31 996 181 

Source: Deloitte estimates based on data obtained from surveys to tax authorities 

88 | P a g e  

 
 
 
Table 87 – Share of total turnover generated by businesses of different size 

Member State 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 – 
EUR 500 000 

EUR 500 000 – 
EUR 2 000 000 

More than 
EUR 2 000 000 

Belgium* 

Bulgaria* 

Croatia* 

Cyprus** 

Czech 
Republic* 

Denmark* 

Estonia* 

Finland* 

France* 

Germany** 

Greece** 

Hungary* 

Ireland* 

Italy* 

Latvia* 

Lithuania* 

Malta* 

Nether-
lands* 

Poland* 

Portugal** 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

0% 

2% 

2% 

1% 

1% 

0% 

2% 

1% 

1% 

1% 

1% 

2% 

1% 

1% 

2% 

1% 

1% 

1% 

3% 

1% 

1% 

2% 

2% 

1% 

1% 

1% 

1% 

1% 

1% 

1% 

1% 

1% 

1% 

2% 

1% 

1% 

1% 

1% 

1% 

1% 

3% 

7% 

7% 

5% 

8% 

3% 

7% 

4% 

6% 

5% 

5% 

6% 

3% 

7% 

7% 

6% 

4% 

4% 

6% 

5% 

5% 

90% 

12% 

77% 

11% 

78% 

8% 

16% 

6% 

85% 

74% 

89% 

12% 

77% 

7% 

7% 

8% 

8% 

9% 

4% 

9% 

87% 

85% 

85% 

85% 

81% 

92% 

80% 

13% 

78% 

10% 

81% 

8% 

6% 

8% 

8% 

86% 

88% 

82% 

85% 

89 | P a g e  

 
 
Member State 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 – 
EUR 500 000 

EUR 500 000 – 
EUR 2 000 000 

More than 
EUR 2 000 000 

Romania** 

Slovakia* 

Slovenia* 

Spain* 

Sweden* 

United 
Kingdom** 

0% 

0% 

0% 

0% 

0% 

0% 

1% 

2% 

2% 

2% 

1% 

1% 

1% 

1% 

1% 

1% 

1% 

1% 

5% 

5% 

6% 

5% 

5% 

5% 

8% 

9% 

9% 

7% 

8% 

7% 

85% 

82% 

83% 

84% 

86% 

86% 

*Deloitte estimates based on data obtained from surveys to tax authorities, see Annex B.  

**Deloitte estimates, see Annex C for details. 

Table  88  –  Share  of  turnover  generated  by  businesses  of  different  size  in  Austria,  classified  within 
turnover brackets provided by the tax authorities 

Member 
State 

Reference 
year 

Less than 
EUR 30 000 

EUR 30 000 
– EUR 100 
000 

EUR 10 000 
– EUR 220 
000 

EUR 220 
000 – EUR 
700 000 

EUR 700 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Austria 

2013 

1% 

2% 

2% 

6% 

6% 

83% 

Source: Deloitte estimates based on data obtained from surveys to tax authorities 

Table  89  -  Share  of  turnover  generated  by  businesses  of  different  size  in  Austria,  classified  within 
turnover brackets provided by the tax authorities 

Member State 

Reference year 

Less than EUR 
25 000 

EUR 25 000 – 
EUR 112 000 

EUR 112 000 – 
EUR 620 000 

More than EUR 
620 000 

Luxembourg  

2014 

0% 

0% 

1% 

99% 

Source: Deloitte estimates based on data obtained from surveys to tax authorities 

90 | P a g e  

 
 
 
 
Belgium* 

Bulgaria* 

Croatia* 

Cyprus** 

Czech 
Republic* 

Denmark* 

Gross and net VAT revenue generated by businesses of different size 

Table 90 – Gross and net VAT revenue generated by businesses of different size (million EUR) 

Member State 

VAT revenue 
type 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 
– EUR 500 
000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

278  

- 111  

966  

329  

1 424  

7 467  

10 910  

171 488  

606  

2 670  

2 801  

20 078  

0% 

1% 

2% 

10% 

11% 

76% 

992  

88 

2% 

39  

-12 

0% 

56  

- 29  

246  

32 

306  

61 

1 573  

2 637  

17 908  

293 

460 

3 005 

1% 

2% 

7% 

12% 

76% 

378  

113 

388  

116 

1 483  

1 556  

14 867  

421 

424 

3 303 

2% 

2% 

10% 

10% 

76% 

76  

25  

81  

37  

369  

155  

573  

4,240  

213  

1,110  

-2% 

2% 

3% 

10% 

14% 

73% 

Gross 

2 751 

362 

433 

2 756 

5 886 

28 547 

Net 

207 

44 

95 

611 

1 169 

4 281 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Estonia* 

Net 

Distribution 
of net 
revenue 

3% 

16 

-257 

1% 

678 

200 

1% 

10% 

18% 

67% 

914 

395 

4 801 

2 061 

8 755 

86 823 

3 381 

19 210 

-1% 

1% 

2% 

9% 

14% 

77% 

8 

-18 

58 

14 

58 

29 

260 

390 

1 835 

148 

237 

1 099 

-1% 

1% 

2% 

10% 

15% 

73% 

91 | P a g e  

 
 
Member State 

VAT revenue 
type 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 
– EUR 500 
000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

Finland* 

France* 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

34 

-180 

725 

286 

833 

342 

3 880 

1 380 

6 052 

69 400 

1 963 

11 445 

-1% 

2% 

2% 

9% 

13% 

75% 

633 

211 

0% 

3 545 

2 182 

5 469 

3 034 

32 152 

48 925 

538 561 

14 484 

20 005 

138 413 

1% 

2% 

8% 

11% 

78% 

Gross 

7 462  

10 249  

10 837  

49 600  

77 016  

569 540  

Germany** 

Net 

- 3 917  

3 405  

4 932  

20 870  

28 636  

149 154  

Greece** 

Hungary* 

Ireland* 

Italy** 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Net 

Distribution 
of net 
revenue 

Gross 

Latvia* 

Net 

Distribution 
of net 
revenue 

-2% 

2% 

3% 

10% 

14% 

73% 

466  

- 245 

640  

213  

676  

308  

3 096  

4 807  

35 550  

1 303  

1 787  

9 310  

-2% 

2% 

3% 

10% 

14% 

73% 

30 

18 

0% 

12 

-0.2 

852 

339 

2% 

189 

53 

915 

312 

2% 

341 

152 

4 045 

1 200 

5 601 

1 653 

32 496 

12 673 

8% 

10% 

78% 

2 188 

4 094 

33 628 

835 

1 394 

4 685 

0% 

1% 

2% 

12% 

19% 

66% 

709 

7 893 

8 991 

35 406 

45 053 

363 031 

-1 123 

3 563 

3 767 

11 181 

9 794 

59 936 

-1% 

4% 

4% 

13% 

11% 

69% 

87 

4 

94 

19 

124 

667 

1 188 

6 734 

29 

135 

209 

1 115 

0% 

1% 

2% 

9% 

14% 

74% 

92 | P a g e  

 
 
Member State 

VAT revenue 
type 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 
– EUR 500 
000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

Gross 

118  

212  

311  

1 715  

2 726  

19 524  

Lithuania** 

Net 

- 37  

31  

106  

499  

703  

3 603  

Distribution 
of net 
revenue 

Gross 

Malta* 

Net 

Distribution 
of net 
revenue 

-1% 

1% 

2% 

10% 

14% 

74% 

2 

-6 

34 

14 

34 

14 

163 

255 

843 

71 

106 

314 

-1% 

3% 

3% 

14% 

20% 

61% 

Gross 

1 723  

2 366  

2 502  

11 450  

17 778  

131 473  

Netherlands** 

Net 

928  

585  

1 408  

4 557  

4 447  

34 955  

Distribution 
of net 
revenue 

1% 

1% 

1% 

7% 

11% 

79% 

Gross 

83 

1 400 

1 150 

3 718 

4 461 

37 638 

Poland* 

Net 

-421 

745 

774 

2 296 

2 369 

21 195 

Distribution 
of net 
revenue 

-2% 

3% 

3% 

8% 

9% 

79% 

Gross 

539  

740  

783  

3 583  

5 564  

41 148  

Portugal** 

Net 

- 283  

246  

356  

1 508  

2 069  

10 776  

Distribution 
of net 
revenue 

-2% 

2% 

3% 

10% 

14% 

73% 

Gross 

428  

588  

622  

2 845  

4 418  

32 671  

Romania** 

Net 

- 225  

195  

283  

1 197  

1 643  

8 556  

Distribution 
of net 
revenue 

-2% 

2% 

3% 

10% 

14% 

73% 

Slovakia* 

Gross 

1 153 

277 

360 

1 818 

2 908 

23 373 

93 | P a g e  

 
 
Member State 

VAT revenue 
type 

Less than 
EUR 5 000 

EUR 5 000 – 
EUR 50 000 

EUR 50 000 – 
EUR 100 000 

EUR 100 000 
– EUR 500 
000 

EUR 500 000 
– EUR 2 000 
000 

More than 
EUR 2 000 
000 

Net 

-533 

14 

68 

357 

496 

1 299 

Distribution 
of net 
revenue 

-31% 

1% 

4% 

21% 

29% 

76% 

Gross 

18 

141 

216 

947 

1 465 

12 487 

Slovenia* 

Net 

-0.1 

56 

88 

295 

354 

1 594 

Distribution 
of net 
revenue 

0% 

2% 

4% 

12% 

15% 

67% 

Gross 

243 

2 771 

1 803 

5 521 

6 503 

51 819 

Spain* 

Net 

-1 093 

1 833 

1 260 

4 093 

5 090 

40 890 

Distribution 
of net 
revenue 

-2% 

4% 

2% 

8% 

10% 

79% 

Gross 

146  

1 294  

1 532  

7 715  

12 935  

149 269  

Sweden* 

Net 

- 439 

337  

649  

2 789  

4 079  

25 591  

Distribution 
of net 
revenue 

-1% 

1% 

2% 

8% 

12% 

78% 

Gross 

5 664  

7 779  

8 225  

37 648  

58 458  

432 301  

United 
Kingdom** 

Net 

- 2 973  

2 584  

3 744  

15 841  

21 736  

113 213  

Distribution 
of net 
revenue 

-2% 

2% 

3% 

10% 

14% 

73% 

*Data obtained from surveys to tax authorities, see Annex B.  

**Deloitte estimates, see Annex C for details. 

Table 91 – Gross and net VAT revenue generated by businesses of different size in Austria, classified 
within the turnover brackets provided by the tax authorities (million EUR) 

Member 
State 

Reference 
year 

VAT 
revenue 
type 

Less than 
EUR 30 000 

EUR 30 000 
– EUR 100 
000 

EUR 10 000 
– EUR 220 
000 

EUR 220 
000 – EUR 
700 000 

EUR 700 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Austria 

2013 

Gross 

945 

1 753 

2 325 

6 157 

9 492 

147 360 

94 | P a g e  

 
 
Member 
State 

Reference 
year 

VAT 
revenue 
type 

Less than 
EUR 30 000 

EUR 30 000 
– EUR 100 
000 

EUR 10 000 
– EUR 220 
000 

EUR 220 
000 – EUR 
700 000 

EUR 700 
000 – EUR 
2 000 000 

More than 
EUR 2 000 
000 

Net 

670 

1 493 

1 929 

4 832 

7 072 

80 993 

Distribution 
of net 
revenue 

1% 

2% 

2% 

5% 

7% 

83% 

Source:  Gross  and  Net  VAT  revenue  data  obtained  from  surveys  to  tax  authorities.  Deloitte  estimates  of  the 

distribution of net revenue based on tax authority data. 

Table  92  –  Gross  and  net  VAT  revenue  generated  by  businesses  of  different  size  in  Luxembourg, 
classified within the turnover brackets provided by the tax authorities (million EUR) 

Member State  Reference year 

VAT revenue 
type 

Less than EUR 
25 000 

EUR 25 000 – 
EUR 112 000 

EUR 112 000 – 
EUR 620 000 

More than EUR 
620 000 

Gross 

322 

105 

456 

21 643 

Luxembourg 

2014 

Net 

Distribution of 
net revenue 

75 

2% 

42 

1% 

180 

3 581 

5% 

92% 

Source:  Gross  and  Net  VAT  revenue  data  obtained  from  surveys  to  tax  authorities.  Deloitte  estimates  of  the 

distribution of net revenue based on tax authority data.  

D.2  

Consolidation of data related to the SME exemption scheme 

Number of businesses exempted from paying VAT under the SME exemption scheme 

Table 93 - Number of exempted businesses and take-up rates77 under the SME exemption scheme 

Member State 

Exempted 
businesses 

% of SMEs 

% of all businesses 

Take-up rate 

Austria** 

Belgium* 

Bulgaria* 

Croatia* 

Cyprus** 

383 367  

114 332  

136 282  

51 276  

21 325  

38% 

14% 

43% 

23% 

35% 

37% 

14% 

42% 

23% 

34% 

63% 

N/A78 

72% 

48% 

63% 

77 Defined as the proportion of eligible businesses to the SME exemption taking advantage of the scheme and not paying VAT. 
78 The tax authorities in Belgium did not provide the number of eligible businesses which opt out of the scheme, necessary to 
calculate the take-up rate.  

95 | P a g e  

 
 
 
 
                                                      
Member State 

Exempted 
businesses 

Czech Republic* 

414 774  

Denmark** 

Estonia* 

Finland** 

France* 

Germany** 

Greece** 

Hungary* 

Ireland** 

Italy* 

Latvia** 

Lithuania* 

Luxembourg* 

Malta* 

Poland** 

Portugal* 

Romania** 

Slovakia* 

Slovenia* 

259 173  

81 269  

206 867  

1 865 000  

930 559  

255 961  

319 615  

168 330  

479 787  

57 944  

79 842  

445  

10 618  

1 225 823  

541 610  

254 080  

523 834  

105 977  

United Kingdom* 

2 700 000  

% of SMEs 

% of all businesses 

Take-up rate 

49% 

36% 

65% 

35% 

23% 

33% 

27% 

36% 

41% 

9% 

46% 

35% 

N/A79 

21% 

40% 

53% 

45% 

74% 

53% 

58% 

48% 

35% 

63% 

34% 

23% 

32% 

26% 

36% 

39% 

9% 

45% 

34% 

1% 

21% 

39% 

52% 

43% 

73% 

52% 

56% 

70% 

63% 

76% 

63% 

57% 

63% 

63% 

55% 

63% 

0% 

63% 

54% 

5% 

29% 

63% 

95% 

63% 

87% 

92% 

74% 

*Deloitte estimates based on data obtained from surveys to tax authorities, see Annex B for details.  

**Deloitte estimates, see Annex C for details. 

79 The data provided by Luxembourg did not allow to classify businesses between SMEs and non-SMEs.  

96 | P a g e  

 
 
                                                      
Table 94 – Turnover generated by businesses exempted under the SME exemption scheme 

Member State 

Turnover generated by 
exempted businesses 
(million EUR) 

Proportion of SMEs’ 
turnover generated by 
exempted businesses 

Proportion of all 
businesses’ turnover 
generated by exempted 
businesses 

Austria** 

Belgium* 

Bulgaria* 

Croatia* 

Cyprus** 

Czech Republic* 

Denmark** 

Estonia* 

Finland** 

France* 

Germany** 

Greece** 

Hungary* 

Ireland** 

Italy* 

Latvia** 

Lithuania* 

Luxembourg* 

Malta* 

Poland** 

Portugal* 

Romania** 

Slovakia* 

Slovenia* 

3 883  

289  

1 207  

455  

81  

1 162  

154  

300  

201  

2 259  

3 219  

384  

1 959  

2 727  

5 923  

529  

613  

1  

77  

13 949  

1 914  

2 542  

4 041  

2 860  

United Kingdom* 

55 000  

3% 

0.2% 

4% 

2% 

1% 

2% 

0.2% 

3% 

0.4% 

0.3% 

1% 

0.4% 

4% 

6% 

1% 

4% 

2% 

N/A80 

2% 

6% 

2% 

5% 

11% 

15% 

10% 

0.5% 

0.02% 

1% 

0.5% 

0.2% 

0.5% 

0.03% 

1% 

0.05% 

0.05% 

0.2% 

0.1% 

1% 

0.47% 

0.2% 

1% 

0.4% 

0.0002% 

0.2% 

1% 

0.3% 

1% 

2% 

3% 

1% 

*Deloitte estimates based on data obtained from surveys to tax authorities, see Annex B.  

**Deloitte estimates, see Annex C for details. 

80 The data provided by Luxembourg did not allow to classify businesses between SMEs and non-SMEs. 

97 | P a g e  

 
 
                                                      
Annex E – Ipsos MORI surveys 

Ipsos MORI was commissioned to conduct surveys in four markets, Austria, Italy, Poland and the UK, 
and  interviewed 500  SMEs  in each country. Businesses were asked  about their turnover, their VAT 
obligations and cross-border trading behaviours.  

This  survey  was  commissioned  to  fill  gaps  in  the  data,  particularly  in  areas  where  limited  public 
sources  exist  (for  example,  data  on  exempted  businesses  under  the  SME  exemption  scheme). 
However, more data than expected was obtained via other sources, such as surveys to tax authorities 
or studies conducted on the Internationalisation of SMEs.81 Moreover, the Ipsos MORI survey results 
revealed that some confusion existes among businesses on their exact situation. Therefore, wherever 
possible,  data  from  tax  authorities  is  used  as  the  primary source  and  less reliance  is  placed  on  the 
results  of  the  Ipsos  MORI  surveys  for  the  different  data  points  that  were  estimated.  Details  on  the 
businesses interviewed and some of the results obtained are however presented in this Annex.   

E.1  

Profile of businesses interviewed 

Ipsos  MORI  interviewed  500  businesses  in  each  of  the  four  markets.  The  surveys  focused  on  very 
small  SMEs82  in  order  to  capture  the  ones  most  likely  to  be  able  to  take  advantage  of  the  SME 
exemption  scheme.  The  distribution  by  turnover  brackets  of  the  businesses  interviewed  in  each 
market is presented below.  

Table 95 – Number of businesses interviewed by Ipsos MORI in each country, by turnover bracket 

Member State 

Less than EUR 50 000 

EUR 50 000 – EUR 125 000 

EUR 125 000 – EUR 2 000 
000 

Austria 

Italy 

Poland 

United Kingdom 

108 

135 

160 

170 

291 

162 

231 

214 

101 

205 

110 

116 

Source: Deloitte estimates based on Ipsos MORI surveys data 

In Austria, Italy and Poland, only few firms declared taking advantage of the SME exemption scheme, 
with a higher number in the United Kingdom. This is unsurprising given the lower threshold in Austria 
and Poland compared to United Kingdom (EUR 30 000 and c. EUR 35 000 compared to c. EUR 124 

81 Flash Eurobarometer 421, Internationalisation of Small and Medium-sized Enterprises (2015) 
82 With less than EUR 125 000 of turnover  

98 | P a g e  

 
 
 
                                                      
000), and the fact that Italy imposes additional conditions for businesses to be eligible for the scheme. 
The numbers of exempted businesses in each country and turnover bracket is reported below.  

Table 96 – Number of businesses exempted under the SME exemption scheme in each country, by 
turnover bracket 

Member State 

Less than EUR 50 000 

EUR 50 000 – EUR 125 000 

EUR 125 000 – EUR 2 000 
000 

Austria 

Italy 

Poland 

United Kingdom 

13 
(12.0%) 

4  
(3.0%) 

19 
(11.9%) 

72 
(42.4%) 

7 
(2.4%) 

2 
(1.2%) 

2 
(0.9%) 

100 
(46.7%) 

5 
(5.0%) 

4 
(2.0%) 

1 
(0.9%) 

2 
(1.7%) 

Source: Deloitte estimates based on Ipsos MORI surveys data 

Given  the  small  sample  sizes  and  the  fact  that  a  large  proportion  of  Member  States  provided  the 
number  of  exempted  businesses  and  data  allowing  the  calculation  of  take-up  rates83,  the  numbers 
obtained from Ipsos MORI surveys were not used to draw conclusions on the quantitative analysis of 
the scheme.  

The survey was also used to calculate the percentage of businesses trading cross-border. Due to the 
inconsistencies in the businesses’ responses, a range rather than single point estimates is reported: 
when it was not clear whether a business did carry out cross-border trade or not (due to contradictory 
answers on different questions), this business was assumed to not sell outside of its country to obtain 
the lower bound estimate, and was assumed to do so to obtain the upper bound estimate. 

The percentage of businesses carrying out cross-border trade in each country is reported below.  

Table 97 – Percentage of businesses interviewed carrying out cross-border trade in each country and 
across the three markets 

Member State 

Lower bound 

Upper bound 

Median 

Austria 

Italy 

Poland 

United Kingdom 

83 See Annex B for details 

21% 

20% 

20% 

14% 

29% 

45% 

26% 

31% 

25% 

33% 

23% 

23% 

99 | P a g e  

 
 
 
 
                                                      
Member State 

Lower bound 

Upper bound 

Median 

Four markets 
combined 

19% 

33% 

26% 

Source: Deloitte estimates based on Ipsos MORI surveys data 

The cross-border behaviours were also separately evaluated for: 

  Businesses taking advantage of the SME exemption scheme; and 
  Businesses  eligible  for  the  SME  exemption  scheme  but  choosing  to  opt  for  the  common 

regime. 

Businesses eligible for the scheme were identified according to the threshold in place in the country 

and  whether  a  business’s  turnover  was  below  this  threshold.  This  could  however  only  be  done  in 
Austria, Poland and the UK as Italy has multiple thresholds depending on the sector of activity, and 
additional  conditions  such  as  employee  costs  which  were  unidentifiable  for  the  survey  results.  In 
addition,  the  sample  sizes  of  eligible  and  exempted  businesses  in  the  separate  markets  of  Austria, 
Poland  and  the  UK  were  considered  too  small  to  obtain  estimates.  As  such,  the  cross-border 
behaviours of businesses in and out of the scheme were calculated for the  Austrian, Polish and UK 
markets combined. The results are presented below.  

Table 98 – Percentage of businesses carrying out cross-border transactions out of businesses 
exempted under the SME exemption scheme or businesses eligible to the scheme but opting for the 
common regime 

Lower bound 

Upper bound 

Median 

10% 

14% 

24% 

32% 

17% 

23% 

Businesses 
exempted under 
the scheme 

Businesses 
eligible to the 
scheme but 
opting for the 
common regime 

Source: Deloitte estimates based on Ipsos MORI surveys data 

100 | P a g e  

 
 
 
 
Annex F – VAT Compliance 
costs estimation – Literature 
review  

This Annex presents in more detail the VAT compliance cost estimates found in the literature 
and the methodology used to extrapolate these estimates to all EU countries.  

Estimates found in the literature 

A  number  of  different  studies  have  been  conducted  to  estimate  the  burden  imposed  by  VAT  on 
businesses. They differ by the methodologies used (for example, using surveys versus Standard Cost 
Models),  the  types  of  businesses  on  which  they  focus  (some  restrain  the  studies  to  very  small 
businesses  while  some  look  at  the  whole  economy)  or  the  type  of  results  they  present  (number  of 
hours  spent  complying  with  VAT,  monetary  cost  of  VAT  compliance  or  cost  as  a  percentage  of 
turnover).  The  information  calculated  in  these  studies  falls  into  three  main  categories,  which  are 
presented in turn.  

  Estimates of the actual monetary cost of complying with VAT for a business; 

  Estimates  of  the  cost  of  complying  with  VAT  as  a  percentage  of  turnover  or  relative  to  the 

number of employees; and 

  Estimates of the hours spent complying with VAT. 

Estimates of aggregate VAT compliance costs in monetary terms have been found in the literature for 
7 Member States and the table below gives an overview of the estimates obtained.  

Table 99 – VAT compliance costs per business found in the literature 

Member 
State 

Source 

Overall 
methodology 

Results 

Comments 

Croatia 

Helena Blazic, 
Tax Compliance 
Costs of Small 
Business in 
Croatia, 
November 2004 

Tax compliance 
costs of businesses 
not exceeding 50 
employees in 
2001/2002, 
measured via 
surveys 

VAT compliance cost for VAT-
registered businesses of 
different size 

0 employees 

EUR 512 

1 to 2 
employees 

3 to 5 
employees 

EUR 721 

EUR 1 517 

2001 Kruna to 
EUR exchange 
rate of 0.13484 

84 2001 exchange rate (12 months average) from OANDA. 

101 | P a g e  

 
 
 
                                                      
Member 
State 

Source 

Overall 
methodology 

Results 

Comments 

Denmark 

International 
comparison of 
measurements of 
administrative 
burdens related to 
VAT in the 
Netherlands, 
Denmark, Norway 
and Sweden, April 
2005 

6 to 50 
employees 

EUR 2 476 

Administrative 
burdens from VAT 
on businesses 
measured by a 
Standard Cost 
Model in 2004 

Cost of 
administering 
VAT per 
business per 
year 

EUR 180 

- 

VAT compliance cost per 
business 

Germany 

Sebastian 
Eichfelder and 
Michael Schorn, 
Tax compliance 
costs: A business 
administration 
perspective, 2009 

Compliance cost of 
overall taxation 
estimated via 
surveys, data 
obtained in 2003 

0 to 18 
employees85 

19 to 48 
employees 

49 to 498 
employees 

EUR 5 490 

EUR 10 990 

EUR 29 560 

499 and more 
employees 

EUR 173 
780 

Ireland 

Netherlands 

Revenue, 
Administrative 
Burden 
Reduction, Report 
on the 
measurement of 
the regulatory 
burden imposed 
on business by 
Revenue, July 
2012  

International 
comparison of 
measurements of 
administrative 
burdens related to 
VAT in the 
Netherlands, 
Denmark, Norway 
and Sweden, April 
2005 

Taxes 
administrative 
burden for 
businesses 
measured via a 
Standard Cost 
Model in 2012 

VAT 
administrative 
burden per 
business 

EUR 1 597 

Administrative 
burdens from VAT 
on businesses 
measured by a 
Standard Cost 
Model in 2004 

Cost of 
administering 
VAT per 
business per 
year 

EUR 807 

- 

Sweden 

Skatteverket, 
Compliance costs 

VAT compliance 
costs estimated for 

VAT compliance costs for 
VAT-registered businesses86 

2006 SEK to 
EUR exchange 

85 The paper reports the costs by the number of associates, including the entrepreneur. The numbers here are reported by the 
number of employees, which is the number of associates minus one.  
86 The costs for businesses with less than 500 employees are based on surveys  carried out  with  VAT-registered businesses 
with  a  telephone  number.  The  authors  then  assume  that  the  VAT  compliance  costs  for  VAT-registered  businesses  without  a 

102 | P a g e  

The paper 
reports the total 
tax compliance 
cost per 
business. Based 
on a UK study 
(KMPG, 2006), 
20% of these 
costs are 
assumed to 
relate to VAT for 
each size class 
of businesses. 

The paper 
reports the 
aggregate VAT 
compliance costs 
in 2012 for all 
businesses. This 
number is 
divided by the 
number of VAT 
registered 
businesses in 
2013 provided by 
the Irish tax 
authority in the 
survey 
conducted by 
Deloitte. 

 
 
                                                      
 
Member 
State 

Source 

of value-added 
tax in Sweden, 
2006 

Overall 
methodology 

businesses of 
different sizes via 
surveys in 2005 

Results 

Comments 

0 employee 

EUR 677 

rate of 0.1187 

1 to 4 
employees 

5 to 9 
employees 

10 to 49 
employees 

50 to 499 
employees 

EUR 1 570 

EUR 2 130 

EUR 2 625 

EUR 2 870 

500 and more 
employees88 

EUR 70 040 

International 
comparison of 
measurements of 
administrative 
burdens related to 
VAT in the 
Netherlands, 
Denmark, Norway 
and Sweden, April 
2005 

Administrative 
burdens from VAT 
on businesses 
measured by a 
Standard Cost 
Model in 2004 

Cost of 
administering 
VAT per 
business per 
year 

EUR 344 

- 

United 
Kingdom 

KPMG and 
HMRC, 
Administrative 
Burdens – 
Measurement 
Project, 2006 

Costs of compliance 
with tax legislation 
for businesses 
established in the 
UK measured by a 
Standard Cost 
Model in 2005 

VAT compliance costs for 
VAT-registered businesses 

0 employee 

EUR 180 

1 to 9 
employees 

10 to 49 
employees 

50 to 249 
employees 

EUR 1 210 

EUR 3 366 

EUR 9 531 

250 and more 
employees 

EUR 103 
828 

The paper 
calculates the 
total aggregate 
costs of VAT 
compliance in the 
UK for 
businesses of 
different size. 
These estimates 
are then divided 
by the number of 
VAT-registered 
businesses in 
each size class89. 
While the authors 
provide the 
number of VAT-
registered 
businesses in the 
UK, these are 
divided across 
size classes 
based on the 
same distribution 
as the overall 
number of 
businesses 

telephone number amount to 25% of the costs obtained due to the assumed lower activity of businesses without a telephone 
number. These estimates are not reported here.  
87 2006 exchange rate (12 months average) from OANDA. 
88 The estimates for compliance costs of businesses with more than 500 employees are based on interviews with 7 businesses 
and exclude public authorities. The interview followed the questions asked in the postal survey sent to the smaller businesses. 
89 KPMG and HMRC, Administrative Burdens – Measurement Project, 2006, Page 16 

103 | P a g e  

 
 
                                                                                                                                                                     
 
Member 
State 

Source 

Overall 
methodology 

Results 

Comments 

which is provided 
in the paper90. 
The numbers are 
converted to 
EUR using a 
2005 GBP to 
EUR exchange 
rate of 1.4791. 

The  results  presented  in  the  table  above  highlight  the  wide  range  of  estimates  obtained  in  the 
literature for VAT compliance costs faced by businesses. They range from EUR 180 per business in 
Denmark to at least EUR 5 500 per business in Germany. However, some studies calculate the VAT 
compliance  costs  for  all  businesses  in  the  economy,  while  some  break  down  these  costs  by 
businesses of different size or focus on small businesses, making direct comparison difficult.  

When  broken  down  by  businesses  of  different  size,  the  studies  all  show  that  total  VAT  compliance 
costs  are  higher  for  larger  businesses.  This  was  also  a  finding  of  a  survey  conducted  in  Ireland  on 
SME Taxpayers in 2013. While the study did not report monetary costs of tax compliance, they found 
that smaller businesses spend less time on tax-related matters compared to larger businesses.92 They 
also found that the most burdensome obligations for SMEs were the ones related to VAT.  

In addition to considering total VAT compliance costs faced by firms it is also useful to consider how 
these  costs  compare  to  the  turnover  of  enterprises  and  hence  their  impact  on  the  viability  of  the 
business.  A  number  of  studies  have  also  estimated  compliance costs  relative  to  the  turnover  of  the 
business or the number of employees. Studies that have estimated this information include a number 
of  the  studies  listed  above  and  two  additional  studies,  in  Slovenia  and  the  UK.    The  results  are 
presented in the table below.  

90 KPMG and HMRC, Administrative Burdens – Measurement Project, 2006, page 15. Note that VAT-registered businesses will 
be more concentrated towards the higher size class of businesses compared to overall businesses. As a result, the numbers 
presented might overestimate compliance cost for large businesses and underestimate compliance costs for small businesses.  
91 2005 exchange rate (12 months average) from OANDA. 
92 Sean Kennedy, Survey of SME Taxpayers 2013, December 2013. Table 5, page 25.  

104 | P a g e  

 
 
 
                                                      
Table 100 – VAT compliance costs per employee or as a percentage of turnover found in the 
literature 

Member 
State 

Source 

Overall 
methodology 

Results 

Comments 

VAT compliance cost 
associate 

Germany 

Sebastian 
Eichfelder and 
Michael Schorn, 
Tax compliance 
costs: A business 
administration 
perspective, 2009 

Compliance cost of 
overall taxation 
estimated via 
surveys, data 
obtained in 2003 

1 to 19 
associates 

20 to 49 
associates 

50 to 499 
associates 

EUR 833 

EUR 367 

EUR 212 

500 and more 
associates 

EUR 175 

Average VAT compliance cost 
per employee93 

0 employee 

- 

1 to 4 
employees 

5 to 9 
employees 

10 to 49 
employees 

50 to 499 
employees 

EUR 818 

EUR 328 

EUR 136 

EUR 24 

500 and more 
employees 

EUR 16 

VAT compliance cost as a 
percentage of turnover 

Up to c. EUR 
417 000 

3.73% 

c. EUR 
417 000 to c. 
EUR 
4 170 000 

0.73% 

Sweden 

Skatteverket, 
Compliance costs 
of value-added 
tax in Sweden, 
2006 

VAT compliance 
costs estimated for 
businesses of 
different sizes via 
surveys in 2005 

Slovenia 

Maja KLUN, 
Administrative 
Costs of Taxation 
in a Transition 
Country: The 
Case of Slovenia, 
2003 

Compliance cost of 
VAT estimated via 
surveys, data 
obtained for the 
2000 fiscal year 

The paper 
reports the total 
tax compliance 
cost per 
associate. Based 
on a UK study 
(KMPG, 2006), 
20% of these 
costs are 
assumed to 
relate to VAT for 
each size class 
of businesses. 

2006 SEK to 
EUR exchange 
rate of 0.1194 

EUR to SIT 
exchange rate of 
239.64 used to 
convert the 
turnover 
brackets95 

93 The costs for businesses with less than 500 employees are based on surveys  carried out  with  VAT-registered businesses 
with  a  telephone  number.  The  authors  then  assume  that  the  VAT  compliance  costs  for  VAT-registered  businesses  without  a 
telephone number amount to 25% of the costs obtained due to the assumed lower activity of businesses without a telephone 
number. These estimates are not reported here.  
94 2006 exchange rate (12 months average) from OANDA. 
95  A  permanent  exchange  rate  between  the  euro  and  the  tolar  was  established  in  2006  before  Slovenia  adopted  the  euro  in 
2007. 

105 | P a g e  

 
 
                                                      
Member 
State 

Source 

Overall 
methodology 

Results 

Comments 

United 
Kingdom 

Centre for 
Economics and 
Business 
Research 
(CEBR), Impact of 
increasing VAT 
registration 
threshold for 
Small businesses, 
2010 

Over c. EUR 
4 170 000 

0.08% 

VAT compliance cost as a % 
of a business’s turnover 

Estimation based 
on data obtained 
from another paper, 
Sandford et al 
(1989) 

Up to 
EUR153 000 

1.48% 

EUR 153 000 to 
EUR 765 000 

0.28% 

2002 GBP to 
EUR exchange 
rate of 1.53 used 
to convert the 
turnover 
brackets96 

Over EUR 1 53 
million 

0.1% 

As shown in the table above, even though total costs of VAT compliance are found to increase with 
business  size,  the  costs  of  complying  with  VAT  are  consistently  found  to  be  regressive:  they  affect 
small businesses significantly more than large ones, e.g. as a percentage of turnover.  

Estimating VAT compliance costs across the EU 

As presented in the report Volume I, in addition to these studies, PwC and the World Bank publish a 
time series of the VAT burden for EU countries in terms of the number of hours spent on compliance, 
which  can  be  used  to  compare  the  compliance  burden  across  markets.97  These  estimates  are 
produced by national tax experts based on a model company scenario that is structured on a set of 
financial  statements  and  assumptions  about  the  number  and  cost  of  transactions  relating  to  tax 
compliance over the year. The costs are reported in hours per year required to prepare, file and pay 
consumption taxes.98 Figure 20 below shows the number of hours spent complying with VAT across 
the 28 Member States in 2014, as reported by the World Bank.  

96 2002 exchange rate (12 months average) from OANDA is used since the euro did not exist before then.  
97 PwC and World Bank, Paying Taxes 2008 to 2016. 
98 For the purpose of this report, consumption taxes are assumed to reflect VAT in the EU.  

106 | P a g e  

 
 
                                                      
Figure 20 – VAT compliance burden (number of hours) in 2014 across Member States based on a 
medium sized business model company (PWC and World Bank) 

s
r
u
o
H

180

160

140

120

100

80

60

40

20

0

Hours spent complying with VAT

Average

Source: PWC and World Bank, Paying Taxes 2016, Table A3.3: Time to comply, page 137 

A  review  of  these  estimates  over  time  shows  that  the  time  spent  complying  with  VAT  has  stayed 
constant  or  decreased  for  most  EU  countries  since  2006.99  In  only  three  Member  States,  (Belgium, 
Croatia and France) has this burden increased over time.  

While  the  estimates  found  on  VAT  compliance  costs  for  an  average  business  vary  widely  across 
studies  and  Member  States,  they  can  be  used  as  a  basis  to  obtain  indicative  figures  of  VAT 
compliance costs across the EU. To ensure comparability of the estimates, this approach focuses on 
those  studies  that  provide  evidence  on  the  average  cost  per  business  in  the  economy:  this 
encompasses five of the seven studies presented above. However, these studies were conducted at 
different times and may not reflect recent changes in the compliance burden, so the following sources 
have been used to adjust the estimates: 

  PwC and the World Bank report the hours spent complying with VAT for each Member State 
from  2006  to  2014.  This  data  is  to  calculate  the  change  over  time  in  the  hours  spent 
complying with VAT for the 5 Member States in the sample. 

  Eurostat  publishes  a  time  series  of  the  average  hourly  labour  cost  for  all  EU  Member 
States.100  The  data  is  reported  for  the  years  2004,  2008,  2012,  2013  and  2014.  It  can 
therefore be used to estimate the change in the cost associated with the time spent complying 
with VAT for the 5 Member States in the sample from the time the studies were produced to 
2014.   

The estimates obtained are presented in the table below.  

99  PWC  and  World  Bank,  Paying  Taxes  2016,  Paying  Taxes  2015,  Paying  Taxes  2014,  Paying  Taxes  2013,  Paying  Taxes 
2012, Paying Taxes 2011, Paying Taxes 2010, Paying Taxes 2009, Paying Taxes 2008 
100 http://ec.europa.eu/eurostat/statistics-explained/index.php/Hourly_labour_costs 

107 | P a g e  

 
 
 
 
                                                      
 
Table 101 – VAT compliance costs estimated in 2014 for 5 Member States 

Average VAT 
compliance 
cost per 
business 

Year in 
which the 
estimates 
are based 

Member State 

Denmark 

Ireland 

Netherlands 

Sweden 

EUR 180 

EUR 1 597 

EUR 807 

EUR 344 

EUR 1 181101 

United Kingdom 

EUR 827 

2004 

2012 

2004 

2004 

2006 

2005 

Change in 
hour spent 
complying 
with VAT 
from the 
year the 
study was 
produced to 
2014 

0%* 

0% 

-82%* 

0%* 

0% 

-29%* 

Change in 
labour costs 
from the 
year the 
study was 
produced to 
2014 

Estimates of 
VAT 
compliance 
cost per 
business in 
2014 

37% 

0% 

24% 

29% 

23%** 

4%** 

EUR 247 

EUR 1 597 

EUR 184 

EUR 442 

EUR 1 454 

EUR 617 

Source: Deloitte estimates based on data obtained from PwC and World Bank, Paying Taxes 2008 to 2016 and 
Eurostat dataset on hourly labour costs. 

* Note that since PwC and the World Bank do not publish data before 2006, the above estimates do not take into 
account  any  change  in  the  hours  spent  complying  with  VAT  between  the  time  the  studies  were  produced  and 
2006. 

**  In  order  to  ensure  consistency  across  country  estimates,  Eurostat  data  on  average  labour  costs  is  used  to 
estimate how the compliance costs may have adjusted over time. This data is, however, only available for 2004 
and 2008 and therefore the values for the intervening period have been interpolated from these points.   

Having obtained comparable estimates of 2014 VAT compliance costs per business for the 5 Member 
States, these estimates can form a basis for calculating compliance costs in other Member States.  

Data from Eurostat, PwC and the World Bank are used to calculate an index of how compliance costs 
compare across countries, taking into account both differences in the time spent complying with VAT 
across  Member  States,  and  differences  in  labour  costs.  The  VAT  compliance  cost  per  business  in 
country i is then calculated by: 

  Taking one of the estimated compliance costs outlined in Table 101 as a baseline;102 
  Using the PwC and World Bank data to calculate how the time spent complying with VAT in 

country i compares to that Member State; 

  Using Eurostat’s data to calculate the relative hourly labour cost in country i compared to that 

Member State; and 

  Scaling the VAT compliance cost taken by these factors to obtain an estimate for country i’s 

compliance cost. 

One limitation of this approach is that the estimates obtained based on the World Bank data are not 
necessarily consistent with those found in the literature, due to differences in the methodologies used 
or  samples  selected.  This  discrepancy  between  the  estimates  calculated  from  the  World  Bank  data 
and those found in the literature is shown in Figure 21 below (which uses the Netherlands’ costs as a 
basis for estimation in the other Member States).  

101 Based on VAT compliance costs for VAT-registered businesses with telephone numbers from Skatteverket (2006) 
102  It  is  possible  that  the  change  in  hours  spent  complying  with  VAT  in  the  Netherlands  might  represent  an  outlier  in  those 
specific years, meaning that the lower bound calculated based on the Netherlands may be unlikely to be attained in practice. 
However, given the wide range reported in the other estimates – and the fact that the estimated burden for Denmark is also low 
– this information is included within the estimates to reflect the inherent uncertainty.  

108 | P a g e  

 
 
                                                      
Figure 21 – Comparison of 2014 VAT compliance costs obtained from the literature and from the 
estimation methodology taking the Netherlands as a base cost 

s
s
e
n
i
s
u
b
r
e
p
t
s
o
c

e
c
n
a
i
l

p
m
o
c

T
A
V

EUR 1.800

EUR 1.600

EUR 1.400

EUR 1.200

EUR 1.000

EUR 800

EUR 600

EUR 400

EUR 200

EUR 0

Netherlands

Denmark

Ireland

Sweden (SCM
study)

Sweden
(Skatteverket
study)

United Kingdom

Estimated VAT compliance costs per business from the literature

 Source: Deloitte estimates based on estimates found in the literature, PwC and World Bank data and Eurostat 

data 

To  reflect  the  inherent  uncertainty,  a  range  rather  than  single  point  estimates  of  VAT  compliance 
costs is therefore calculated for each EU country based on the following methodology: 

  The 2014 average VAT compliance cost per business for 5 Member States are obtained, as 

presented in Table 101.  

  Each in turn is taken as a base cost. 2014 indexes are then calculated based on the PwC and 
World  Bank  data  and  the  Eurostat  data,  estimating  the  differences  in  compliance  cost 
between the Member State taken as a base and the remaining 27 Member States.  

  These  indexes  are  used  to  calculate  VAT  compliance  costs  per  business  across  all  28 

Member States.  

  The exercise is repeated using each estimate presented in Table 97 as a base. The minimum 
and maximum of the estimates obtained from a range of VAT compliance cost per business in 
each Member State. The results obtained are presented in the figure below.  

109 | P a g e  

 
 
 
 
 
 
 
 
 
Figure 22 – Range of 2014 VAT compliance costs per business estimated for each EU Member State 

s
s
e
n
i
s
u
b
r
e
p
s
t
s
o
c

e
c
n
a
i
l

p
m
o
C
T
A
V

EUR 8.000

EUR 7.000

EUR 6.000

EUR 5.000

EUR 4.000

EUR 3.000

EUR 2.000

EUR 1.000

EUR 0

Average

Source:  Deloitte estimates  based  on estimates found in  the literature,  PwC and World  Bank data  and Eurostat 

data 

The estimates obtained show that on average, it costs a business between EUR 140 and EUR 1 540 
to comply with VAT obligations across the EU.  

However,  because  the  estimates  obtained  from  the  literature  were  given  as  a  monetary  value,  they 
were  extrapolated  to  other  Member  States  taking  into  account  the  differences  in  labour  costs.  This 
may under- or over-estimate the actual burden of VAT on businesses: a country with low labour costs 
may appear to impose a small compliance burden on its businesses even if a lot of hours are spent 
dealing  with  VAT  obligations.  This  is  the  case  for  example  in  Bulgaria,  whose  estimates  of  VAT 
compliance  costs  per  business  vary  between  EUR  95  and  EUR  1  020,  below  the  EU  averages. 
However  when  comparing  the  PwC  and  World  Bank  data  on  the  hours  spent  complying  with  VAT, 
Bulgarian businesses appear to spend the most time, at 165 hours a year.  

The VAT compliance costs are therefore computed as a percentage of a business’s turnover. While 
this data can be estimated using the results obtained from surveys to tax authorities, some Member 
States did not provide these estimates. When this was the case, an average turnover per business in 
each size class was applied based on the EU average, as presented in Annex B. Using the resulting 
estimates therefore does not take into account the variations in businesses’ turnover for the Member 
States where no tax authority data was provided. To capture this variation, Eurostat datasets on the 
number  of  businesses  in  each  EU  country  and  the  total  generated  turnover  is  used  to  estimate  the 
average turnover of a business in each Member State.103   

103  Eurostat  Structural  Business  Statistics,  2014.  This  data  is  not  available  for  Greece  which  is  therefore  excluded  from  the 
calculations. 

110 | P a g e  

 
 
 
                                                      
 
 
 
 
 
The mid-point VAT compliance cost from the range estimated in each Member States is then used to 
estimate the compliance burden as a percentage of turnover for each Member State. The results are 
presented below.  

Figure 23 – Median of the VAT compliance costs estimated as a percentage of turnover for an 
average business in each Member State.  

0,8%

0,7%

0,6%

0,5%

0,4%

0,3%

0,2%

0,1%

0,0%

Median compliance cost as a percentage of turnover

Average

Source: Deloitte estimates 

As  stressed  in  the  report,  the  robustness  of  the  estimates  should  be  carefully  considered  as  they 
present  some  limitations.  As  stressed  by  Chittenden  (2002),  comparing  tax  compliance  costs 
estimates  across  countries  raises  substantial  issues  of  consistency  related  to  differences  in  the 
methodologies  used,  tax  systems  and  tax  populations,  time  periods  studied,  sample  frames  and 
response rates.  

111 | P a g e  

 
 
 
Annex G – Standard Cost Model  

This annex describes the approach and methodology used for the analysis of the compliance 
costs for businesses using the Standard Cost Model, and provides detailed results per each of 
the SME schemes analysed in the eight Member States chosen for fieldwork.  

The quantification of the burden for businesses within and outside of the VAT special schemes is an 
important component of this study. In keeping with the European Commission’s Guidelines, this study 
uses the Standard Costs Model (SCM) methodology. 

The SCM was developed by the Dutch ministry of Finance and is used to measure the administrative 
burden imposed on businesses and/or citizens through the need to comply with regulation. The SCM 
identifies Information Obligations (IOs), or tasks associated with regulation which require the delivery 
of  information  to  public  authorities  or  third  parties.  The  IOs  can  be  further  subdivided  into  Data 
Requirements (DRs). The SCM provides a simplified and consistent method to measure the impact of 
regulation.  It  is  used  across  several  Member  States  and  is  part  of  the  EU’s  tool  kit  for  assessing 
administrative costs imposed by EU legislation104. 

Standard Cost Model:  

Administrative burden = Time*Price*Quantity (amount x frequency) 

Time: The time spent by the citizen or the employee in the enterprises to comply with an IO 

Price:  The  standard  cost  to  apply  to  the  time  spent  according  to  the  level  of  the  employee  who 
performs the IO (Information Obligation). 

Quantity: The number of IOs to perform per year and their frequency (e.g. monthly, yearly) 

G.1 Objectives, scope and sources for the analysis 

A  key  objective  of  this  study  is  to  identify  and  quantify  the  compliance  costs  for  VAT-related 
obligations for SMEs using the special schemes and for those not using them (while eligible). In order 
to do this, the key IOs these businesses have to comply with on the basis  of the current legislation 
have been identified, and data on the time and costs  they incur was collected through interviews  in 
the eight Member States selected for fieldwork.  

As the application of the SME schemes differ across Member States, here we present separately the 
details of each of the schemes assessed in the relevant Member States.  

104 See Impact Assessment Guidelines, annex 10: Assessing administrative costs imposed by EU legislation, p.46  

112 | P a g e  

 
 
 
                                                      
Information  from  interviews  in  each  Member  State  (per  each  of  the  special  scheme  analysed)  was 
merged  to  create  a  ‘typical’  SME  in  the  national  context.  The  formula  below  denotes  this  process 
mathematically:  

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑜𝑠𝑡 =  

1
𝑁

 ∑(𝑇𝑖𝑚𝑒𝑁

∗   𝑊𝑎𝑔𝑒𝑁 ) 

𝑁

where N is the number of businesses in the sample per each Member State.  

Data and assumptions 

Data for the exercise came from a variety of sources:  

  Real data from business and accountant interviews;  
  Commission’s official guidelines and standardised data (for hourly costs);  
  Expert assessments; 
  Third party sources. 

Data from businesses interviewed  

Data  on  time  and  costs  for  complying  with  the  IOs  came  from  interviews  with  real  businesses  both 
within and outside of the VAT special schemes for SMEs in each of the eight Member States selected 
for the fieldwork. Businesses were identified and contacted using a variety of channels, such as the 
Deloitte network, business representative organisations (both at EU and national level), chambers of 
commerce, and the study team’s personal network.  

Given  the crucial role of  business representative  organisations  (providing  fiscal  advisory  services  to 
their members) and of accountants in supporting businesses to use and benefit from the special VAT 
schemes,  we  decided  to  include  interviews  with  business  representative  organisations  and 
accountants (in a limited number) in the fieldwork, whenever possible. In particular, for the collection 
of  data  for  the  Standard  Cost  Model,  the  SMEs  interviewed  regularly  directed  us  towards  their 
external  accountants  as  they  were  in  a  better  position  to  give  such  details.  Several  interviewed 
accountants were also qualifying SMEs themselves.  

The  selection  of  the  eight  Member  States  for  fieldwork  took  into  account  a  set  of  criteria,  such  as 
dimension of the countries, geographical distribution and SME schemes implemented.  

Given the specific objectives of the exercise, the aim within the sample of businesses in each Member 
State was to  balance to the maximum extent possible businesses using VAT special schemes with 
businesses not using them (while eligible). 

The table below provides an overview of the VAT special schemes analysed in each of eight Member 
States chosen for fieldwork, and of the sample of businesses interviewed in each of them.  

113 | P a g e  

 
 
 
Table 102 – Sample of VAT special schemes and businesses interviewed in the eight Member States selected for fieldwork 

Member State 

VAT 
exemption 

Graduated relief   Cash 

Flat-rate scheme 

Interviews 

accounting 

Belgium 

Estonia 

France 

Italy 

✓ 

✓ 

✓ 

✓ 

✓ 

9 carried out: 

  1 Start-up 
  1 business with turnover between EUR 50 001 – 100 000 
  3  businesses  with  turnover  between  EUR  100  001  – 

500 000 

  1 business with turnover between EUR 500 001 – EUR 2 

000 000 

  2 accountants 
  1 Business Association 

✓ 

6 carried out: 

  2  businesses  with  turnover  of  less  than  EUR  100  001  – 

500 000 

  4  businesses  with  turnover  between  EUR  100  001  – 

500 000 

6 carried out: 

  5 businesses with turnover between EUR 5 001 – 50 000 

  1 Accountant 

9 carried out: 

  2  businesses  with  turnover  between  EUR  100  001  – 

500 000; 

  1  businesses  with  turnover  between  EUR  50  001  – 

100 000 (accountant)  

  4 businesses with turnover between EUR 5 001 – 50 000 
  2 business associations  

114 | P a g e  

 
 
 
 
 
 
 
 
 
 
 
 
Member State 

VAT 
exemption 

Graduated relief   Cash 

Flat-rate scheme 

Interviews 

accounting 

Poland 

Romania 

✓ 

✓ 

Spain 

✓ 

UK 

✓ 

Source: Deloitte  

✓ 

2 carried out: 

  2 accountants105  

2 carried out: 

  2 accountants106 

5 carried out: 

✓ 

✓ 

  3 accountants 
  1  business  with  turnover  between  EUR  5 001  –  EUR 

50 000 

  1  business  with  turnover  between  EUR  500 001  –  EUR 

2 000 000 

7 carried out: 
  1 start-up 
  1 business with turnover between EUR 5 001 – 50 000 
  1 business with turnover between EUR 50 001 – 100 000 
  2  businesses  with  turnover  between  EUR  100  001  – 

500 000  

  1 business with turnover between EUR 500 001 – EUR 2 

000 000 

  SME VAT Forum (discussion) 

105 It was not possible to interview any businesses using the flat-rate scheme in Poland. 
106 It was not possible to interview any businesses using the schemes in Romania. 

115 | P a g e  

 
 
 
 
 
 
 
 
 
 
 
                                                      
It should be noted that the sample cannot be considered statistically representative of the variety of 
SMEs  operating  (within  and  outside  of  the  VAT  special  schemes)  in  the  Member  States,  nor  is 
statistical representativeness requested by the SCM methodology.  

Other data  

Data on hourly earnings is provided by Eurostat107. Specifically, hourly rates for the category ISCO 2, 
i.e. for management accounts, were used, as they make up the personnel responsible for VAT-related 
procedures  in  businesses.  Management  accountants  are  classified  under  the  code  2411  in  the 
International Standard Classification of Occupations elaborated by the ILO.  

The  results  from  the  SCM  were  cross-checked  using  expert  judgement  findings  from  existing 
literature,  including  recent  studies  carried  out  for  the  European  Commission,  DG  TAXUD,  on  VAT-
related  topics108.  It  should  be  noted,  however,  that  figures  from  existing  studies  are  not  necessarily 
directly  comparable,  as  other  studies  may  be  measuring  different  aspects  and  using  different 
approaches.  

Information Obligations (IOs) used for the analysis 

The table below provides the overview of the IOs used in the SCM. The relevant IOs were identified 
through  the  current  literature  and  interviews  with  Deloitte’s  tax  practitioners,  and  discussed  and 
agreed upon with the Commission in the Inception phase of the study. In addition, the list of IOs was 
validated by both national tax authorities and the businesses interviewed.  

Table 103 – Information Obligations used in the Standard Cost Model 

Type 
of 
obligation 

Frequency 

Description for businesses 

One-off 

One-off 

VAT 
registration 

Re 
Domestic 

Applying 
for special 
scheme110 

Charging a 
flat-rate on 
its output 
VAT 

IO1a consists of the one-off registration for VAT purposes in the 
Member State where the business  is established. This includes 
all  tasks  necessary  to  complete  the  registration  such  as 
communication with the relevant authorities and the provision of 
evidence of taxable activities.109  

IO2 consists of the application process (if any) the business has 
to  carry  out  in  order  to  benefit  from  the  special  scheme.  This 
includes all tasks necessary to complete the registration such as 
communication with the relevant authorities and the provision of 
evidence of taxable activities. By contrast, the waiting time is not 
included in the calculation.  

IO4b  refers  to  the  situation  in  which  a  business  applied  for  the 
application  of  a  flat-rate  scheme  and  thus  is  liable  to  pay  a 
certain flat-rate on its output VAT 

107 See: http://ec.europa.eu/eurostat/web/products-datasets/-/earn_ses_hourly . The most recent figures date back to 2010, but 
given  the  economic  crisis,  figures  are  considered  still  quite  accurate  by  the  Commission’s  services  consulted  on  the  topic. 
Updated hourly earnings should be elaborated by Eurostat by the end of 2015,  
108 The full list of references used is provided in Annex F 
109  Waiting  time  is  not  calculated  in  the  Standard  Cost  Model  (SCM),  e.g.  time  for  the  tax  authorities  to  reply  to  requests,  to 
finalise the registration, etc.  
110 Only applicable to the flat-rate scheme and the exemption scheme in France. 

116 | P a g e  

 
 
 
 
                                                      
of 
Type 
obligation 

Frequency 

Invoicing  

Transactional 

Description for businesses 

IO5a consists of the invoicing for each transaction in accordance 
with the business' home country rules.  

Re 
domestic 

VAT 
declaration/ 
returns  

Re 
Domestic 

VAT 
payment 

Re 
Domestic 

Book-
keeping  

Changes or 
cancelling 
of VAT 
registration 

Re 
Domestic 

Monthly/bi-
monthly/quarterly/annual 

IO6a consists of the periodical submission of the domestic VAT 
return.  

Monthly/quarterly/annual 

IO8a consists of the periodical payment of the VAT related to the 
business' domestic VAT return.  

Ongoing  

One-off 

IO9  consists  of  the  obligations  related  to  the  book-keeping  for 
business to comply with the audit rules of the Member State the 
business is established.  

IO10a  consists  of 
the  one-off  cancellation  or  change  of 
registration for VAT purposes in the Member State the business 
is  established  This  include  all  tasks  necessary  to  complete  the 
cancellation or change such as communication with the relevant 
authorities.111  

Source: Deloitte analysis based on VAT Directive 2006/112/EC 

The list above was originally quite long in order not to dismiss any obligation the business may have 
to comply with. However, after the interviews it was apparent that some information obligations were 
not  relevant  to  any  businesses  at  all  and  were  therefore  removed  from  the  list.  Other  information 
obligations  included  those  related  to  cross-border  activities,  the  MOSS,  the  European  Sales  listing 
and audits.  

Main assumptions used for the analysis 

During the analysis, a set of basic assumptions was used uniformly across the different VAT special 
schemes and the Member States selected for fieldwork, in order to enhance the comparability of the 
results. Importantly, such homogeneous assumptions were only used in cases where no country- or 
scheme-specific  patterns  applied.  The  assumptions  were  defined  based  on  evidence  from  the 
interviews, literature review, expert assessment and experience in previous studies in related topics.  

These assumptions concern the following issues:  

  Frequency  of  VAT  registration:  the  frequency  with  which  businesses  apply  for  VAT 
registration in other Member States was assumed to be 10 years on average. It is based on 
the observation that generally companies register for VAT in a Member State only once, and 
this action therefore represents a one-off cost. The figure represents the average lifespan of a 
company. It was verified by the experts consulted.  

111 Waiting time is not calculated in the SCM, e.g. time for the tax authorities to reply to requests, to finalise the registration, etc.  

117 | P a g e  

 
 
                                                      
  Frequency  of  changes  or  cancelling  of  VAT  registration:  similarly  to  the  above,  it  was 
assumed  to  be  10  years  on  average.  It  is  based  on  the  observation  that  this  is  a  very 
infrequent event in the lifespan of a company. It was verified by the experts consulted.  

  Number  of  invoices:  the  number  of  invoices  and/or  fiscal  receipts  businesses  issue  on  a 
yearly basis (when they are obliged to issue them) vary greatly across sectors, as data from 
the fieldwork pointed out. For instance, professionals may issues less than a dozen invoices 
per year (even only one per year to each of their clients), while other businesses have much 

larger volumes (for instance, cafe’ and restaurants). Based on the information collected during 
fieldwork, an average of 20 invoices/fiscal receipts per month was considered in the analysis 
(validated  by  experts).  However,  in  order  to  account  for  such  variance,  sensitivity  analysis 
was  carried  out  using  a  larger  amount  of  average  invoices/fiscal  receipts  per  year  (30  per 
month,  360  per  year),  in  order  to  assess  the  relevance  of  such  costs  on  the  overall 
compliance costs for businesses.  

  Advisory  costs:  data  collected  via  the  fieldwork  did  not  allow  us  to  identify  the  costs  of 
advisory  fees  for  each  of  the  IOs  to  which  they  apply.  Both  businesses  and  accountants 
provided  us  with  the  lump-sum  fees  they  normally  pay  (of  charge,  in  the  case  of  the 
accountants) for the set of obligations relevant to the analysis. Therefore, we decided to add 
such costs as a lump-sum to the internal costs of businesses.  

More detail on the methodology and assumptions applied can be found in Annex I ‘Methodological 
Note for the analysis of the options’. 

118 | P a g e  

 
 
 
G.2   Detailed results of the Member State analysis 

Here we present the detailed results of the analysis for each of the VAT special schemes for SMEs in 
each of the eight Member States selected for fieldwork, namely:  

  SME exemption scheme;  
  VAT graduated relief;  
  Cash accounting scheme;  
  Other simplification (flat-rate scheme).  

For each of the special schemes, we provide the results of the analysis of the compliance costs for 
businesses in each of the Member States selected for the analysis.  

SME exemption scheme 

The  following  Member  States  among  those  selected  for  fieldwork  implement  the  SME  exemption 
threshold scheme:  

  Estonia;  
  France;  
Italy;  

  Romania;  
  UK.  

Below  we  present  the  details  of  the  analysis  per  each  Member  States,  including  the  composition  of 
the  businesses  interviewed  during  the  fieldwork,  and  the  compliance  costs  both  for  businesses 
benefiting from the scheme and for businesses not adopting it (while eligible).  

Estonia 

The VAT exemption threshold applies in Estonia to businesses having an annual turnover below EUR 
16 000 in a calendar year.  

The application of this special scheme is Estonia exempts businesses not only from charging output 
VAT  (and  recovering  input  VAT)  and  submitting  period  VAT  returns,  but  also  from  additional 
obligations (including VAT registration, book-keeping for VAT purposes, etc.).  

The SME exemption scheme is optional: eligible businesses can opt for the standard VAT regime.  

The  interviewed  sample  in  Estonia  consisted  of  three  businesses  and  three  accountants,  who  also 
qualified as SMEs. The following table provides an overview of the interviewed sample. 

Table 104 – Sample of businesses interviewed in Estonia 

Sector 
Accommodation 
Sport-tourism  

Turnover range 
EUR 5 001 – 50 000 
EUR 5 001 – 50 000 

Scheme Applied 
No 
VAT 
threshold 

exemption 

Marketing company 
Accountant 
Accountant 

EUR 5 001 – 50 000 
EUR 5 001 – 50 000 
Below EUR 5 00 

Accountant 

EUR 5 001 – 50 000 

No 
No 
VAT 
threshold 
No 

exemption 

Type of Supplies 
Domestic only 
Also  cross-border  (1 
MS),  below  distance 
sales threshold  
Domestic only 
Domestic only 
Domestic only 

Domestic only 

119 | P a g e  

 
 
 
 
Source: Deloitte 

Results of the SCM analysis for businesses within the special scheme 

The application of the VAT exemption threshold in Estonia relieves businesses from all VAT-related 
obligations.  Therefore,  businesses  benefiting  from  this  scheme  do  not  have  any  VAT  compliance 
costs.  

Results of the SCM analysis for businesses outside of the special scheme 

The  following  table  presents  the  costs  for  businesses  outside  of  the  VAT  exemption  threshold  in 
Estonia (Table 105). The table is followed by a discussion of the various information obligations.  

120 | P a g e  

 
 
 
Table 105 – Compliance costs for businesses outside of the SME exemption scheme in Estonia 

Administrative task 

Tariff 
(national) 

Time 
(minute) 

Wage 
cost 

Tot. WAGE 
costs 

External 
Fees 

Frequency  

Other 
costs 

TOTAL 

VAT registration 

IN-HOUSE 

OUTSOURCE  

TOTAL 

Invoicing (re domestic)  

IN-HOUSE 

VAT declarations/returns 

IN-HOUSE 

VAT payment (domestic) 

IN-HOUSE 

Book-keeping 

IN-HOUSE 

Advisory services 

OUTSOURCE 

8.80 

8.80 

8.80 

8.80 

8.80 

8.80 

8.80 

N/A 

180 

0 

26.4 

0 

180.00 

26.40 

2 

105 

5 

240 

N/A 

0.29 

15.4 

1 

35.2 

N/A 

2.64 

0.00 

2.64 

70.40 

184.80 

9 

422.40 

0.00 

Every 10 years 

30 

Every 10 years 

30.00 

Every 10 years 

240 (20 per month) 

Monthly 

Monthly 

Monthly 

0.00 

3.00 

3.00 

0.00 

2.64 

3.00 

5.64 

70.40 

0.00 

184.80 

0.00 

8.80 

0.00 

422.40 

180.00 

Annual  

180.00 

180.00 

872.04 

Source: Deloitte compilation of data from interviews with Estonian businesses and accountants 

121 | P a g e  

 
 
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
In  Estonia,  it  was  found  that  VAT  registration  is  not  perceived  as  burdensome  by  the  businesses 
interviewed. Indeed, interviews revealed that the VAT registration process is quite automated, so that 
many businesses recur to external advisors only to a limited extent.  

Periodic  VAT  returns/declaration  account  for  approximately  21%  of  the  VAT  compliance  costs  for 
businesses outside of the special scheme. While the actual preparation of invoices and submission of 
the  VAT  return  is  not  perceived  as  burdensome  by  businesses  (it  takes  businesses  about  105 
minutes  on  average  to  organise  and  check  the  invoices  and  send  the  information  to  their 
accountants),  this  obligation  needs  to  be  carried  out  on  a  monthly  basis.  Contrary  to  many  other 
Member  States,  the  Estonian  VAT  framework  does  not  foresee  different  (lower)  frequencies  of 
obligations  for  businesses  depending  on  their  turnover  (e.g.  quarterly  instead  of  monthly  VAT 
returns/declarations  for  small  businesses  as  we  found  in  many  other  Member  States  selected  for 
fieldwork).  The  actual  submission  of  the  VAT  returns/declarations  is  done  by  advisors,  who  also 
confirmed that the process is relatively simple and straightforward, and benefits from a high degree of 
automation (it is an electronic service).  

Book-keeping was found to be the most burdensome cost, accounting for 48% of the total VAT cost 
accrued  for  businesses.  Both  businesses  and  accountants  commented  that  the  book-keeping 
requirements are not particularly complex or burdensome (it takes businesses approximately 4 hours 
per month to carry out this obligation). It should be noted however that the cost for bookkeeping is not 
reflective of VAT obligations only. Businesses expressed difficulty with separation of this task in terms 
of  VAT-only  book-keeping  and  other  book-keeping  obligations  requires  for  instance  for  income  tax 
purposes.  

Advisory fees account for about 21% of the total compliance costs for businesses outside of the VAT 
special  schemes  in  Estonia.  This  is  a  relatively  low  share  of  external  costs  (compared  to  other 
Member States where it can reach up to 40% of compliance costs), despite the monthly frequency of 
many  IOs.  Both  businesses  and  accountants  commented  this  finding  as  a  consequence  of  the  fact 
that legislative framework for VAT in Estonia is quite clear and straightforward, reducing the need of 
businesses for external guidance and for relying on external experts.  

France 

The  SME  exemption  scheme  applies  in  France  to  businesses  with  a  turnover  below  EUR  82 200. 
However the thresholds for application of the exemption scheme can vary between EUR 82 200 and 
EUR 32 900 depending on the type of supply. Other special thresholds exist for lawyers, performing 
artists, and authors and other artists.  

The application of this scheme exempts businesses from charging output VAT (and recovering input 
VAT)  and  submitting  period  VAT  returns.  In  general,  the  obligation  to  register  for  VAT  is  removed 
except if the business carries out any of the following transactions: 

  The  purchase  of  services  in  respect  of  which  it  is  required  to  account  for  VAT  under  the 
reverse charge in France per Article 283 of the Tax Code (Code général des impôts i.e. CGI); 
  The provision of services in respect of which the recipient is exclusively required to account 

for VAT per Article 196 of the VAT directive; 

  The  carrying  out  of  intra-EU  acquisitions  either  in  excess  of  the  EUR  10  000  threshold  or 

having opted for taxation of such acquisitions. 

122 | P a g e  

 
 
 
The  interviewed  sample  in  France  consists  of  two  businesses  inside  the  scheme  and  three 
businesses outside the scheme. The following table provides an overview of the interviewed sample. 

Table 106 – Sample of businesses interviewed in France 

Sector 
Consulting 
Web press agency 
Accommodation 
Psychologist 
Hairdresser 
Accountant 

Source: Deloitte 

Turnover range 
EUR 5 001 – 50 000 
EUR 5 001 – 50 000 
EUR 5 001 – 50 000 
EUR 5 001 – 50 000 
EUR 5 001 – 50 000 
N/A 

Scheme Applied 
No 
No 
No 
Yes 
Yes 
N/A 

Type of Supplies 
Domestic 
Domestic 
Domestic 
Domestic 
Domestic 
Domestic 

Results of the SCM analysis for businesses within the special scheme 

The following table presents the costs for businesses within the exemption scheme in France (Table 
107). The table is followed by a discussion of the various information obligations.  

123 | P a g e  

 
 
 
 
Table 107 – Compliance costs for businesses within the SME exemption scheme in France  

Administrative task 

Tariff 
(national) 

Time 
(minute) 

Wage 
cost 

Tot. WAGE 
costs 

External 
Fees 

Frequency  

Other 
costs 

TOTAL 

Applying for a special 
scheme 

IN-HOUSE 

39.2 

Invoicing (re domestic)  

IN-HOUSE 

Book-keeping 

IN-HOUSE 

39.2 

39.2 

30 

5 

20 

1176 

19.60 

Annual 

0 

19.60 

196 

784 

784.00 

156.80 

240 (20 

per month) 

Monthly 

0 

0 

784.00 

156.80 

960.40 

Source: Deloitte compilation of data from interviews with French businesses and an accountant 

124 | P a g e  

 
 
  
  
 
  
 
 
 
 
 
 
 
 
 
 
 
 
Overall, the VAT-related costs for businesses within the scheme are not substantial. 

Most  of  the  regular  information  obligations  are  removed  within  the  scheme.  As  mentioned  above, 
there is no obligation for businesses to register for VAT. However, the business has to periodically 
apply  for  the  scheme.  Although  an  additional  burden,  the  procedure  is  not  so  burdensome  and 
accounts only for 2% of the costs for businesses within the scheme. 

Further, there are no tasks for VAT declarations. 

With  regard  to  invoicing,  although  businesses  may  be  exempt  from  registering,  the  obligation  to 
invoice  is  still  required.  The  invoice  from  a  business  not  charging  VAT  needs  to  contain  a  clause 
stating that VAT was not applicable to the transaction in accordance with the law (Art. 293 B of the 
Tax  Code  (CGI)).  We  have  taken  the  assumption  that  the  time  for  processing  an  invoice  for 
businesses within the scheme is relatively the same as for those businesses outside the scheme. It 
was also pointed out by experts that invoicing remains one of the biggest burdens for businesses in 
general.  This  is  the  most  burdensome  obligation  for  businesses,  accounting  for  over  80%  of  their 
costs. 

For  bookkeeping,  the  costs  are  significantly  lowered  compared  to  businesses  outside  the  scheme. 
As the exemption scheme does not oblige businesses to keep detailed accounts, savings are made 
here. Overall, bookkeeping accounts for just 16% of the obligations inside of the scheme. It should be 
noted however, that the costs associated with bookkeeping are not entirely VAT-specific in this case. 
As businesses within the scheme are exempt from complying with VAT-related obligations they do not 
need  to  keep  detailed  records.  However  as  per  the  general  scheme  in  France,  bookkeeping  is  still 
required for other purposes. 

In addition general advisory services for VAT purposes are not needed by the businesses within the 
scheme, mainly because there are no obligations to file VAT declarations/returns. 

Results of the SCM analysis for businesses outside the special scheme 

The  following  table  presents  the  costs  for  businesses  outside  of  the  exemption  scheme  in  France 
(Table 108). The table is followed by a discussion of the various information obligations.  

125 | P a g e  

 
 
Table 108 – Compliance costs for businesses outside of the SME exemption scheme in France 

Administrative task 

Tariff 
(national) 

Time 
(minute) 

Wage 
cost 

Tot. WAGE 
costs 

External 
Fees 

Frequency 
(annual) 

Other 
costs 

TOTAL 

VAT registration 

IN-HOUSE 

OUTSOURCE  

TOTAL 

Invoicing (re domestic)  

IN-HOUSE 

VAT declarations/returns 

IN-HOUSE 

VAT payment (domestic) 

IN-HOUSE 

Book-keeping 

IN-HOUSE 

Advisory services 

OUTSOURCE 

39.20 

39.20 

39.20 

39.20 

39.20 

39.20 

39.20 

N/A 

70 

0 

70 

5 

140 

5 

70 

N/A 

45.73 

0.00 

45.73 

3.27 

91.47 

3.27 

45.73 

N/A 

4.57 

0.00 

4.57 

784.00 

365.87 

13.07 

548.80 

0.00 

0.00 

Every 10 years 

150.00 

150.00 

Every 10 years 

Every 10 years 

0.00 

15.00 

15.00 

4.57 

15.00 

19.57 

240 (20 per month) 

0.00 

784.00 

Quarterly 

Quarterly 

Annual 

Annual 

0.00 

365.87 

0.00 

13.07 

0.00 

548.80 

250.00 

250.00 

1 981.31 

250.00 

Source: Deloitte compilation of data from interviews with French businesses and an accountant 

126 | P a g e  

 
 
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
Compared to the businesses inside the scheme, the costs for complying with VAT-related obligations 
are higher. The most significant cost is invoicing which accounts for almost 40% of all VAT-related 
costs for the business (assuming that the business produces 20 invoices per month). Presuming that 
the business would produce 30 invoices per month, the costs would account for approximately 60% of 
the total VAT-related costs (at EUR 1 176 per year). 

Another  costly  obligation  is  bookkeeping  which  accounts  for  approximately  28%  of  the  total  VAT-
related costs. In France, there are three legally required journals:  

the general journal (le livre-journal); 
the inventory journal (le livre d’inventaire);  
the general ledger (le grand livre). 

Outside  of  the  exemption  scheme,  VAT  declarations  and  payments  must  be  made  on  a  quarterly 
basis. The SCM finds  that the VAT declaration accounts for  approximately 18% of the annual VAT-
related  costs  and  payments  accounts  for  approximately  0.7%.  This  minor  cost  due  to  the  fact  that 
payments are mainly made online or through an automatic direct debit. 

Notably,  and  similar  to  other  Member  states  analysed,  advisory  services  accounts  for  a  substantial 
amount  of  the  VAT-costs  borne  by  businesses.  Overall,  they  account  for  approximately  13%  of  the 
total VAT-related costs.  

Italy 

The  SME  exemption  threshold  scheme  in  Italy  changed  frequently  in  the  last  few  years.  The  2015 
budget  law  (art.  1,  c  111-113  of  law  208/2015,  introducing  the  ‘regime  forfetario’)  rationalized  the 
legislative  framework  (according  to  both  tax  authorities  and  accountants  interviewed,  the  rules 
introduced in 2015 should remain stable for the next years).  

It is an optional regime, i.e. businesses need to opt for it. Businesses do not need to expressly apply 
for it, as the application of the cash accounting scheme is verified by the tax authorities based on the 
business conduct (‘comportamento concludente’). 

The SME exemption threshold scheme applies to businesses having the following characteristics:  

  Being  sole  traders  or  professionals  (i.e.  individuals;  the  regime  does  not  applied  to 

incorporated businesses, limited liability businesses or partnerships);  

  Not having purchased capital goods for more than EUR 20 000 in the previous solar year; and  
  Having  had  an  additional  income  from  employment  lower  than  EUR  30 000  income  from 

employment in the previous solar year; and  

  Having annual turnover below specific thresholds defined by the law, and different per sectors 

of economic activity. 

The following table provides an overview of such sector-based thresholds.  

Table 109 – Sector-based turnover thresholds for VAT exemption in Italy 

Sector of economic activity  

Max annual turnover 

Food and beverage 

EUR 45 000 

127 | P a g e  

 
 
 
 
 
 
 
Sector of economic activity  

Wholesale and retail trade 

Itinerant trade of food and beverage 

Itinerant trade of other goods  

Real estate  

Intermediary trade  

Restaurant and accommodation services  

Professional activities and Finance and insurance services  

Other economic activities  

Source:  Art. 1, c 111-113 of law 208/2015 

Max annual turnover 

EUR 50 000 

EUR 40 000 

EUR 30 000 

EUR 25 000 

EUR 25 000 

EUR 50 000 

EUR 30 000 

EUR 30 000 

This  SME  exemption  scheme  also  benefits  from  additional  provisions  which  makes  it  especially 
interesting  for  some  businesses.  The  most  important  of  such  provisions  related  to  the  taxation  of 
income. Income from economic activities benefitting from the VAT exemption threshold is subject to 
an income tax of 15%, which merges (and substitutes) the income tax (IRPEF) and related additional 
taxes, and of the regional taxation on economic activities (IRAP).  

With regard to VAT-related obligations, businesses opting for this VAT special scheme are exempted 
from the following obligations:  

  Charging and payment of VAT;   
  Registering of invoices issued;  
  Storing of books and documents, with the exception of invoices for purchases, invoices and 

fiscal receipts issued;  

  Annual  declaration  and  communication  of  data  related  to  transactions  with  economic 

operators in the so-called ‘black-list’; and  

  Automated communication of transactions relevant for VAT purposes.  

On the contrary, businesses opting for this VAT special scheme still have to comply with the following 
obligations:  

  Registering for VAT purposes;  
  Numbering and storing of purchase invoices and duty invoices;  
  Reverse charging VAT and presenting INTRASTAT declarations when relevant;  
Issuing of invoicing and/or fiscal receipts, and storing of related documentation;  

  Annual income statement and payment of related substitute income tax (via ‘UNICO’ form);  
  Communicate cross-border activity in advance for inclusion in VIES.  

The interviewed sample in Italy consisted of six businesses and one accountant, who also qualified as 
a  SME.  Two  additional  interviews  were  held  with  business  organisations  that  also  provide  fiscal 
advisory  services  to  their  members.  The  following  table  provides  an  overview  of  the  interviewed 
sample. 

Table 110 – Sample of businesses interviewed in Italy 

Sector 
Lawyer 

Turnover range 
EUR 5 001 – 50 000 

Scheme Applied 
VAT 
threshold 

exemption 

Type of Supplies 
Domestic only 

128 | P a g e  

 
 
 
 
Sector 
Nurse 

Turnover range 
EUR 5 001 – 50 000 

Private teacher 

EUR 5 001 – 50 000 

Web services 

Precision  mechanical 
engineering 
Architect 
Accountant 

EUR  100  001  –  500 
000 
EUR  100  001  –  500 
000 
EUR 5 001 – 50 000 
EUR 50 000 – 100 000 

Business  organisation 
providing  accounting 
services 

N/A 

Business  organisation 
providing  accounting 
services 

N/A 

Scheme Applied 
VAT 
threshold 
VAT 
threshold 
Cash accounting 

exemption 

exemption 

Type of Supplies 
Domestic only 

Domestic only 

Domestic only 

Cash accounting 

Domestic only 

Domestic only 
Domestic only 

N/A 

N/A 

No 
No 
About 30% of clients in 
the  VAT  exemption 
threshold  
No 
Several  members 
in 
both  schemes,  and 
in 
others 
many 
standard regime 
No 
Several  members 
in 
both  schemes,  and 
many 
in 
others 
standard regime 

Results of the SCM analysis for businesses within the special scheme 

The  following  table  presents  the  costs  for  businesses  within  the  VAT  exemption  threshold  in  Italy 
(Table 111). The table is followed by a discussion of the various information obligations.  

129 | P a g e  

 
 
 
Table 111 – Compliance costs for businesses within the SME exemption scheme in Italy 

Administrative task 

Tariff (national) 

Time 
(minute) 

Wage 
cost 

Tot. WAGE 
costs 

External 
Fees 

Frequency  

Other 
costs 

TOTAL 

VAT registration 

Invoicing (re domestic)  

VAT return ('Unico') 

IN-HOUSE 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

Advisory services 

OUTSOURCE 

38.90 

38.90 

38.90 

38.90 

38.90 

38.90 

150.00 

97.25 

0.00 

5.00 

129.00 

0.00 

0.00 

3.24 

83.64 

0.00 

9.73 

0.00 

9.73 

778.00 

83.64 

0.00 

150.00 

150.00 

485.00 

Every 10 years 

Every 10 years 

Every 10 years 

240 (20 per month) 

Annual 

Annual 

0.00 

15.00 

15.00 

0.00 

0.00 

9.73 

15.00 

24.73 

778.00 

83.64 

485.00 

485.00 

1 371.36 

Source: Deloitte compilation of data from interviews with Italian businesses and accountants 

130 | P a g e  

 
 
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
As  shown  by  the  table  above,  the  costs  for  VAT  registration  are  not  particularly  elevated  (the 
account for  less than  1% of the overall compliance costs). Businesses  and accountants interviewed 
did  not  perceive  this  obligation  as  particularly  burdensome,  as  it  is  now  entirely  automated  can  be 
carried out online in a simple way.  

Invoicing obligations account for more than 55% of the overall compliance costs. While the issuing of 
the single invoice/fiscal receipt is not particularly long or complex per se (it does not take each of the 
business  interviewed  more  than  10  minute  to  issue  one),  the  volume  (i.e.  the  number)  of  such 
invoices issued can vary greatly among businesses. For instance, professionals may issues less than 
a  dozen  invoices  per  year  (even  only  one  per  year  to  each  of  their  clients),  while  other  businesses 
have  much  larger  volumes  (for  instance,  cafe’  and  restaurants).  The  record-keeping  and  storing 
obligations related to invoicing are perceived as more burdensome by the businesses interviewed, as 
very  rarely  they  invest  in  IT  systems  and  software  that  can  reduce  the  time  and  effort  needed  to 
comply with such obligations.  

The submission of VAT returns/declaration is carried out on an annual basis (via the ‘Unico’ annual 
declaration). This obligation only accounts for about 6% of the overall compliance costs, and it is not 
perceived as a burdensome obligations by the businesses interviewed. The income substitute tax of 
15%  applying  to  the  SME  exemption  threshold  scheme  is  particularly  appealing  for  many  of  the 
businesses opting for this VAT special scheme.  

Advisory fees for businesses within the VAT exemption threshold account for approximately 36% of 
the  compliance  costs.  Both  businesses  and  accountants  interviewed  had  issues  in  assessing  the 
exact  costs  for  each  of  the  relevant  IOs,  as  such  services  are  usually  offered  as  a  bundle,  also 
including support for  other obligations, such as income statement and social security, and generally 
charged as a lump-sum on an annual basis. Based on the information collected during fieldwork, the 
average amount of advisory fees for businesses  within the VAT exemption  threshold  in Italy ranges 
from EUR 500 to EUR 800.  

Results of the SCM analysis for businesses outside of the special scheme 

The following table presents the costs for businesses outside of the VAT exemption threshold in Italy 
(Table 112). The table is followed by a discussion of the various information obligations.  

131 | P a g e  

 
 
Table 112 – Compliance costs for businesses outside of the SME exemption scheme in Italy 

Administrative task 

Tariff 
(national) 

Time 
(minute) 

Wage 
cost 

Tot. WAGE 
costs 

External 
Fees 

Frequency 
(annual) 

Other 
costs 

TOTAL 

VAT registration 

IN-HOUSE 

OUTSOURCE  

TOTAL 

Invoicing  

IN-HOUSE 

VAT declarations/returns 

IN-HOUSE 

VAT payment  

Book-keeping 

IN-HOUSE 

IN-HOUSE 

Advisory services 

OUTSOURCE 

38.90 

38.90 

38.90 

38.90 

38.90 

38.90 

38.90 

180 

116.70 

0 

0.00 

180 

116.70 

5 

150 

5 

3.24 

97.25 

3.24 

1 080 

700.20 

Source: Deloitte compilation of data from interviews with Italian businesses 

11.76 

0.00 

11.67 

778.00 

389.00 

12.97 

700.20 

Every 10 years 

150.00 

Every 10 years 

150.00 

Every 10 years 
240 (20 per 
month) 

Quarterly 

Quarterly 

Annual 

0.00 

15.00 

15.00 

0.00 

0.00 

0.00 

0.00 

11.76 

15.00 

26.67 

778.00 

389.00 

12.97 

700.20 

1 000.00 

Annual 

1 000.00 

1000.00 

2 906.84 

132 | P a g e  

 
 
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs  for  VAT  registration  outside  of  the  VAT  special  scheme  are  not  particularly  elevated  (the 
account for less than 1% of the overall compliance costs). Businesses  and accountants interviewed 
did  not  perceive  this  obligation  as  particularly  burdensome,  as  it  is  now  entirely  automated  can  be 
carried  out  online  in  a  simple  way.  Advisory  fees  for  such  obligation  can  vary,  ranging  from 
approximately EUR 500 up to EUR 2 000 for the most complex cases (e.g. incorporated businesses).  

Invoicing obligations account for about 27% of the overall compliance costs. While the issuing of the 
single  invoice/fiscal  receipt  is  not  particularly  long  or  complex  per  se  (it  does  not  take  each  of  the 
business  interviewed  more  than  10  minute  to  issue  one),  the  volume  (i.e.  the  number)  of  such 
invoices  issued  can  vary  greatly  among  businesses.  Businesses  outside  of  the  VAT  exemption 
threshold  tend  to  be  slightly  larger,  and  tend  to  have  more  resources  to  invest  in  IT  systems  and 
software that can reduce the time and effort needed to comply with such obligations.  

The submission of VAT returns/declaration can be carried out on an annual basis (if the business is 
eligible/opts for the annual returns and fills out the ‘Unico’ annual declaration), or on a quarterly basis. 
Businesses below the annual turnover thresholds of EUR 400 000 (for businesses providing services) 
or of EUR 700 000 (for other businesses) benefit from simplified accounting obligations (‘contabilita’ 
semplificata’), which is reflected in the frequency of the information obligations presented in the table. 
Businesses  opting  for  the submission  (and  payment)  of quarterly  returns  face  a 1%  interest  rate  on 
the quarterly returns and on the yearly declaration, as well as higher advisory fees. The decision on 
whether  to  option  for  the  annual  or  the  yearly  frequency  (with  the  additional  1%  interest  rate)  was 
taken together with the advisors supporting the businesses, and based on the cash flow needs of the 
businesses. Overall, the businesses’ internal costs for the submission of the VAT returns/declaration 
represent a limited share of the overall compliance costs (about 13% of the overall compliance costs, 
as we assumed a quarterly submission, based on the sample of businesses interviewed).  

Book-keeping  obligations  are  quite  burdensome,  as  they  represent  about  13%  of  the  internal 
businesses’ compliance costs. The use of the cash payment or receipt as a basis for the obligation to 
account for VAT obliges businesses to keep records of invoices as well as of the related cash flows, 
which  they  would  not  do  otherwise  (unless  above  the  EUR  400 000  or  EUR  700 000  threshold)112. 
Indeed, book-keeping costs are slightly higher for businesses adopting the cash accounting scheme 
than for those in the standard VAT regime, reflecting the additional book-keeping requirements.  

Similarly,  advisory  fees  for  businesses  within  the  cash  accounting  scheme  are  24%  higher  than 
those 
interviewed  have 
accountants/external advisors they rely on for VAT and other fiscal and administrative obligations.  

the  standard  VAT  regime.  All 

the  businesses 

for  businesses 

in 

112 Interviews with accountants and business organisations, businesses above such thresholds represent a small share of the 
businesses in Italy, and an even smaller share of those applying the cash accounting scheme.  

133 | P a g e  

 
 
 
                                                      
Romania 

The  VAT exemption  in  Romania applies  to businesses with a  threshold of  up to  EUR  65 000  (RON 
220 000). However businesses under this threshold can also opt to apply the normal regime.   

Businesses under the threshold do not have to register for VAT purposes unless they are supplying 
intra-EU. If the business exceeds the threshold in a calendar year, it has 10 days from the month that 
the threshold was breached to register for VAT. 

The interviewed sample in Romania consists of two accountants with experience of carrying our VAT-
related obligations for clients inside and outside of the  SME exemption scheme. The following table 
provides an overview of the interviewed sample. 

Table 113 – Sample of businesses interviewed in Romania 

Sector 
Accountant 

Turnover range 
N/A 

Accountant 

N/A 

Scheme Applied 
Works  for  clients  that 
apply the scheme 

Works  for  clients  that 
apply the scheme 

for 

Type of Supplies 
Works 
supplying 
and cross-border 
Works 
supplying 
and cross-border 

for 

clients 
domestic 

clients 
domestic 

Results of the SCM analysis for businesses within the special scheme 

The application of the VAT exemption threshold in Romania relieves businesses from all VAT-related 
obligations.  Therefore,  businesses  benefiting  from  this  scheme  do  not  have  any  VAT  compliance 
costs.  

Results of the SCM analysis for businesses outside the special scheme 

The  following  table  presents  the  costs  for  businesses  outside  of  the  VAT  exemption  threshold  in 
Romania (Table 114). The table is followed by a discussion of the various information obligations.  

134 | P a g e  

 
 
 
 
 
 
 
Table 114 – Compliance costs for businesses outside of the SME exemption scheme in Romania 

Administrative task 

Tariff 
(national) 

Time 
(minute) 

Wage 
cost 

Tot. WAGE 
costs 

External 
Fees 

Frequency  
(annual) 

Other 
costs 

TOTAL 

VAT registration 

IN-HOUSE 

OUTSOURCE  

TOTAL 

Invoicing (re domestic)  

IN-HOUSE 

VAT declarations/returns 

IN-HOUSE 

VAT payment (domestic) 

IN-HOUSE 

Book-keeping 

IN-HOUSE 

Advisory services 

OUTSOURCE 

6.50 

6.50 

6.50 

6.50 

6.50 

6.50 

6.50 

180 

0 

180 

5 

150 

5 

105 

19.5 

0 

19.50 

0.54 

16.25 

0.54 

11.38 

Source: Deloitte compilation of data from interviews with Romanian accountants  

1.95 

0.00 

0.00 

130.00 

16.25 

0.54 

136.50 

0.00 

Every 10 years 

150.00 

Every 10 years 

Every 10 years 

0.00 

15.00 

15.00 

1.95 

15.00 

16.95 

240 (20 per month) 

0.00 

130.00 

2 200.00 

Monthly 

Quarterly 

Monthly 

Annual 

0.00 

0.00 

16.25 

0.54 

0.00 
2 200.00 

136.50 
2200.00 

2 500.24 

135 | P a g e  

 
 
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
The  compliance  costs  for  businesses  for  in-house  activities  are  very  little  when  compared  with  the 
costs  for  advisory  services.  Advisory  services  in  Romania  account  for  on  average  EUR  2 200  per 
business per year.  

Accountants  noted  however  that  the  VAT  registration  procedure  for  businesses  is  particularly 
burdensome. 

In 2015, the registration procedure was amended and businesses now have to fill in an application 
form known as the Form 088. Form 088 introduces the concept of assessing the business owner(s) 
intention  and  capability  to  carry  out  a  business  activity  proposed.  It  is  now  deemed  essential  in 
Romania that this criterion is met and proved, in order to obtain a VAT number. 

Form  088  requires  businesses  to  submit  a  number  of  documents  e.g.  diploma  certificates  of  all 
associates of the company, as well as their earnings of the last 12 months (in Romania and outside). 
In addition, income statements of all other companies of the associates have to be submitted to the 
tax  authority.  The  documents  have  to  be  submitted  as  officially  certified  copies  (i.e.  certified  by  a 
notary) and officially translated into Romanian. Also, the application with Form 088, requires that the 
business have contracts with clients already as well as contracted employees. 

Finally, it was noted by interviewees that it takes a very long time for tax authorities to go through the 
documentation and to respond to businesses. Interviewed accountants noted that quite often the first 
couple  of  applications  are  not  successful  (with  an  estimated  refusal  rate  for  70  –  75%)  and  this  is 
particularly  burdensome  for  the  business  as  they  are  faced  with  filing  the  documentation  up  to  3 
times.   

Thus, if we multiply the time it takes to complete one registration by three, the costs for registering for 
VAT  amounts  to  approximately  EUR  50  per  year  (although  the  one-off  costs  were  be  significantly 
more burdensome), accounting for around 2% of the compliance costs overall. 

UK 

The  VAT  exemption  threshold  applies  in  UK  to  businesses  having  an  annual  turnover  below  EUR 
102 700  in  the  fiscal  year  (GBP  81 000)  in  2014-2015.  The  threshold  is  updated  each  April  at  the 
beginning  of  the  financial  year.  It  only  applies  to  businesses  established  in  the  UK  (there  is  a  nil 
threshold for non-established traders). The threshold relates to taxable supplies, where the place of 
supply is the UK 

The  VAT  exemption  threshold  applies  automatically,  so  that  businesses  do  not  have  to  apply  for  it. 
However, businesses may decide to opt-out and apply the standard VAT regime.  

The application of this special scheme is UK exempts businesses not only from charging output VAT 
(and  recovering  input  VAT)  and  submitting  period  VAT  returns,  but  also  from  additional  obligations 
(including VAT registration, book-keeping for VAT purposes, etc.).  

However, a business still must register for Corporate Tax within three months of incorporation. 

The interviewed sample in UK consisted of four businesses and two accountants, who also qualified 
as SMEs. The following table provides an overview of the interviewed sample. 

Table 115 – Sample of businesses interviewed in UK 

Sector 

Turnover range 

Scheme Applied 

Type of Supplies 

136 | P a g e  

 
 
 
and 

(car 

Sector 
Clothing 
accessories  
Services 
maintenance) 
Food  and  beverage 
(cafe’) 
Services 
(Management 
consulting) 
Accountant 

Accountant 

Turnover range 
EUR  500  001  –  2 000 
000 
EUR 50 001 – 100 000  No  special  scheme 

Scheme Applied 
No  special  scheme 
applied 

Type of Supplies 
Domestic  and  cross-
border 
Domestic only 

applied (opt-out)  
EUR 50 001 – 100 000  Flat-rate scheme 

Domestic only 

EUR  100  001  –  500 
000 

EUR 5 001 – 50 000 

EUR  100  001  –  500 
000 

Flat-rate scheme 

Domestic only 

No  special  scheme 
applied 
Flat-rate scheme 
Majority  of  clients  are 
micro- 
small 
and 
businesses 

Domestic only 

Domestic only 

Results of the SCM analysis for businesses within the special scheme 

The  application  of  the  VAT  exemption  threshold  in  UK  relieves  businesses  from  all  VAT-related 
obligations. Therefore, businesses benefiting from this scheme do not have VAT compliance costs.  

Results of the SCM analysis for businesses outside of the special scheme 

The following table presents the costs for businesses outside of the VAT exemption threshold in UK 
(Table 116). The table is followed by a discussion of the various information obligations.  

137 | P a g e  

 
 
 
 
Table 116 – Compliance costs for businesses outside of the SME exemption scheme in UK 

Administrative task 

Tariff 
(national) 

Time (minute) 

Wage 
cost 

Tot. 
WAGE 
costs 

External 
Fees 

Frequency   

Other costs 

TOTAL 

VAT registration 

IN-HOUSE 

Invoicing 

VAT return 

VAT payment 

Book-keeping 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

IN-HOUSE 

IN-HOUSE 

38.20 

38.20 

38.20 

38.20 

38.20 

38.20 

38.20 

70 

44.57 

0 

44.57 

4.46 

0.00 

4.46 

3.18 

764.00 

38.2 

152.80 

3.18 

12.73 

38.20 

458.40 

70 

5 

60 

5 

60 

Advisory services 

OUTSOURCE 

1 100.00 

Source: Deloitte compilation of data from interviews with UK businesses 

Every 10 years 

Every 10 years 

0.00 

Every 10 years 

240 (20 per month) 

Quarterly 

Quarterly 

Monthly 

Annual 

0.00 

0.00 

1 100.00 

4.46 

0.00 

4.46 

764.00 

152.80 

12.73 

458.40 

1 100.00 

2 492.39 

138 | P a g e  

 
 
  
  
  
 
  
  
  
  
  
  
  
  
  
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Costs  for  VAT  registration  outside  of  the  VAT  special  scheme  are  not  particularly  elevated  (the 
account for less than 1% of the overall compliance costs). Businesses  and accountants interviewed 
did  not  perceive  this  obligation  as  particularly  burdensome,  as  it  is  now  entirely  automated  can  be 
carried out online in a simple way. Advisory fees for such obligation can vary, and further investigation 
is undergoing to provide a more accurate estimate of such costs.  

Invoicing obligations account for about 30% of the overall compliance costs. While the issuing of the 
single  invoice/fiscal  receipt  is  not  particularly  long  or  complex  per  se  (it  does  not  take  each  of  the 
business interviewed more than 5 minute to issue one), the volume (i.e. the number) of such invoices 
issued  can  vary  greatly  among  businesses.  Many  of  the  businesses  interview  have  some  software 
that can reduce the time and effort needed to comply with such obligations.  

VAT returns/declaration represent just about 6% of compliance costs for businesses. The frequency 
of such obligations (quarterly) is on the main drivers of this cost.  

Book-keeping  obligations  represent  about  18%  of  the  internal  businesses’  compliance  costs. 
Overall,  they  are  not  perceived  as  particularly  burdensome,  and  businesses  devote  about  one  hour 
per month to carry out them, often with the support of specific software.  

Advisory  costs  are  the  most  significant  burden  faced  by  businesses.  In  particular,  it  was  noted  that 
businesses  recur  to  advisors  to  carry  out  their  VAT  declarations.  For  VAT  related  services, 
accountants  charge  from  about  EUR  190  (GBP  160-180  to  EUR  360  (GBP  300)  for  larger 
declarations.  On  average  we  can  see  that  this  accounts  for  more  than  40%  of  the  businesses 
compliance costs. 

VAT graduated relief 

The  following  Member  State  among  those  selected  for  fieldwork  implements  the  VAT  exemption 
threshold scheme:  

  Spain;   

In Spain, there is no SME exemption scheme with a VAT threshold and all traders need to register 
and account for VAT. However, the Spanish tax authorities have introduced a type of graduated relief 
scheme for individual entrepreneurs and pass-through entities formed exclusively by individuals with 
turnover up to EUR 250 000.  

Businesses  who  are  within  the  scope  of  the  graduated  relief  scheme  still  file  a  quarterly  return,  but 
have simplified VAT accounting obligations (no obligation to keep a sales book) and are not required 
to  issue  invoices  (save  some  exceptions  in  a  B2B  environment).  The  scheme  is  automatically 
applicable for a period of three years unless a trader chooses to opt-out.  

The  calculation  of  the  output  VAT  within  the  scheme  is  rather  complex  and  is  based  on  certain 

indexes (called ‘módulos’). However, some additional rules apply in relation to recovery of input tax. 
The result of the calculation can be a VAT due which is higher or lower than under the normal regime. 
The Spanish tax authorities consider it an effective measure. They also do not see any disadvantages 
(such  as  the  potential  loss  of  VAT  revenue),  most  likely  because  the  audit  and  control  of  these 
businesses is also much reduced, and in their opinion this counter-balances the (limited) loss of VAT 
revenues.  Where  the  final  VAT  assessment  is  higher  in  the  simplified  regime  than  the  result  in  the 

139 | P a g e  

 
 
 
normal general regime, the latter applies. This implies some form of monitoring for the business and 
tax authority. The relief also applies to non-established businesses. 

Below  we  present  the  details  of  the  analysis  per  for  Spain,  including  the  composition  of  the 
businesses interviewed during the fieldwork, and the compliance costs both for businesses benefiting 
from the scheme and for businesses not adopting it.  

The  interviewed  sample  in  Spain  consisted  of  two  business  and  three  accountants.  The  following 
table provides an overview of the interviewed sample. 

Table 117 – Sample of businesses interviewed in Spain 

Turnover range 
EUR 5 001 – 50 000 
EUR 5 001 – 50 000 
EUR  100  001  –  500 
000 
EUR  100  001  –  500 
000 
EUR  500 001  –  200 
000 

Scheme Applied 
No 
No 
No 

Type of Supplies 
Domestic only 
Domestic only 
Domestic only 

No 

No 

Domestic only 

Domestic only 

Sector 
Clothes shop 
Accountant 
Accountant 

Accountant 

Services provider 

Spain 

Spain applies a type of graduated relief scheme known as the ‘Régimen Simplificado’ which applies to 
entrepreneurs i.e. not to companies.  

The scheme can be applied if the business has an annual turnover below EUR 250 000.  

The scheme is optional for eligible businesses. If the business wants to leave the scheme, it has to 
present a formal declaration to the authorities and it cannot return to the scheme within 3 years. 

Results of the SCM analysis for businesses within the special scheme 

The  following  table  presents  the  costs  for  businesses  within  the  scheme  in  Spain  (Table  118).  The 
table is followed by a discussion of the various information obligations.  

140 | P a g e  

 
 
 
 
Table 118 – Compliance costs for businesses within the graduated relief scheme in Spain 

Administrative task 

Tariff 
(national) 

Time 
(minute) 

Wage 
cost 

Tot. WAGE 
costs 

External 
Fees 

Frequency  

Other 
costs 

TOTAL 

VAT registration 

IN-HOUSE 

OUTSOURCE  

TOTAL 

VAT declaration/return 

IN-HOUSE 

VAT payment 

Book-keeping 

Advisory costs 

IN-HOUSE 

IN-HOUSE 

27.60 

27.60 

27.60 

27.60 

27.60 

27.60 

12 

0 

12 

68 

1 

20 

21 

5.75 

0 

5.75 

31.28 

0.46 

9.20 

0.00 

0.58 

0.00 

0.58 

156.40 

2.30 

110.40 

0.00 

50.00 

50.00 

600 

Every 10 years 

Every 10 years 

Every 10 years 

5.00 

0.58 

5.00 

5.58 

Quarterly + 1 summary declaration 

0.00 

156.40 

Quarterly  

0.00 

1.84 

Monthly 

0.00 

110.40 

Annual 

600.00 

600.00 

874.22 

Source: Deloitte compilation of data from interviews with Spanish busineses and accountants 

141 | P a g e  

 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
The  VAT  declaration/return  is  the  most  burdensome  IO  under  the  graduated  relief  scheme 
accounting for approximately 18% of the overall compliance costs for businesses.  

Bookkeeping  is  also  similarly  burdensome  with  interviewees  indicating  that  it  accounts  for  almost 
13% of VAT-related costs. 

Like other schemes in the Member States advisory costs make up the majority of costs with average 
costs  amounting  to  approximately  EUR  600  per  year,  accounting  for  67%  of  the  overall compliance 
costs. 

Results of the SCM analysis for businesses within the special scheme 

The  following  table  presents  the  costs  for  businesses  outside  of  the  graduated  relief  scheme 
threshold  in  Spain  (Table  119).  The  table  is  followed  by  a  discussion  of  the  various  information 
obligations. 

142 | P a g e  

 
 
 
Table 119 – Compliance costs for businesses outside of the graduated relief scheme in Spain  

Administrative task 

Tariff 
(national) 

Time 
(minute) 

Wage 
cost 

Tot. 
WAGE 
costs 

External 
Fees 

Frequency  (annual) 

Other 
costs 

TOTAL 

VAT registration 

IN-HOUSE 

Invoicing 

VAT return 

VAT payment 

Book-keeping 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

IN-HOUSE 

IN-HOUSE 

27.60 

27.60 

27.60 

27.60 

27.60 

27.60 

27.60 

12 

0 

12 

5 

5.75 

0 

5.75 

0.58 

0.00 

0.58 

2.3 

552.00 

50.00 

50.00 

0.00 

Every 10 years 

Every 10 years 

 5.00 

Every 10 years 

5.00 

240 (20 per month) 

240 

110.4 

552.00 

Quarterly + 1 summary declaration 

1 

0.46 

1.84 

22 

10.12 

40.48 

quarterly 

quarterly 

0.58 

5.00 

5.58 

552.00 

552.00 

1.84 

40.48 

Advisory services 

OUTSOURCE 

0.00 

800.00 

annual 

800.00 

800.00 

1 951.90 

Source: Deloitte compilation of data from interviews with Spanish businesses and accountants 

143 | P a g e  

 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
The compliance costs for businesses outside of the VAT exemption scheme are notably higher than 
those for businesses within the scheme.  

This can  be explained  by the  additional  obligation  to  invoice  which  makes  up almost  30%  of  the 
overall compliance costs. 

The VAT return, although also an obligation under the scheme is also regarded as more burdensome 
as  it  follows  a  different  procedure  and  accounts  for  24%  of  the  overall  compliance  costs.  Like 
businesses inside the scheme however, businesses still have to file a quarterly declaration and one 
annual summary return.  

Comprising  the  majority  of  the  VAT-related  compliance  costs,  costs  for  advisory  services  and 
software account for 43% of business costs outside the scheme. Accountants in Spain indicated that 
their fees normally correspond to the size of the business. Thus, given that businesses applying the 
graduated relief scheme have an annual turnover of less that EUR 250 000, costs for advice is lower 
(by approximately EUR 200). 

Cash accounting scheme 

The  following  Member  States  among  those  selected  for  fieldwork  implement  the  VAT  exemption 
threshold scheme:  

  Estonia;  
Italy; and  
  Romania;  

Below  we  present  the  details  of  the  analysis  per  each  Member  States,  including  the  composition  of 
the  businesses  interviewed  during  the  fieldwork,  and  the  compliance  costs  both  for  businesses 
benefiting from the scheme and for businesses not adopting it (while eligible). 

Estonia 

The cash accounting scheme for VAT with threshold in Estonia applies to businesses with a turnover 
with  the  200  000  EUR  threshold.  The  scheme  applies  both  to  input  and  output  VAT.  There  are  no 
specific  limitations  for  the  application  of  the  cash  accounting  scheme  with  regard  to  sectors  of 
economic activity or types of businesses. It is an optional regime.  

However, the uptake of such scheme is very low. The main reason for the low uptake is the fact that 
all  businesses  (with  no  threshold  and  with  the  only  exception  of  sole  traders)  are  required  by  the 
Accounting act to use accrual accounting for their accounting purposes. Therefore, using the scheme 

would usually increase administrative burden of businesses as they’d need to use reconciliations or 
parallel  accounting  schemes.  So  the  only  businesses  using  the  scheme  are  a  low  number  of  sole 
traders, who benefit from the scheme as they use cash accounting also for general accounting and for 
other taxes (income tax).  

Unfortunately, it proved not possible to include any sole traders using cash accounting in the sample 
of businesses interviewed.  

144 | P a g e  

 
 
 
 
 
Results of the SCM analysis for businesses within the special scheme 

As  mentioned  above,  it  was  not  possible  to  identify  any  sole  traders  using  cash  accounting  in  the 
sample  of  businesses  interviewed.  Therefore,  no  estimation  of  the  compliance  costs  for  businesses 
using the scheme was possible.  

Results of the SCM analysis for businesses outside of the special scheme 

The costs for businesses outside of the cash accounting scheme in Estonia were presented already 
(see Table 105) in the section presenting the results for the VAT exemption threshold for Estonia.   

Italy 

The cash accounting scheme was introduced in Italy in 2012 (art. 32-bis of Dl 83/2012), and applies 
to transactions as of 1 December 2012.  

It applies to businesses with a threshold below EUR 2 000 000, both on input and output VAT. There 
are no specific limitations for the application of the cash accounting scheme with regard to sectors of 
economic activity or types of businesses. It is an optional regime, i.e. businesses need to opt for it.  

Businesses do not need to apply for it, as the application of the cash accounting scheme is verified by 
the tax authorities by the business conduct (‘comportamento concludente’). The adoption of the cash 
accounting schemes is communicated to the tax authorities via a specific part of the VAT declaration 
(‘Quadro VO’) in the first year.  

Importantly,  once  opted  for,  the  scheme  applies  for  three  years  (unless  the  business  trespass  the 
turnover  threshold).  After  the  first  three  years,  the  option  is  automatically  applies  for  each  of  the 
following years, unless the business decides to opt out. The decision to opt out is communicated to 
the  tax  authorities  in  the  same  way  as  the  decision  to  opt  in  (i.e.  and  specific  part  of  the  VAT 
declaration).  

The cash accounting scheme as applied in Italy does not include any additional provision or additional 
simplification,  so  that  all  the  remaining  obligations  still  apply  (including  VAT  registration,  invoicing, 
etc.). In addition, all invoices issued by businesses benefiting from such scheme need to include the 
indication  that  the  transaction  is  subject  to  the  cash  accounting  scheme,  as  per  art.  32-bis  of  Dl 
83/2012.  

The sample of businesses interviewed during the fieldwork in Italy was presented already (see Table 
110) in the section presenting the results for the VAT exemption threshold for Italy. For the analysis of 
the compliance costs of the cash accounting, the businesses adopting such schemes and those out of 
the scheme were used.  

Results of the SCM analysis for businesses within the special scheme 

The  following  table  presents  the  costs  for  businesses  within  the  cash  accounting  scheme  in  Italy 
(Table 120). The table is followed by a discussion of the various information obligations.  

145 | P a g e  

 
 
 
Table 120 – Compliance costs for businesses within the cash accounting scheme in Italy 

Administrative task 

VAT registration 

IN-HOUSE 

Invoicing  

OUTSOURCE  

TOTAL 

IN-HOUSE 

VAT declarations/returns 

IN-HOUSE 

VAT payment  

Book-keeping 

IN-HOUSE 

IN-HOUSE 

Advisory services 

OUTSOURCE 

Tariff 
(national) 

Time 
(minute) 

Wage 
cost 

Tot. WAGE 
costs 

External 
Fees 

Frequency 
(annual) 

Other 
costs 

TOTAL 

38.9 

38.9 

38.9 

38.9 

38.9 

38.9 

38.9 

180 

0 

180 

5 

150 

5 

116.7 

0.0 

116.7 

3.2 

97.3 

3.2 

1260 

816.0 

11.67 

0.00 

11.67 

778.00 

97.25 

3.24 

816.00 

0.00 

Every 10 years 

150 

Every 10 years 

Every 10 years 

240 (20 per year) 

annual 

annual 

annual 

annual 

1 800 

0 

15.00 

15.00 

0 

0 

0 

0 

11.67 

15.00 

26.67 

778.00 

97.25 

3.24 

816.00 

1 800 

1800.00 

3 521.16 

Source: Deloitte compilation of data from interviews with Italian businesses and accountants 

146 | P a g e  

 
 
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
The  cash  accounting  scheme  as  implemented  in  Italy  does  not  modify  the  other  information 
obligations  of  businesses,  therefore  the  relevant  IOs  for  the  analysis  (and  the  related  costs)  do  not 
differ notably from those of businesses in the standard VAT regime.  

As shown by the table above, the costs for VAT registration are the same as for businesses in the 
standard VAT regime, and the obligation is not perceived as particularly burdensome by businesses.  

The submission of VAT returns/declaration can be carried out on an annual basis (if the business is 

eligible/opts for the annual returns and fills out the ‘Unico’ annual declaration), or on a quarterly basis. 
Businesses below the annual turnover thresholds of EUR 400 000 (for businesses providing services) 
or of EUR 700 000 (for other businesses) benefit from simplified accounting obligations (‘contabilita’ 
semplificata’), which is reflected in the frequency of the information obligations presented in the table. 
Businesses  opting  for  the submission  (and  payment)  of quarterly  returns  face  a 1%  interest  rate  on 
the quarterly returns and on the yearly declaration, as well as higher advisory fees. The decision on 
whether  to  option  for  the  annual  or  the  yearly  frequency  (with  the  additional  1%  interest  rate)  was 
taken together with the advisors supporting the businesses, and based on the cash flow needs of the 

businesses. Overall, the businesses’ internal costs for the submission of the VAT returns/declaration 
represent a limited share of the overall compliance costs (about 3%).  

Book-keeping  obligations  are  quite  burdensome,  as  they  represent  about  23%  of  the  internal 
businesses’ compliance costs. The use of the cash payment or receipt as a basis for the obligation to 
account for VAT obliges businesses to keep records of invoices as well as of the related cash flows, 
which  they  would  not  do  otherwise  (unless  above  the  EUR  400 000  or  EUR  700 000  threshold)113. 
Indeed, book-keeping costs are slightly higher for businesses adopting the cash accounting scheme 
than for those in the standard VAT regime, reflecting the additional book-keeping requirements.  

Similarly,  advisory  fees  for  businesses  within  the  cash  accounting  scheme  are  44%  higher  than 
those for businesses in the standard VAT regime (about 20% if we consider the upper bound of the 
average advisory fees for such businesses of EUR 1 500). 

Overall a clear significant costs for businesses within the VAT cash accounting scheme in Italy is the 
cost of book-keeping and accounting/advisory services. Those costs together represent about 74% of 
the overall VAT compliance costs for businesses within such scheme.  

Results of the SCM analysis for businesses outside of the special scheme 

The  costs  for  businesses  outside  of  the  cash  accounting  scheme  in  Italy  were  presented  already 
(seeTable 112) in the section presenting the results for the VAT exemption threshold for Italy.  

The key elements to point out in comparison to the compliance costs for the cash accounting scheme 
are the overall lower costs for book-keeping and external advisory fees, which reflect the lower book-
keeping requirements.  

Romania 

The  cash  accounting  scheme  can  be  applied  by  businesses  with  an  annual  turnover  below  RON 
2 250 000 (approx. EUR 500 000). 

113 Interviews with accountants and business organisations, businesses above such thresholds represent a small share of the 
businesses in Italy, and an even smaller share of those applying the cash accounting scheme.  

147 | P a g e  

 
 
                                                      
Taxable  persons  opting  to  apply  the  cash  accounting  scheme  must  notify  the  tax  authorities  by  the 
25th  of  January  of  their  intention  to  apply  the  scheme.  Similarly,  to  exit  the  cash  accounting  VAT 
scheme, the notification should be submitted to the tax authorities by 25th of the month following the 
fiscal period in which the threshold is exceeded. The option to exit the scheme cannot be exercised 
during  the  first  year  of  application.  If  the  threshold  is  breached  in  the  first  year,  the  scheme  will  be 
applied until the end of the fiscal period following the one in which the threshold was exceeded. 

The interviewed sample in Romania consists of two accountants with experience of carrying our VAT-
related obligations for clients inside and outside of the cash accounting scheme. The following table 
provides an overview of the interviewed sample. 

Table 121 – Sample of businesses interviewed in Romania 

Sector 
Accountant 

Turnover range 
N/A 

Accountant 

N/A 

Scheme Applied 
No 
Works  for  clients  that 
apply the scheme 
No 
Works  for  clients  that 
apply the scheme 

for 

Type of Supplies 
Works 
supplying 
and cross-border 
Works 
supplying 
and cross-border 

for 

clients 
domestic 

clients 
domestic 

Results of the SCM analysis for businesses within the special scheme 

The  results  of  the  SCM  did  not  produce  any  results  that  differentiate  the  compliance  costs  for 
businesses within the special scheme from compliance costs for businesses outside the scheme.  

Results of the SCM analysis for businesses outside the special scheme 

The costs for businesses outside of the cash accounting scheme in Romania were presented already 
(see Table 114) in the section presenting the results for the VAT exemption threshold for Romania.  

Flat-rate scheme 

The  following  Member  States  among  those  selected  for  fieldwork  implement  the  VAT  exemption 
threshold scheme:  

  Belgium;  
  Poland;  
  Spain; and  
  UK.  

Below  we  present  the  details  of  the  analysis  per  each  Member  States,  including  the  composition  of 
the  businesses  interviewed  during  the  fieldwork,  and  the  compliance  costs  both  for  businesses 
benefiting from the scheme and for businesses not adopting it (while eligible). 

Belgium  

The flat-rate scheme applies in Belgium to businesses with the following characteristics: 

  Having an annual turnover below EUR 750 000; and  
  Being active in the following sectors:  

148 | P a g e  

 
 
 
 
o  Retailers in nutrition, Butchers, Bakeries and patisseries, Café owners, Hairdressers, 
Retailers in dairy products and milkmen, Pharmacy/drugstore/chemist, Doctors with a 
drug  depot,  Ice-cream  makers,  Specialised  retailers  in  wild  game  and  poultry, 
Retailers  in  shoes,  Cobblers,  Retailers  in  fish,  Fish  peddlers,  Snack  bars  (chip 
shops), Retailers in various textile and leather goods, Retailers in hardware and tools, 
Travelling fair operators, Retailers in newspapers and magazines, Retailers in books, 
Retailers in tobacco products; and  

  Their  selling  activities  do  not  generally  involve  the  obligation  to  invoice  (at  least  75%  of 

turnover should have no invoice obligation). 

Further, the scheme can only apply to unincorporated businesses (i.e. sole trader or partnership) or a 
private company with limited liability. 

Under  the  scheme,  the  taxable  turnover  (i.e.  the  basis  for  calculation)  is  determined  differently 
according to the sector and/or activity. The taxable turnover is then subject to the normal (or reduced) 
rates of VAT (i.e. 21%, 12% or 6%). There are three ways which the taxable turnover is calculated: 

1.  On the basis of profit margins: 

The  businesses  taxable  turnover  is  made  up  primarily  of  supplies  of  goods.  The  goods  must  be 
divided into relevant categories (as defined by the authorities). The supplies are then multiplied by a 
coefficient established by the authorities on the basis of the average gross profit earned by retailers 
for goods in the relevant category. Taxable turnover is calculated by applying these coefficients to the 
total amount of purchases. 

2.  Flat-rates established on the basis of presumed remuneration: 

If the businesses main activity concerns the supply of services, the taxable turnover is determined on 
a  lump  sum  basis  by  multiplying  the  number  of  working  hours  by  an  hourly  rate.  This  technique  is 
used commonly by hair dressers. 

 3. Flat-rates on the basis of normal return: 

Taxable  turnover  can  also  be  calculated  on  the  basis  of  the  return  on  raw materials  or  on  products 
purchased in Belgium or imported. 

The coefficients applied in each case vary between sectors and are adjusted each year. It should be 
noted  that  when  the  technique  is  based  on  the  amount  or  value  of  purchased  goods,  the  taxable 
person is presumed to have sold all goods purchased during the period which needs to be reported in 
the VAT return (whether or not they were actually sold is irrelevant).  

The  interviewed  sample  in  Belgium  consisted  of  six  businesses  and  two  accountants.  An  additional 
interview  was  held  with  a  business  association.  The  following  table  provides  an  overview  of  the 
interviewed sample. 

Table 122 – Sample of businesses interviewed in Belgium 

Sector 
Restaurant 

Hairdresser 

Ice Cream vendor 

Scheme Applied 
No 

Turnover range 
EUR  100  001  –  500 
000 
EUR  100  001  –  500 
000 
EUR  100  001  –  500  No 

No 

Type of Supplies 
Domestic only 

Domestic only 

Domestic only 

149 | P a g e  

 
 
 
Sector 

Pet store owner 

Foodtruck 
Hairdresser 

Accountant 

Turnover range 
000 
EUR 50 001 – 100 000  No 

Scheme Applied 

N/A (startup) 
EUR 500 001 – EUR 2 
000 000 
N/A 

No 
No 

Type of Supplies 

Domestic only 

Domestic only 
Domestic only 

in 

Domestic only 

Domestic only 

10%  of  clients 
scheme 
Previous 
scheme 
opting 
anymore) 

in 
(no  clients 
scheme 

clients 

for 

Accountant 

N/A 

Source: Deloitte 

It should be noted that due to the specific nature of the scheme, it was difficult to identify businesses 
actually benefitting from the scheme. As  indicated by accountancy professionals, the scheme is  not 
very  widespread.  As  also  indicated  by  accountants  and  business  associations,  the  businesses 
applying the flat-rate scheme are not necessarily aware of the specificities of VAT and would not have 
the required knowledge of the scheme to partake fully in interviews.  

Results of the SCM analysis for businesses within the special scheme 

The  following  table  presents  the  costs  for  businesses  within  the  flat-rate  scheme  in  Belgium  (Table 
123). The table is followed by a discussion of the various information obligations.  

150 | P a g e  

 
 
 
 
Table 123 – Compliance costs for businesses within the flat-rate scheme in Belgium 

Administrative task 

Tariff 
(national) 

Time 
(minute) 

Wage cost 

Tot. 
WAGE 
costs 

External 
Fees 

Frequency 
(annual) 

Other 
costs 

TOTAL 

VAT registration 

Applying for scheme 

VAT return  

VAT payment 

Book-keeping 

IN-HOUSE 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

IN-HOUSE 

IN-HOUSE 

49.3 

49.3 

0 

49.3 

49.3 

49.3 

49.3 

2000 

1 643.33 

164.33 

Every 10 years 

0.00 

0.00 

0.00 

0.00 

150.00 

Every 10 years 

150.00 

Every 10 years 

0.00 

0.00 

15.00 

480.00 

12.33 

147.90 

394.40 

1 577.60 

5 

4.11 

32.87 

monthly 

quarterly 

Bi-monthly 

20.00 

16.43 

4 108.33 

Per working day 

0.00 

15.00 

15.00 

0.00 

0.00 

0.00 

0.00 

*Advisory services 

OUTSOURCE 

0.00 

3 360 

annual 

3 360.00 

Source: Deloitte compilation of data from interviews with Belgian businesses and accountants 

164.33 

15.00 

179.33 

147.90 

1 577.60 

32.87 

4 108.33 

3 360.00 

9 406.03 

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In  Belgium,  it  was  found  that  VAT  registration  is  somewhat  burdensome,  costing  the  business  at 
least EUR 200 to complete its registration. In total it was found that VAT registration accounts for 2% 
of overall VAT compliance costs for businesses within the scheme. It was also noted by interviewees 
that the process leading up to registration i.e. the organisation of relevant documents before applying 
for a VAT number is quite burdensome and unclear. It was noted in particular by a startup company 
that the administrative requirements were not clear and excessive costs were experienced because of 
this. 

With regard to applying for a special scheme, it was found that the tax authorities only have to be 
notified through a simple form that the business is applying the scheme. This obligation was not found 
to  be  particularly  burdensome  and  is  normally  conducted  by  the  accountant  for  the  business.  It 
therefore accounts for just 0.1% of all VAT related obligations. 

The VAT return accounts for approximately 17% of the VAT obligations for business within the flat-
rate  scheme.  For  the  businesses,  this  involves  the  organisation  of  invoices  for  sending  to  the 
accountant.  Businesses  indicated  that  this  can  take  from  half  a  day  to  two  days.  The  VAT  returns 
within  the  scheme  are  submitted  every  three  months.  With  regard  to  the  practicalities  of  the  VAT 
return,  accountants  indicated  that  the  return  under  the  flat-rate  scheme  can  actually  be  more 
burdensome than the normal VAT return. This is because the flat-rate scheme requires an additional 
calculation (i.e. the taxable turnover). Since the taxable basis is not dependent on the selling price to 
the  customer,  the  business  must  first  decide  which  base  at  which  they  will  calculate  the  taxable 
turnover (i.e. one of the three options as explained above). Although only a minor calculation, it still 
requires an additional effort on the part of the accountant dealing with the VAT return. In addition, a 
document explaining the calculation must also be accompanied by the VAT return declaration.  

Book-keeping was found to be the most burdensome cost, accounting for 44% of the total VAT cost 
accrued for businesses. Although the flat-rate scheme does not oblige businesses to keep a journal of 
daily receipts, it was indicated by accountants that businesses perform this task anyway as a normal 
part  of  business.  In  theory  therefore,  the  flat-rate  scheme  could  reduce  this  burden  for  businesses 
however in practice it is  more beneficial for businesses to keep track of their daily sales  for income 
purposes  and  tracking  of  stock.  It  should  be  noted  however  that  the  cost  for  bookkeeping  is  not 
reflective  of  VAT  obligations  only.  Within  the  scheme  also,  businesses  do  not  need  to  document  if 
goods  were  given  away  or  used  for  personal  purposes.  Businesses  expressed  difficulty  with 
separation of this task in terms of VAT only bookkeeping and other bookkeeping.  

Overall  a  clear  significant  costs  for  businesses  within  the  VAT  flat-rate  scheme  is  the  cost  of 
accounting/advisory services. The cost of an accountant in Belgium accounts for approximately 35% 
of all VAT costs. 

Results of the SCM analysis for businesses outside of the special scheme 

The  following  table  presents  the  costs  for  businesses  outside  of  the  flat-rate  scheme  in  Belgium 
(Table 124). The table is followed by a discussion of the various information obligations. 

152 | P a g e  

 
 
Table 124 – Compliance costs for businesses outside of the flat-rate scheme in Belgium 

Administrative task 

Tariff (national)  Time (minute)  Wage cost  Tot. WAGE costs  External Fees 

Frequency   

Other costs  TOTAL 

VAT registration 

IN-HOUSE 

OUTSOURCE  

TOTAL 

Invoicing 

IN-HOUSE 

VAT return 

IN-HOUSE 

VAT payment 

IN-HOUSE 

Book-keeping 
Advisory services  OUTSOURCE 

IN-HOUSE 

49.30 

49.30 

49.30 

49.30 

49.30 

49.30 

49.30 

N/A 

2 000 

1643.33 

0 

0 

2 000 

1 643.33 

5 

480 

5 

15 

N/A 

4.10 

394.40 

4.10 

12.32 

N/A 

164.33 

0.00 

164.33 

986.00 

1577.60 

32.87 

3081.25 

0.00 

Every 10 years 

164.33 

150.00 

Every 10 years 

15.00 

15.00 

150.00 

Every 10 years 

15.00 

179.33 

240 (20 per month) 

986.00 

Quarterly 

0.00  1 577.60 

Bi-monthly 

Per working day 

32.87 

3 081.25 

3360 

Annual 

3 360.00  3 360.00 

9 217.05 

Source: Deloitte compilation of data from interviews with Belgian businesses and accountants 

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There  are  no  major  changes  with regard  to  the  overall  costs  for SMEs  outside  the  flat-rate  scheme 
compared to those inside the scheme.114  

One significant difference is that there is no longer the IO of applying for the special scheme since the 
business is applying the normal VAT rules. However outside of the scheme, businesses are obliged to 
provide VAT invoices which accounts for around 11% of all VAT-related compliance costs. 

Further,  the  bookkeeping  costs  are  lower  outside  of  the  scheme.  This  can  be  attributed  to  the 
additional administrative tasks for businesses in calculating the taxable turnover for applying the flat-
rate. 

Poland 

The flat-rate scheme applies in Poland only to individual taxi drivers (‘sole traders’; rental of cars with 
a driver is excluded). Businesses applying this special scheme apply a flat VAT rate on output of 4%, 
while have no rights to deduct input VAT.  

The scheme only covers domestic supplies, but the Polish VAT Act does not limit the application of 
such the flat-rate scheme to domestic businesses only.  

Businesses  benefiting  from  this  scheme  have  to  submit  simplified  monthly  VAT  returns  to  tax 
authorties. 

The flat-rate scheme is an optional regime. In fact, data provided by Polish tax authorities show that 
this special regime is applied in a small minority of cases (only 650 businesses were reported to apply 
it), so that it can be considered as a marginal regime.  

Results of the SCM analysis for businesses within the special scheme 

It  was  not  possible  to  collect  data  on  the  administrative  costs  faced  by  businesses  applying  this 
regime, given the very small number of businesses opting for it.  

Results of the SCM analysis for businesses outside the special scheme 

The following table presents the costs for businesses outside of the flat-rate scheme in Poland (Table 
124). The table is followed by a discussion of the various information obligations. 

114 According to acocuntants in Belgium since no SMEs within the scheme were interviewed. 

154 | P a g e  

 
 
                                                      
Table 125 – Compliance costs for businesses outside the flat-rate scheme in Poland 

Administrative task 

Tariff 
(national) 

Time 
(minute) 

Wage 
cost 

Tot. WAGE 
costs 

External 
Fees 

Frequency  
(annual) 

Other 
costs 

TOTAL 

VAT registration 

IN-HOUSE 

Invoicing  

OUTSOURCE  

TOTAL 

IN-HOUSE 

VAT declarations/returns 

IN-HOUSE 

VAT payment  

IN-HOUSE 

Book-keeping 
Advisory services 

IN-HOUSE 
OUTSOURCE 

22.20 

22.20 

22.20 

22.20 

22.20 

22.20 

22.20 

N/A 

150 

0 

150 

5 

120 

5 

55.5 

0 

55.50 

1.85 

44.4 

1.85 

637 

235.69 

Source: Deloitte compilation of data from interviews with Polish accountants 

5.55 

0.00 

5.55 

444.00 

177.60 

7.40 

235.69 

0.00 

150.00 

150.00 

Every 10 years 

Every 10 years 

Every 10 years 

240 (20 per month) 

15.00 

15.00 

5.55 

15.00 

20.55 

444.00 

Quarterly 

0.00 

177.60 

Bi-monthly 

Annual 

7.40 

235.69 

3360 

Annual 

3 360.00  3 360.00 

4 245.24 

155 | P a g e  

 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
The  VAT  compliance  costs  in  the  normal  regime  are  above  average  in  comparison  to  the  other 
Member States analysed. 

Costs for advisory services account for the majority (80%) of overall compliance costs. This result is 
likely  to  have  been  influenced  by  the  interview  sample  which  was  made  up  only  of  accountants. 
Although  accountants  estimated  the  time  it  takes  businesses  to  carry  out  the  IOs,  there  may  have 
been an underestimation.  

Among  the  business  obligations,  invoicing  is  the  most  burdensome,  accounting  for  10%  of  the 
overall compliance costs. 

Bookkeeping  accounts  for  approximately  6%  of  the  compliance  costs  with  accountants  estimating 
that businesses spend about 10 – 15 minutes per week on bookkeeping for VAT purposes. 

Unfortunately due to the lack of data a comparison between these costs and the costs for businesses 
applying the flat-rate scheme could not be drawn. 

Spain  

The flat-rate scheme is a special and mandatory VAT regime in Spain applying to: 

  Unincorporated  businesses:  retailers115,  natural  entrepreneurs,  or  entities  subject  to  the 
income  allocation  system  in  the  Personal  Income  Tax  (Impuesto  sobre  la  Renta  de  las 
Personas Físicas) 

  That do not transform the product, 
  And are selling to the final consumer. 

Business  usually  complying  with  such  requirements  are:  pharmacies,  clothes  shops,  beauty  clinics, 
hairdressers  (when  selling  products),  florist  shops.  It  is  important  to  highlight  that  there  are  some 
exemptions to this scheme: jewelry, art and luxury products, boats and vessels, airplanes and other 
aircraft, industrial machinery, and others. 

The flat-rate to be paid is provided by the law according to the VAT applied to the product. There are 
three different VAT depending on the kind of product: 

  The  general  VAT  (21%)  applies  to  common  products  (such  as  clothes,  books,  household 
appliance, jewelry, among others). When the retailer is purchasing these kind of products, he 
needs to pay a 5.2% flat-rate. 

  The  reduced  VAT  (10%)  applies  to  foods  in  general  (although  some  are  applied  the  super 
reduced  VAT)  and  other  products  (such  as:  products  for  agricultural  activities,  water, 
healthcare products, catering, medicines for animals, and others). If the retailer is purchasing 
such products, he will need to pay a 1.4% flat-rate. 

  The super reduced VAT (4%) applies to basic products (such as bread, dairy products, flour, 
eggs,  fruits, vegetables,  cereals,  and  others).  In  this  case,  the  retailer  needs  to  pay  a  0.5% 
flat-rate. 

115 Are considered as retailers those who usually sell movable goods or livestock without any kind of transformation as long as 
sells to final consumers represent at least 80% of the total sells. 

156 | P a g e  

 
 
 
 
                                                      
Table 126 – Flat rates applied in Spain 

VAT 
General: 21% 
Reduced: 10% 
Super reduced: 4% 

Source: Deloitte 

FLAT-RATE 
5.2% 
1.4% 
0.5% 

Under  this  scheme,  businesses  have  no  VAT  return  obligation.  They  are  obliged  instead  to 
communicate to their providers that they are actually under this special scheme. Hence, businesses 
under this special scheme will pay the VAT together with the relevant flat-rate to their providers (and 
not to the tax authorities).  

The  interviewed  sample  in  Spain  consisted  of  one  business  and  three  accountants.  The  following 
table provides an overview of the interviewed sample. 

Table 127 – Sample of businesses interviewed in Spain 

Sector 
Clothes shop 
Accountant 

Accountant 

Turnover range 
EUR 5 001 – 50 000 
EUR 5 001 – 50 000 

EUR  100  001  –  500 
000 

Accountant 

Services provider 

EUR  100  001  –  500 
000 
EUR  500 001  –  200 
000 

clients 

Scheme Applied 
Yes 
No  clients  under  the 
flat-rate scheme 
Previous 
scheme 
opting 
anymore) 
Clients  under  the  flat-
rate scheme 
No 

in 
(no  clients 
scheme 

for 

Type of Supplies 
Domestic only 
Domestic only 

Domestic only 

Domestic only 

Domestic only 

157 | P a g e  

 
 
 
 
Results of the SCM analysis for businesses within the special scheme 

The following table presents the costs of the businesses inside the special flat-rate scheme in Spain 
(Table 128). The table is followed by a discussion of the various information obligations. 

158 | P a g e  

 
 
Table 128 – Compliance costs for businesses within the flat-rate scheme in Spain 

Administrative task 

Tariff (national)  Time (minute)  Wage cost  Tot. WAGE costs  External Fees  Frequency (annual)  Other costs  TOTAL 

VAT registration 

IN-HOUSE 

OUTSOURCE  

TOTAL 

27.60 

27.60 

27.60 

12.50 

0.00 

12.50 

5.75 

0 

5.75 

0.58 

0.00 

0.58 

50.00 

50.00 

Every 10 years 

Every 10 years 

Every 10 years 

5.00 

0.58 

5.00 

5.58 

Source: Deloitte compilation of data from interviews with Spanish businesses and accountants 

159 | P a g e  

 
 
 
  
  
  
  
  
 
 
 
Overall there are almost no compliance costs for businesses applying the flat rate scheme in Spain. 

The only cost relates to VAT registration which is approximately EUR 60 – 70. Over 10 years this cost 
is minimal. 

Results of the SCM analysis for businesses outside the special scheme 

The costs for businesses outside of the VAT flat rate scheme in Spain were presented already (see 
Table 119) in the section presenting the results for the graduated relied scheme for Spain.  

The  key  element  to  point  out  in  comparison  to  the  compliance  costs  for  the  flat-rate  scheme  is  the 
overall lower costs because of the lack of obligations under the scheme.  

UK 

The application of the flat-rate scheme in UK is reserved to businesses established in the country. It 
applies  to  businesses  not  exceeding  the  turnover  threshold  of  EUR  187 500  (GBP  150  000)  in  the 
fiscal year.  

The regime is optional, so that businesses can decide whether to apply it or to opt for the standard 
VAT regime.  

Businesses applying the flat-rate scheme in UK cannot recover input VAT unless:  

  They purchase a capital asset with a VAT inclusive value of £2k or more; or 

In relation to pre-registration input tax. 

The  flat  VAT  rate  applied  on  outputs  varies  with  sectors  of  economic  activity,  ranging  from  4%  to 
14.5%.  

The table below provides an overview of the flat-rates applied116.  

Table 129 – Flat-rates applied in UK 

Sector of economic activity 

Current VAT 
flat-rate (%) 

Sector of economic activity 

Current VAT 
flat-rate (%) 

Accountancy or book-keeping 

14.5  Manufacturing food 

Advertising 

Agricultural services 

Any other activity not listed 
elsewhere 
Architect, civil and structural 
engineer or surveyor 
Boarding or care of animals 
Business services not listed 
elsewhere 
Catering services including 
restaurants and takeaways 
Computer and IT consultancy 

11 

11 

Manufacturing not listed 
elsewhere 
Manufacturing yarn, textiles or 
clothing 

12  Membership organisation 

14.5  Mining or quarrying 

12  Packaging 

12  Photography 

12.5  Post offices 

14.5  Printing 

116 See: https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay, accessed 30 November 2016. 

9 

9.5 

9 

8 

10 

9 

11 

5 

8.5 

160 | P a g e  

 
 
 
 
 
                                                      
Sector of economic activity 

or data processing 
Computer repair services 
Entertainment or journalism 
Estate agency or property 
management services 
Farming or agriculture not 
listed elsewhere 
Film, radio, television or video 
production 

Financial services 

Forestry or fishing 

General building or 
construction services* 
Hairdressing or other beauty 
treatment services 
Hiring or renting goods 
Hotel or accommodation 
Investigation or security 

Labour-only building or 
construction services* 

Laundry or dry-cleaning 
services 
Lawyer or legal services 
Library, archive, museum or 
other cultural activity 
Management consultancy 
Manufacturing fabricated 
metal products 

Current VAT 
flat-rate (%) 

Sector of economic activity 

Current VAT 
flat-rate (%) 

10.5  Publishing 
12.5  Pubs 

12 

6.5 

Real estate activity not listed 
elsewhere 
Repairing personal or 
household goods 

13  Repairing vehicles 

13.5 

10.5 

Retailing food, confectionery, 
tobacco, newspapers or 
children’s clothing 
Retailing pharmaceuticals, 
medical goods, cosmetics or 
toiletries 

9.5  Retailing not listed elsewhere 

13  Retailing vehicles or fuel 

9.5  Secretarial services 

10.5  Social work 

12  Sport or recreation 

14.5 

Transport or storage, including 
couriers, freight, removals and 
taxis 

12  Travel agency 

14.5  Veterinary medicine 

9.5 

Wholesaling agricultural 
products 

14  Wholesaling food 

10.5 

Wholesaling not listed 
elsewhere 

11 
6.5 

14 

10 

8.5 

4 

8 

7.5 

6.5 

13 
11 
8.5 

10 

10.5 

11 

8 

7.5 

8.5 

Finally, businesses can apply a further 1% reduction on their normal flat-rates in their first year of VAT 
registration. This measure is meant to encourage businesses to adopt the flat-rate scheme. 

The sample of businesses interviewed during the fieldwork in UK was presented already (see Table 
115) in the section presenting the results for the VAT exemption threshold for UK. For the analysis of 
the compliance costs of the flat-rate scheme, the businesses adopting such schemes and those out of 
the scheme were used.  

Results of the SCM analysis for businesses within the special scheme 

The following table presents the costs for businesses outside of the VAT exemption threshold in UK 
(Table 130). The table is followed by a discussion of the various information obligations.  

161 | P a g e  

 
 
 
Table 130 – Compliance costs for businesses within the flat-rate scheme in UK 

Administrative task 

Tariff 
(national) 

Time 
(minute) 

Wage cost 

VAT registration 

IN-HOUSE 

38.2 

70 

Applying for scheme 

Invoicing 

VAT return  

VAT payment 

Book-keeping 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

IN-HOUSE 

IN-HOUSE 

IN-HOUSE 

38.2 

38.2 

38.2 

38.2 

38.2 

60 

5 

180 

5 

45 

44.57 

0.00 

0.00 

38.20 

3.18 

114.60 

3.18 

28.65 

Tot. 
WAGE 
costs 

4.46 

0.00 

0.00 

3.82 

763.20 

458.40 

12.73 

343.80 

External 
Fees 

Frequency  

Other 
costs 

TOTAL 

Every 10 years 

Every 10 years 

Every 10 years 

Every 10 years 

240 (20 per 
month) 

quarterly 

quarterly 

monthly 

0 

0 

0 

0 

0 

0 

0 

0 

Advisory Services 

OUTSOURCE 

0.00 

1 100.00 

annual 

1 100.00 

Source: Deloitte compilation of data from interviews with UK businesses and accountants 

4.46 

0.00 

4.46 

3.82 

763.20 

458.40 

12.73 

343.80 

1 100.00 

2 686.41 

162 | P a g e  

 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
Costs  for  VAT  registration  outside  of  the  VAT  special  scheme  are  not  particularly  elevated  (the 
account for less than 0.5% of the overall compliance costs). Businesses and accountants interviewed 
did  not  perceive  this  obligation  as  particularly  burdensome,  as  it  is  now  entirely  automated  can  be 
carried  out  online  in  a  simple  way.  Similarly,  applying  for  the  flat-rate  scheme  is  not  perceived  as 
burdensome  or  particularly  complex.  Advisory  fees  for  such  obligation  can  vary,  and  further 
investigation is undergoing to provide a more accurate estimate of such costs.  

Invoicing obligations account for about 28% of the overall compliance costs. While the issuing of the 
single  invoice/fiscal  receipt  is  not  particularly  long  or  complex  per  se  (it  does  not  take  each  of  the 
business interviewed more than 5 minute to issue one), the volume (i.e. the number) of such invoices 
issued can vary greatly among businesses. Many of the businesses interviewed have some software 
that can reduce the time and effort needed to comply with such obligations.  

VAT returns/declaration represent about 60%) of compliance costs for businesses. The frequency of 
such obligations (quarterly) is on the main drivers of this cost. Businesses recur to advisors to comply 
with this obligation, which charge about EUR 65 (GBP 50) for this service.  

Book-keeping  obligations  represent  about  17%  of  the  internal  businesses’  compliance  costs. 
Overall,  they  are  not  perceived  as  particularly  burdensome,  and  businesses  devote  about  one  hour 
per month to carry out them, often with the support of specific software.  

Advisory  costs  are  the  most  significant  burden  faced  by  businesses.  In  particular,  it  was  noted  that 
businesses  recur  to  advisors  to  carry  out  their  VAT  declarations.  For  VAT  related  services, 
accountants  charge  from  about  EUR  190  (GBP  160-180)  to  EUR  360  (GBP  300)  for  larger 
declarations. On average we can see that this accounts for about 40% of the businesses compliance 
costs. 

Results of the SCM analysis for businesses outside of the special scheme 

The  costs  for  businesses  outside  of  the  flat-rate  scheme  in  UK  were  presented  already  (see  Table 
116) in the section presenting the results for the VAT exemption threshold for UK.   

163 | P a g e  

 
 
 
 
 
Annex H – Elements of the 
Policy Options  

This  Annex  provides  an  overview  and  high  level  assessment  of  the  policy  elements,  a 
selection and combination of which has been used in designing the policy options.  

The list contains the following policy elements:  

1. SME exemption scheme (variations) 

a)  General; 
b)  Application - to domestic or all SMEs; 
c)  Level of threshold – national or standard EU; 
d)  Basis – total turnover, cross-border or sales to a Member State of consumption; 
e)  Basis – other than turnover; 
f)  Optionality; 
g)  Number of thresholds; 
h)  Graduated thresholds – extent of sales; 
i)  Gradual relief – reduction of VAT burden 
j)  Graduated thresholds – alternatives; 
k)  Flexible threshold; 
l)  Transition period. 

2. VAT calculations, accounting simplifications and compensation measures 

a)  Flat-rate and presumptive tax measures; 
b)  Reduced VAT rate for SMEs; 
c)  Simplified/fixed input tax credit; 
d)  Exemption for supplies to SMEs; 
e)  Cash accounting; 
f)  Payment flexibility measures; 
g)  Less frequent filing of VAT returns; 
h)  Special input VAT refund; 
i)  Reduced VAT burden. 

3. Simplified VAT administrative obligations 

a)  Simplified/abolished VAT administrative obligations  

4. Treatment as non-taxable person 

a)  Harmonised and mandatory treatment as non-taxable person 

164 | P a g e  

 
 
 
 
 
 
 
Table 131 – Elements of the policy options – description and assessment 

Element 

Description 

Assessment 

1. 

SME exemption scheme (with variations in its design) 

1.a 

General  

Forms  a  basis  of  the 
current  SME  scheme 
and  provides  exemption 
for  supplies  below  the 
threshold 

There  is  a  number  of 
different  ways  for  how 
the  threshold  could  be 
set  or  applied,  in  order 
to  either  maximise  the 
support  to  SMEs  or  to 
address  some  risks  and 
(a 
disadvantages 
combination  could  be 
also used). 

1.b 

Application  – 
or 
domestic 
SMEs 

to 
all 

Threshold/SME  scheme 
could be  

1) applied only nationally 
(as  now, 
to  domestic 
SMEs); 

2)  applied  equally  to  all 
EU SMEs; 

3)  applied  also  to  non-
EU SMEs. 

Main  advantages:  provides  significant 
support to SMEs and admin cost reduction 
to 
tax  authorities,  especially  where 
combined  with  additional  simplification 
measures 
from  VAT 
registration, declaration, invoicing).  

relief 

(e.g. 

for 

either 

foreign 

trading 

between 

disadvantages:  may 

create 
Main 
different 
distortions 
domestic  taxpayers  or  between  domestic 
and 
taxpayers;  also  a  scope 
limitation  to  domestic  supplies  may  limit 
the  simplification  effect  (and 
financial 
both 
SMEs 
support) 
domestically and cross-border. In addition, 
where significant simplifications are added 
to the SME scheme, the SMEs exceeding 
the  threshold  are  required  to  apply  full 
VAT  obligations,  which  may  cause  a 
sudden  and  significant 
in 
tax/financial  and  administrative  burden 
and  may  discourage  the  growth  of  SMEs 
(‘threshold  effect’).  From  the  tax  authority 
angle,  the  main  disadvantages  are  the 
loss  of  revenue  and  the  challenges  in 
monitoring  compliance  on  the  application 
of the VAT exemption threshold and SME 
scheme more generally. 

increase 

territorial  application  of 

Current 
the 
scheme  creates  distortions  against  the 
non-established  businesses,  but  at  the 
same time enables the scheme to be fine-
tuned 
local 
for  national  needs  and 
business environment.  

Expansion  of  the  threshold  to  businesses 
established in other Member States would 
level the playing field and fit better for the 
single  market.  However,  such  widening 
would increase the cost of the scheme (i.e. 
revenue  loss),  making  it  also  harder  to 
estimate,  and  make 
the  compliance 
control  more  challenging.  The  control  of 
the  turnover  of  a  non-resident  business 
would  require  high  level  of  administrative 
cooperation.  

Expansion  of  the  threshold  and  the  SME 
to  non-EU  businesses  would 
scheme 
provide  full  neutrality,  however  due  to 
more  limited  administrative  cooperation 
with  third  countries  and  complexity  of 
compliance control, it is likely to go too far. 
However,  in  a  definitive  regime  based  on 
destination  principle,  it  could  be  left  as  a 
choice  of  the  Member  State,  as  it  may 

165 | P a g e  

 
 
 
 
Element 

Description 

1.c 

Level of threshold – 
national or standard 
EU 

level 

the 
The 
threshold could be either  

of 

1)  set 

by  Member 
States,  based  on 
standard criteria; or  

2)  set  at  a  standard 

level across the EU 

1.d 

– 

total 
Basis 
turnover, 
cross-
border  or  sales  to  a 
MSC 

The  threshold  could  be 
calculated based on  

1)  domestic turnover; 

turnover, 

2) 
total 
extended 
border supplies;  

to 

i.e. 
cross-

3)  just  on  cross-border 
supplies; or  

4)  supplies  to  a  specific 
Member State 

Assessment 
reduce 
authority. 

the  administrative  cost  of 

tax 

Currently the thresholds are set nationally, 
based  on  VAT  directive  or  a  derogatory 
agreement. 

A  standard  EU  level  threshold  may  be 
seen  as  providing  a  level  playing  field  for 
SMEs  in  different  Member  States  and 
trading  internationally  (if  applicable),  as 
well as simplifying the EU VAT system.  

the 

national 

markets, 
However, 
characteristics  of  SME  sectors 
(e.g. 
average  turnover)  and  domestic  policy 
environment  differ  significantly  between 
Member  States, therefore, a threshold set 
at  a  standard  EU  level,  would  have  very 
different 
in  Member  States, 
impact 
including the revenue impact. 

Current  thresholds  are  based  mostly  on 
the business’ domestic turnover (including 
cross-border 
below 
distance 
sales 
threshold  due 
to  domestic  place  of 
supply),  excluding  cross-border  supplies 
taxable in other Member States (e.g. B2C 
e-services),  which  creates  complexity  and 
additional burden for both businesses and 
tax administrations.  

Basing  the  threshold  on  the  total  turnover 
of  the  business  (in  effect  extending  the 
threshold  also  to  cross-border  supplies 
taxable  in  other  Member  States)  would 
provide additional support to the business 
and  help  to  target  the  measure  better  to 
the  businesses  of  certain  size.  However, 
due  to  differences  in  national  SME  sector 
create  new 
it  may 
characteristics, 
distortions in the single market, especially 
if 
to  be  set 
nationally.  It  would  also  have  impact  on 
the  revenues  of  the  Member  States  of 
consumption  and  would  not  follow  the 
destination principle. 

thresholds  continue 

the 

is 

Basing  threshold  only  on  all  cross-border 
supplies taxable in another Member State, 
as proposed in the E-commerce proposal, 
would enable more standardised approach 
to  the  threshold  (depending  on  how  the 
threshold 
of 
harmonisation), making it more of a single 
market  measure 
the 
estimation  of  an  impact  on  Member  State 
of  consumption  revenues.  Although 
it 
the  destination 
follow 
would  not 
principle  or  apply  only  to  businesses  of 
certain size, it would reduce the burden of 

simplify 

level 

fully 

and 

set, 

i.e. 

166 | P a g e  

 
 
 
Element 

Description 

Assessment 
businesses 
(especially smaller SMEs).  

trading 

cross-border 

to 

The  fourth  option  of  basing  the  threshold 
on  the  amount  of  sales  to  a  specific 
Member  State  (similar 
the  current 
distance  sales  thresholds),  would  provide 
the  best  control  for  Member  State  of 
consumption  over  their  revenue  impact 
and would follow thus best the taxation at 
destination  principle  (although  compliance 
control  would  still  be  challenging). 
However,  such  approach  can  be  complex 
and 
businesses, 
especially  after  abolishment  of  distance 
sales rules.  

burdensome 

for 

1.e 

Basis  –  other  than 
turnover 

could 

Threshold 
be 
calculated  on  another 
basis 
turnover, 
such as  annual net VAT 
due. 

than 

the  options 

for 
The  choice  between 
turnover  basis  would  thus  depend  on  the 
policy  objectives  and  relative  priorities  as 
well  as  on  the  decisions  on  the  other 
aspects  of thresholds  (e.g. national or EU 
standardised) and potential combination of 
different elements (e.g. a combination of a 
national 
threshold  and  a  cross-border 
threshold, additional simplifications). 

The turnover is an indication of the size of 
the business, but may not be always most 
suitable  indicator  of  the  availability  of 
sufficient  financial  resources  for  full  VAT 
compliance. Therefore, a use of alternative 
basis  more  closely  linked  to  the  profit 
margin  of 
the  business  may  be 
considered. To  avoid  the use  of  the  basis 
of another tax (such as profit for corporate 
tax  purposes),  a  closest  VAT  related 
indicator  could  be  used,  such  as  annual 
net  VAT  due  (as  currently  applied  in  the 
be 
It  may 
Netherlands). 
considered 
to 
current 
(as  generally  applied 
elsewhere)  and  would  contain  different 
compliance risks. 

too  significant  change 

however 

regime 

1.f 

Optionality 

The  use  of  the  scheme 
may be either  

1) optional for SMEs or  

2) obligatory or  

3)  obligatory  for  certain 
type of SMEs 

The  current  SME  scheme  is  optional  for 
businesses. This provides them maximum 
level  of  flexibility,  enabling  businesses  to 
benefit from the exemption to reduce their 
tax  (and  administrative)  burden,  but  opt 
out  and  apply  the  common  VAT  regime, 
should  this  be  more  beneficial  for  them 
(e.g. enabling input VAT deduction, which 
initial 
for  a  new  business  making 
investments  may  exceed  the  output  VAT, 
thus  resulting  with  business  being  in  VAT 
refund position).  Also, businesses  having 
mostly B2B supplies may prefer to opt out 
of the scheme.  

For tax authorities however, the optionality 

167 | P a g e  

 
 
 
Element 

Description 

Assessment 
complicates  the  scheme  (revenue  impact 
and  administrative  cost  are  harder  to 
estimate)  and  makes  it  more  costly,  as 
they  need  to  administer  microbusinesses, 
which  increases  administrative  cost  and 
may  not  provide  additional  revenue  (or 
have negative revenue impact due to VAT 
refunds).  

to 

The  right  to  opt  out  of  the  scheme  and 
register  for  VAT  may  increase  also  VAT 
fraud risks (especially input VAT fraud and 
missing trader fraud). Therefore, a change 
to  (partially)  compulsory  scheme  may  be 
considered, 
smallest 
keep 
businesses  or  occasional  traders  out  of 
the  VAT  system  (although  a  negative 
impact on start ups ought to be taken into 
account).  As  alternative,  a  minimum 
registration  period  is  sometimes  used  for 
optional  registration,  to  reduce  fraud  risks 
and abuse of the scheme. 

the 

1.g 

Number 
thresholds 

of 

just  one 
Instead  of 
multiple 
threshold, 
thresholds 
be 
applied,  e.g.  different 
thresholds for goods and 
services or by industries  

could 

1.h  Graduated 

thresholds  –  extent 
of sales 

Multiple thresholds could 
in  a 
be  applied  also 
graduated  way, 
e.g. 
depending on how many 
countries  the  SME  sells 
to 

Effective  targeting  of  special  schemes  is 
important  for  tax  authorities,  especially 
where  the  scheme  has  direct  revenue 
impact,  such  as  in  case  of  the  SME 
scheme.  As  the  SMEs  in  different  sectors 
(e.g. goods or services) may have different 
level  of  administrative  burden  (or  need 
different level of support) in comparison to 
their  turnover  or  are  seen  as  posing 
different  level  of  fraud  risk,  tax  authorities 
may  find  it  more  appropriate  to  apply 
multiple  SME  VAT  exemption  thresholds, 
targeted  to  certain  types  of  supplies  or 
industries.  Such  approach 
is  currently 
used by several Member States. However, 
multiple  thresholds  will  make  the  VAT 
system  more  complex  and  may  cause 
challenges  and  additional  burden 
for 
businesses  potentially  falling  under  more 
than one threshold.  

also  main 

As  above,  better  targeting  of  the  VAT 
exemption  threshold  would  reduce  the 
revenue impact. Therefore, on assumption 
that  the  threshold  applies  (also)  to  cross-
(and  SME  scheme 
border  supplies 
simplification 
includes 
measures)  and  considering 
the 
that 
administrative  burden  on  cross-border 
trade  generally  depends  on  whether 
business  trades  in  some  or  many  other 
Member States (e.g. VAT registration cost 
multiplied  by  the  number  of  registrations), 
it  may  be  appropriate  to  set  different 
thresholds,  dependent  on  how  many 
countries 
the  business  sells  to.  Such 
approach  would  however  add  complexity 

168 | P a g e  

 
 
 
Element 

Description 

1.i 

relief 

– 
Gradual 
reduction  of  VAT 
burden 

may 

supplies 

below 
The 
threshold 
be 
subject  to  reduced  VAT 
burden  rather  than  full 
exemption 

1.j 

Graduated 
thresholds 
alternatives 

- 

The 
of 
graduation 
thresholds  may  depend 
on 
the 
the  age  of 
business 

Assessment 
to  the  scheme  and  be  very  difficult  to 
monitor by tax authorities. 

Gradual  relief  is  already  regulated  in  the 
current  VAT  system  and  means 
that 
instead  of  exemption  (or  in  addition  to 
exemption),  a  reduction  of  VAT  burden  is 
provided to the SMEs below the threshold. 

Such  reduction  could 
theoretically  be 
provided  by  application  of  reduced  VAT 
rate  on  outputs  (covered  below)  or  more 
commonly  by  a  discount  to  the  VAT 
payable or later partial refund.  

Similar gradual relief could be also used to 
support a transfer from exceeding the VAT 
exemption  threshold  to  full  application  of 
VAT regime. 

Such  VAT  relief  could  be  seen  as  a 
national  budget  measure  (and  could  as 
such  be  applied  also  outside  of  the  VAT 
system,  keeping 
in  mind  state  aid 
limitations),  but  it  could  be  also  designed 
as  part  of  an  EU  SME  scheme.  The 
aspects  to  keep  in  mind  in  case  of  such 
measure  are  the  revenue  impact  and 
potential  fraud  risk  of  newly  registered 
businesses,  which  need  to  be  carefully 
mitigated.  

There  may  be  other  ways  how  to  use 
graduation  in  better  targeting  of  the  SME 
measures.  As  proven  by 
the  OECD 
study117,  the  SMEs’  need  for  support  and 
simplification  depends  not  only  of  its  size 
but  also,  or  even  more  importantly,  of  its 
age.  Therefore,  the  young  small  start  ups 
may 
support 
(simplification  and  financing),  whilst  more 
experienced  businesses  may  manage 
better  with  regular  VAT  obligations  or  full 
VAT burden.  

biggest 

need 

the 

The SME scheme recently implemented in 
Mexico118  provides  an  example  of  an 
innovative  approach  based  on  graduated 
relief, applied across taxes and combining 
financial and administrative support.  

Amongst  other  supporting  measures,  the 
scheme  applies  relief  from  tax  obligation 
which decreases gradually by 10% a year 
for  10  first  years  of  the  start  of  business 
(from 100% relief to 10% on year 10).  

Using  this  idea,  a  VAT  scheme  could  be 
designed,  providing  start  ups  e.g.  50% 

169 | P a g e  

117 E.g. OECD (2015), Taxation of SMEs in OECD and G20 countries 
118 Called Regimen de Incorporacion Fiscal (RIF) 

 
 
 
                                                      
Element 

Description 

Assessment 
VAT  relief  with  the  right  to  deduct  input 
VAT  and  a  simplification  of  other  VAT 
obligations  for  first  3  years  (changing  to 
25% from year 5 and to 0% from year 7).  

However,  compliance  and  anti-abuse 
control  of  this  measure  may  prove  to  be 
complex  (e.g.  how  to  define  genuine  start 
up  and  differentiate  from  artificial  splitting 
of  a  business).  Therefore,  some  further 
feedback  on  the  experience  from  the 
Mexican system would be useful. 

1.k 

Flexible threshold 

Businesses can fall back 
to  the  SME  exemption 
scheme if exceeding the 
VAT 
exemption 
threshold temporarily  

is 

that 

threshold 

One  of  the  perceived  problems  with  VAT 
exemption 
it  may 
discourage growth. To address this, some 
Member States are already using a form of 
‘flexible  thresholds’.  This  means  that  a 
business  which  exceeds 
the  VAT 
exemption  threshold  does  not  need  to 
apply full VAT obligations immediately but 
can continue to be exempt as long as their 
turnover does not exceed the threshold by 
a  considerable  percentage  (or  another 
slightly  higher  threshold).  Such  measure 
would  help  for  example  in  case  of  a 
temporary  small 
sudden,  one-off  or 
increase  in  sales.  Such  measure  could 
however  also  be  seen  as  just  a  higher 
VAT  exemption  threshold  (with  a  lower 
‘warning’ threshold). to mitigate this, a time 
limit could be added to the measure. 

1.l 

Transitional period 

continue 
for 

SME exemption scheme 
will 
to  be 
one 
applied 
(calendar)  year  after  the 
been 
threshold 
the 
exceeded  or  until 
the 
turnover  exceeds 
exemption 
SME 
threshold 
50%, 
whichever is earlier 

has 

by 

to 

by 

full 

the 

transfer 

temporarily, 

Similarly  to  the  flexible  threshold,  this 
element  suggests  giving  SMEs  time  to 
taxation. 
smooth 
However, it is meant to support all growing 
SMEs,  not  just  cases  where  threshold  is 
exceeded 
providing 
specific  time  period  (1  year)  after  which 
the  scheme  would  cease  to  apply.  As 
such,  it  has  potential  to  provide  wider 
support and have more extensive positive 
impact  in  reducing  ‘threshold  effect’.  A 
higher 
to  be 
threshold  would  need 
introduced,  similarly  to  flexible  threshold, 
to safeguard impact on tax revenues of the 
government. 

2 

2.a 

VAT calculation and accounting simplification and compensation measures. 

Flat-rate 
presumptive 
measures 

and 
tax 

in 

flat-rate 
Existing 
differ 
schemes 
their 
significantly 
design, but their purpose 
is  usually  to  simplify  the 
calculation 
VAT 
(e.g.  by  not 
payable 
input  VAT 
requiring 
calculations 
and 
applying  low  flat-rate  to 

of 

Flat-rate  schemes  are  currently  used  to 
(and  sometimes  compensate 
simplify 
the  VAT 
financial  support) 
/provide 
obligations for small businesses.  

Flat-rate  and  presumptive  tax  measures 
may  provide  an  effective  simplification  for 
tax  authority 
for 
a  business  and 
(depending on a design).  

In  the  EU,  the  schemes  are  currently  not 

170 | P a g e  

 
 
 
Element 

Description 
gross outputs)  

These 
schemes  are 
often targeted to specific 
apply 
or 
sectors 
generally, 
have 
but 
industry  specific  VAT 
rates.  

In case of a presumptive 
tax,  the  business  below 
certain threshold (and in 
specific  sector)  may  opt 
for  a  payment  of  a  fixed 
amount  of  tax,  relieving 
it  from  the  precise  VAT 
calculation. 

Assessment 
intended 
to  provide  a  compensation, 
although  potentially  they  could  provide 
also financial support and in practice some 
businesses still benefit (if they have lower 
than average input VAT cost)..  

As  a  disadvantage,  such  schemes  add 
complexity  to  the  VAT  system  and  may 
disincentivise businesses to grow or widen 
their  activities  (i.e.  business  is  ‘locked  in’ 
to the scheme).  

For  tax  authorities  it  may  be  challenging 
to 
(or  disproportionately  burdensome) 
control  the  compliance  of  such  schemes, 
especially  if  the  reporting  obligations  are 
also significantly simplified. Therefore, the 
schemes may be open for abuse. 

2.b 

Reduced  VAT  rate 
for SMEs 

2.c 

Simplified/fixed 
input tax credit 

SMEs  below  threshold 
reduced 
can  apply  a 
VAT 
their 
supplies 

rate 

to 

As  a  simplification,  the 
deductible 
input  VAT 
may  be  calculated  as  a 
the 
percentage 
turnover (as in Germany 
a 
and  Austria) 
percentage 
VAT 
payable (as in Japan). 

or 

of 

of 

2.d 

Exemption 
supplies to SMEs 

for 

would 
Businesses 
exempt 
right  of 
(with 
deduction) their supplies 
to  SMEs  (currently  used 
in Turkey). 

A  lower  VAT  rate  could  be  used  to 
compensate  the  SMEs.  Such  measure 
would  in  effect  be  a  form  of  a  gradual 
relief. It could for example be applied as a 
transitional  measure  between  the  VAT 
exemption  threshold  and  full  VAT  regime, 
to 
in 
administrative  burden  and  thus  ease  their 
transfer  to  the  full  regime.  However,  it 
would  further  complicate  the  VAT  system 
and have direct impact on Member States 
revenue. 

compensate 

increase 

the 

measure 

Such 
reduce 
administrative  burden  for  businesses  and 
may also reduce input VAT fraud.  

would 

Simplifications  for  input  VAT  calculations 
could  be  either  combined  with  a  flat-rate 
scheme or applied separately. 

As  a  downside,  such  additional  measure 
would add complexity to the VAT regime. 

Although  it  may  provide  effective  financial 
support to SMEs as well as a simplification 
(as  they  would  not  need  to  calculate  and 
deduct input VAT), it would add significant 
complexity  to  the  VAT  system  and  would 
be  challenging 
to 
administer  and  control,  therefore  being 
prone to abuse. 

tax  authorities 

for 

2.e 

Cash accounting 

to 
of 
thus 

Applies  cash  accounting 
the 
principles 
VAT 
calculation 
payable, 
VAT 
becomes  payable  after 
receipt  of  payment  from 
customer 

A consistent approach is 
often applied also to the 
input  VAT  calculations, 

Cash  accounting  is  already  quite  widely 
used  as  a  measure  to  support  SMEs, 
providing  effective  support  regarding  their 
cash flow.  

By  linking  their  output  VAT  calculation  to 
the  payments  from  customers,  the  cash 
that  a 
accounting  scheme  ensures 
business  has  resources  to  pay  the  VAT 
due.  

171 | P a g e  

 
 
 
 
 
 
Element 

Description 
prohibiting  deduction  of 
input  VAT  on  purchases 
before  they  are  actually 
paid for.  

Cash accounting may be 
applied  also  only 
to 
outputs. 

Assessment 

Despite  providing  real  benefit  to  small 
businesses  with  limited  cash  resources, 
such schemes may increase complexity of 
the system, depending on the design (e.g. 
the  other  businesses  trading  with  such 
SME  should  be  impacted  as  little  as 
possible).  

However,  the  uptake  of  scheme  may  be 
impacted  by  other  regulations,  such  as 
accounting  standards’ 
for 
requirement 
businesses to use accrual accounting. 

2.f 

Payment 
measures 

flexibility 

schemes, 

improvement 

to  current  cash 
As  an 
accounting 
further 
alignment  could  be  considered,  especially 
related  VAT  obligations  and 
on 
administrative tasks.  

some 

the 

A number of Member  States  already  offer 
SMEs  more  flexibility  to  adjust  their  VAT 
payments as alternative type of measures 
used to support SME cash flow. 

Further  alignment  of  such  national  best 
practices may be useful. 

The  measure  could  have  negative  impact 
on  tax  authority’s  cash  flow,  but  it  would 
be limited and can be managed/controlled 
by setting an appropriate threshold. 

to 
SMEs  are  allowed 
pay 
VAT 
advance 
payments  on  optional 
basis 
than 
(rather 
mandatory)  (in  France, 
Spain  and  the  UK)  or 
pay 
in 
VAT 
due 
(Australia) 
instalments 
or  deferred  (Chile)  or 
frequently, 
paid 
less 
together 
VAT 
frequent 
declaration 
(widely 
applied in the EU). 

with 

less 

2.g 

Less  frequent  filing 
of VAT returns 

2.h 

Special 
refund 

input  VAT 

SMEs  below 
certain 
threshold  are  allowed  to 
frequent 
less 
submit 
(e.g. 
VAT 
returns 
quarterly 
of 
annual 
monthly, 
instead of quarterly) 

instead 
or 

More flexible or frequent 
or 
input  VAT 
refund procedures 

faster 

This  is  one  of  the  most  common  current 
SME  simplification  measures  (outside  the 
measures  used  together  with  the  SME 
scheme), which reduces the administrative 
burden 
tax 
authorities. 

for  both  businesses  and 

Such  a  measure  would  also  support  cash 
flow  of  SMEs.  This  measure  would  be 
in 
especially  valuable 
countries  where  the  regular  VAT  refunds 
are cumbersome or limited. 

for  businesses 

3 

3.a 

Simplified VAT administrative obligations 

Simplified/abolished 
administrative 
obligations  

Simplified  requirements 
or  abolition  of  VAT 
related  obligations  of 
SMEs: 

1)  VAT registration; 

2)  VAT return; 

3)  VAT invoicing; 

4)  Evidence 

requirements; 

from 

Most  Member  States  provide  significant 
simplification  measures 
to  businesses 
the  SME  exemption 
benefitting 
the  VAT  Directive 
scheme.  Although 
allows  the  Member  States 
to  release 
businesses  benefitting  from  the  scheme 
either 
tax 
obligations,  many  have  opted 
for  a 
full/wide release of VAT obligations.  

from  all  or  only  some 

Considering  more 
in 
some  Member  States,  keeping  some 

limited  approach 

172 | P a g e  

 
 
 
 
 
Element 

Description 

5)  Accounting 
standards.  

Assessment 
obligations, such as VAT registration (and 
e.g. a form of declaration) would increase 
the  administrative  burden 
for  both 
businesses and tax authorities, however it 
may  simplify  the  compliance  control  (and 
reduce avoidance and fraud risk).  

Another  possible  approach  here  could  be 
also  to  use  graduated  thresholds,  e.g.  a 
lower 
release  of 
obligations  and  a  higher  one  with  partial 
release from obligations. 

threshold  with 

full 

As  the  application  of  such  simplification 
measures  can  mean  that  tax  authorities 
collect  or  business  collects  or  keeps  less 
information  on  business  activities,  such 
measures  should  be  well  assessed 
regarding  any  potential  VAT  avoidance 
and fraud risks. 

4 

4.a 

and 

Harmonised 
mandatory 
treatment  as  non-
taxable person 

Treatment as non-taxable person 
Harmonised 
and 
obligatory  treatment  as 
non-taxable 
persons 
could  be  applied  to  a 
of 
specific 
businesses: 
a)  Occasional traders – 
i.e. 
private 
individuals  whose 
taxable  activity 
is 
only incidental; 

group 

b) Smallest 

“nano” 

businesses; 

c) Smaller 

“micro” 

businesses. 

or 

incidental 

Current concept of ‘taxable person’ is very 
wide  and  includes  e.g.  individuals  having 
occasional 
business 
activities.  They  would  be  able  to  benefit 
their 
the  SME  scheme,  unless 
from 
supplies  do  not  qualify  for  the  scheme 
(e.g. occasional B2C supply of e-service to 
another Member State). Current treatment 
to 
allows  also  businesses/individuals 
register  for  VAT  voluntarily  and  deduct 
(proportion of) input VAT on e.g. personal 
assets  partially  used 
for  business 
purposes.  This  increases  the  risks  of 
abuse and input VAT fraud and increases 
the  number  of  VAT  registrations  with 
minimal (or negative) VAT revenue. 
So a mandatory exclusion of such smallest 
traders  may  reduce  administrative  cost 
and  abuse/fraud  risks  for  tax  authorities 
and  benefit  traders  not  eligible  for  SME 
scheme.  
At  the  same  time,  if  targeted  just  by 
turnover  threshold,  it  may  block  start  ups 
from 
initial 
input  VAT  deductions  on 
investments,  which  would  discourage 
entrepreneurship and growth. 
So  a  careful  consideration  and  targeting 
would  be  required  to  make  the  measure 
effective.  

173 | P a g e  

 
 
 
 
 
 
 
 
Annex I – Methodological note 
for the analysis of the options 

This  note  presents  the  methodology  and  assumptions  used  to  assess  the  impacts  of  the 
policy  options  (as  formulated  in  Volume  I).  The  note  provides  detailed  explanations  of  the 
sources used, the approach adopted, the assumptions made and their basis.  

I.1 Introduction  

The proposed options are the following:  

  Option 1: Baseline scenario. This includes the following provisions:  

o  SME exemption schemes as currently implemented in the Member States;  
o  Removal  of  the  intra-EU  common  distance  selling  threshold  for  B2C  supplies  of 
goods  and  of  the  exemption  for  importation  of  small  consignments  from  supplier  in 
third countries. Therefore, as a general rule, all cross-border B2C supplies of goods 
and  services,  as  well  as  imports,  will  be  charged  in  the  Member  State  of  the 
consumer;  

o  Extension of the MOSS to intra-EU distance sales of goods and services other than 
Telecommunication, Broadcasting and Electronic (TBE) as well as to distance sales 
of goods from third countries;  

o  Application of domestic rules in areas such as invoicing and record-keeping for intra-

o 

EU sales;  
Introduction of a common EU threshold (total value of supplies, exclusive of VAT, of 
EUR  10 000)  for  all  B2C  cross-border  supplies  of  goods  and  services.  Up  to  the 
threshold.  EU  businesses  will  be  able  to  treat  intra-EU  supplies  as  domestic 
transactions. Once the threshold is exceeded, the supplier will be required to register 
and  account  for  VAT  due  in  all  other  Member  States  (or  can  opt  for  declaring  VAT 
from intra-EU sales via the MOSS).  

  Option  2:  SME  exemption  scheme  extended  to  supplies  from  other  Member  States  and 

including streamlined simplification measures. 

  Option 3: Option 2 plus mandatory treatment of occasional traders as non-taxable persons. 
  Option 4: Option 3 plus measures for a transition period to reduce the negative impact of the 

‘threshold effect’. 

For each of the options, their impact is evaluated on:  

1.  The number of businesses impacted by the change in policy; 
2.  The  impact  on  their  compliance  costs  with  separate  analysis  according  to  the  size  of 

enterprises; 

3.  The impact on the VAT revenue collected by Member State and at the EU-level;  
4.  The impact on compliance and fraud (qualitative assessment); and 

174 | P a g e  

 
 
5.  The impact on the wider economy, including internal market, cross-border trade growth, and 

effects on consumers in terms of prices and consumption.   

While some data was obtained from tax authorities across the Member States for the quantification of 
businesses in different size classes across the EU, their generated turnover and VAT revenue, some 

of the proposed options require very granular data on SMEs’ activities to estimate their impacts. As 
such data  was  not  always  available, assumptions  had  to be made  to obtain  the  required  estimates. 
The following describes the approach taken for evaluating each option and the proposed assumptions 
used.  

As  the  options  relate  to  the  SME  exemption  scheme  or  to  occasional  traders,  most  businesses 
impacted by the policy options are likely to be small businesses. Businesses with less than EUR 100 
000  of  turnover represent  less  than  3% of  the  overall  EU  turnover  generated,  and  this  proportion  is 
smaller when considering cross-border trade. Therefore, while sensitivities are carried out around the 
assumptions to test the overall impacts calculated, these are relatively small in magnitude.   

I.2 General Assumptions 

As  the  proposed  policy  options  build  on  each  other,  some  common  assumptions  were  required 
throughout to estimate the impacts on the economy. These are outlined and explained in turn below.   

Common VAT rate 

To  assess  the  impact  of  the  options  on  the  VAT  revenue  collected,  some  of  the  options  require 
applying VAT rates on the turnover at stake. However, VAT rates differ by Member State and by type 
of supply.119 As the data was generally not granular enough to obtain precise estimates on the type of 
supplies impacted or the exact Member State in which the sale happens, Member State specific and 
supply specific rates could not be used. Hence, an effective VAT rate was calculated at the EU level 
and applied to the turnover at stake in every option to calculate the impact on VAT revenues. Based 
on the ratio of total VAT revenue collected relative to final consumption, the effective VAT rate in the 
EU is calculated to be 12.3%120. It therefore accounts for: 

  The different rates applied across supplies and the weight that each supply contributes to the 

VAT revenues; and 

  The  different  rates  applied  across  Member  States,  and  again,  the  weight  that  each  country 

contributes to the overall EU VAT revenues.  

Number of SMEs in the EU 

The  data  obtained  from  tax  authorities  is  used  to  estimate  the  number  of  businesses  and  their 
average  turnover  within  size  classes121  for  all  28  Member  States.  The  methodology  and  results  of 
these calculations are presented in Annexes B to D.  

119 There is generally a standard rate, a reduced rate and a zero rate. 
120 Using Eurostat National Accounts data 
121 Defined as: Less than EUR 5 000, EUR 5 000 to EUR 50 000, EUR 50 000 to EUR 100 000, EUR 100 000 to EUR 500 000, 
EUR 500 000 to EUR 2 000 000, over EUR 2 000 000.  

175 | P a g e  

 
 
                                                      
Treatment of Domestic SME Exemption Thresholds 

For all of the options, it is assumed that domestic SME exemption thresholds do not change. Although 
there  is  scope  for  further  EU-level  legislative  alignment  of  the  domestic  thresholds  for  the  SME 
exemption  across  the  EU,  a  fully  harmonised  threshold  level  is  not  foreseen,  still  allowing  Member 
States to apply their own thresholds within the limits set at EU level. 

In  assessing  the  impact  of  extending  the  domestic  threshold  to  non-established  businesses,  the 
relevant threshold to consider for a business exporting to a country is the one in place in the country 
of destination. However, while the data obtained indicated how many SMEs trade within the EU, it is 
not granular enough to know to which exact Member States they trade in, making it challenging to use 
the  Member  State-specific  thresholds.  Therefore,  a  weighted  average  threshold  was  used  for 
calculations across the EU.  

Since  the  Member  States  most  impacted  by  extending  their  domestic  thresholds  to  non-established 
businesses  are  the  ones  with  higher  imports,  the  thresholds  in  place  are  weighted  by  the  share  of 
intra-EU  imports  to  a  given  country  obtained  from  Eurostat.122  The  levels  of  thresholds  vary  across 
Member States from EUR 0 (i.e. no exemption scheme currently available) in Spain, Sweden and the 
Netherlands  to  GBP  83  000  in  the  UK.  However,  the  UK’s  threshold  is  an  outlier  as  it  is  by  far  the 
highest in the EU – most thresholds are set between EUR 10 000 and EUR 50 000 in other Member 
States. Including the UK could therefore overestimate the number of businesses actually impacted as 
it would set the average threshold virtually high. It was therefore decided that UK would be excluded 
from the calculations and a weighted average threshold of EUR 26 000 was used.   

It is important to note that the calculations using the threshold levels were conducted during 
Autumn of 2016 and therefore do not take into account any subsequent changes to thresholds 
or  application  of  the  exemption  scheme  in  additional  Member  States.  Specifically,  this  means 
that the following adjustments made to the application of the exemption scheme in the Member States 
were not taken into account for the impact analysis: 

  The application of the SME exemption scheme in Sweden (brought in in January 2017); 
  France  threshold  levels  for  the  SME  exemption  scheme  which  were  updated  in  February 

2017; 

  Luxembourg  threshold  levels  for  the  SME  exemption  scheme,  which  were  updated  in 

January 2017. 

Cross-border transactions in scope 

For the purpose of assessing the number of business impacted by each policy option and the related 
changes  in  compliance  costs,  it  is  important  to  clearly  state  the  scope  of  the  analysis  (i.e.  market 
segments included or excluded), as  well as the interaction of the VAT exemption threshold with the 
common EU threshold for B2C supplies and the ability to use the MOSS for intra-EU sales. 

122 http://ec.europa.eu/eurostat/statistics-explained/index.php/International_trade_in_goods 

176 | P a g e  

 
 
 
                                                      
B2B transactions 

Under  the  current  legislative  framework,  in  cross-border  transactions  between  businesses  (i.e.  B2B 
transactions), the reverse charge mechanism applies. For all options, it is assumed that the reverse 
charge mechanism would continue to apply for B2B transactions and the supplier would not have VAT 
obligations in the Member State of destination. As such, the compliance costs for B2B cross-border 
transactions are already included  in the analysis of the compliance costs for businesses in option 1 
(baseline scenario).  

In  cross-border  B2B  transactions  the  supplier  (whether  within  the  SME  scheme  in  its  own  Member 
State or not) will not benefit from the extension of the VAT exemption threshold of the customer State, 
as  it  has  already  no  VAT  obligation  in  that  State,  besides  VAT  obligations  (such  as  invoicing  and 
declaring) on this transaction in its Member State of establishment.  

Under  Option  2,  businesses  engaged  in  B2B  cross-border  trade  could  potentially  benefit  from  the 
wider simplification  package  in  their  own Member State,  provided  that  they are  eligible  for  the  SME 
exemption scheme. However, the final effect of such simplification package is uncertain, as in those 
Member  States  that  currently  impose  minimal  obligations  the  actual  compliance  costs  for  business 
may increase due to additional obligations (such as the obligation to register). As a general provision, 
however,  the  cost  of  each  measure  included  in  the  simplification  package  is  calculated  individually. 
Therefore, businesses engaged in B2B transactions are out of scope for the analysis with regard to 
their cross-border transactions, while their compliance costs for domestic obligations are included in 
estimates for options 2 to 4.  

B2C transactions 

EU businesses engaged in intra-EU B2C transactions face different options for the treatment of such 
sales. These options differ under the baseline scenario and the policy options considered, and each is 
considered in turn below.  

Baseline scenario  

Businesses carrying out intra-EU B2C sales can be separated into two groups: those whose values of 
B2C  cross-border  sales  fall  below  the  common  EU-threshold  of  EUR  10  000  and  those  who  fall 
above.  

In  the  first  case,  businesses  with  turnover  of  less  than  EUR  10  000  from  intra-EU  trade  face  the 
following choices with regard to VAT on their B2C cross-border sales: 

  They  can  treat  these  as  domestic  supplies,  and  be  subject  to  the  VAT  obligations  in  their 
home country. Note that these sales might be exempt from VAT if the business is eligible, and 
opts for the SME exemption scheme in its home country; 

  They can declare and pay VAT via the MOSS; or 
  They  can  register  for  VAT  in  the  Member  State  of  destination,  and  be  subject  to  the 

obligations in this country. 

If  the  B2C  cross-border  sales  of  businesses  are  higher  than  the  common  EU-threshold  of  EUR  10 
000, businesses face the following choices: 

  They can declare and pay VAT via the MOSS; or 

177 | P a g e  

 
 
 
 
  They can register for VAT in the Member State of destination and be subject to the obligations 

in this country. 

The choices faced by the different types of businesses described above are summarised in the figure 
below.  

Figure 24 – Summary figure of choices faced by businesses carrying out B2C intra-EU sales in the 
baseline 

Source: Deloitte elaboration  

The decisions of businesses might be impacted by a number of factors, including the simplicity and 
certainty of the legal framework they will operate in, the compliance costs of each option, the number 
of Member States they trade with and the competitive advantage they might obtain by being exempt 
from VAT. For small businesses with a limited turnover from intra-EU trade (below EUR 10 000), the 
use of domestic rules represents the simplest solution, as they need only comply with domestic rules 
(with which they are more familiar) and may benefit from SME exemption from VAT. It is also possible 
that such businesses decide to opt for the MOSS immediately, for instance if they plan to expand their 
intra-EU presence, or if they are already using it for TBE services.  

For small businesses with a turnover from cross-border trade above EUR 10 000, the option of using 
the MOSS is likely to be a pragmatic and effective option, given the limited compliance costs of the 
system  and  the  application  of  one  set  of  (domestic)  rules123.  The  option  of  registering  for  VAT 
purposes  directly  in  the  Member  States  of  destination  is  also  theoretically  possible  for  small 
businesses, however unlikely, as it entails higher compliance costs and legal complexity.  

123 Clearly, the use of the MOSS (either below or above the common EU threshold of EUR 10 000) requires businesses still to 
know and apply the appropriate VAT rate for their goods and services (i.e. the VAT of the Member State of consumption). 

178 | P a g e  

 
 
 
 
                                                      
Options 2 - 4 

When SME exemption schemes are opened to non-established businesses (Options 2-4), businesses 
engaged in B2C trade will have an additional possibility for the treatment of intra-EU sales: they can 
now use the SME exemption scheme in other Member States if they meet the eligibility requirements.  

Under this, businesses carrying out intra-EU B2C sales can be divided to three groups: those whose 
values of B2C intra-EU cross-border sales fall below the common EU-threshold of EUR 10 000, those 
whose  intra-EU  turnover  fall  between  the  common  EU  threshold  and  the  average  VAT  threshold  of 
EUR 26 000, and finally those whose intra-EU sales fall above the VAT average threshold. . 

For businesses in the first two groups, this means that the option of applying for the SME exemption 
scheme  is  now  added  to  the  options  set  out  above.  The  figure  below  shows  the  extended  set  of 
possibilities available to businesses of different sizes under Option 2.  

Figure 25 - Summary figure of choices faced by businesses carrying out B2C intra-EU sales in the 
policy options 

Source: Deloitte 

Under  this  Option,  many  businesses  will  therefore  face  a  choice  between  using  the  MOSS  and 
applying  for  the  SME  exemption  scheme  in  another  Member  State.  Using  the  MOSS  has  the 
advantage of a simpler set of rules (as domestic rules apply, apart from the VAT rate of the Member 
State  of  the  consumer),  but  businesses  lose  the  competitive  advantage  of  being  exempt  from  VAT, 
and thus applying lower consumers’ prices. On the other hand, the decision of applying for the SME 
exemption  scheme  in  another  Member  State  will  depend  on  the  trade-off  between  facing  the 

179 | P a g e  

 
 
 
 
 
compliance  costs  of  such  a  decision  and  the  competitive  advantage  of  lower  consumers’  prices 
thanks to the exemption from VAT.  

The choice is likely to depend on the patterns of cross-border trade of each individual business. It is 
more likely that businesses will opt to apply for the SME exemption scheme in another Member State 
if they have a significant volume of trade with countries with a high VAT rate, where this advantage is 
more likely to offset the compliance costs. Another important element is the number of Member States 
businesses  trade  with,  and  the  turnover  from  each.  If  the  cross-border  trade  is  concentrated  in  one 
Member  State,  and  they  are  eligible  for  the  SME  exemption  scheme  in  that  country,  then  the 
compliance  costs  and  legal  complexity  linked  to  that  option  may  be  offset  by  the  competitive 
advantage  of  being  exempt  from  VAT  (and  able  to  apply  lower  consumers’  prices).  However,  if 
businesses have limited turnover in several Member States, the lower compliance costs and simpler 
set of rules related to the MOSS may prevail over the advantages of the cross-border VAT exemption.  

With the data at hand, it is however difficult to predict the proportion of businesses that will opt for one 
regime or the other when given the choice. The impact of the options on the number of businesses 
affected the VAT revenues and the compliance costs were therefore calculated as a range to account 
for the inherent uncertainty.  

Goods vs services 

Data was collected during the study for both goods and services, and was elaborated per sector using 
the  NACE  classification124.  Data  collected  does  not  have  the  granularity  necessary  to  exclude  those 
services  subject  to  specific  VAT  regimes  (such  as  holiday  and  travel  services  sold  by  travel  agents 
including online, which fall under the taxation of the margin regime).  

The estimates of the impacts of the policy options for reviewing the SME schemes include both goods 
and  services,  with  no  exclusions  of  those  services  subject  to  another  special  VAT  regime  (unless 
otherwise specified). While this can be an over-estimation of the impacts of the policy options in terms 
of  VAT  revenues,  it  has  to  be  considered  that  SMEs  subject  to  the  policy  options  represent  only  a 
small proportion of EU businesses trading cross-border and an even smaller share of VAT revenues 
(see Table 133). Therefore, the possible upward bias in the estimation of VAT impacts is likely to be 
negligible.  

Number of SMEs trading cross border 

The policy option that extends the domestic SME exemption scheme to non-established businesses 
will  only  impact  businesses  that  trade  cross-border,  and  whose  value  of  cross-border  sales  in  an 

individual Member State falls below this Member State’s threshold, or for the purpose of this analysis, 
below  a  weighted  average  threshold  of  EUR  26  000.  Data  from  a  Flash  Eurobarometer  on  the 
Internationalisation  of  SMEs125  suggests  that  only  a  proportion  of  SMEs’  turnover  (around  27%)  is 
generated from cross-border sales. This implies that a majority of businesses impacted by this option, 
i.e. whose cross-border sales fall below the threshold, have turnover below EUR 100 000, as 27% of 
a  value  greater  than  EUR  100  000  will  give  a  value  of  cross-border  sales  above  EUR  26  000.  A 

124 See: http://ec.europa.eu/eurostat/statistics-
explained/index.php/Glossary:Statistical_classification_of_economic_activities_in_the_European_Community_(NACE) 
125 Flash Eurobarometer 421, Internationalisation of Small and Medium-sized Enterprises (2015) 

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business  with  larger  turnover  is  therefore  less  likely  to  be  eligible to  the  SME exemption scheme  in 
the  Member  State  of  destination.  In  obtaining  estimates  of  cross-border  activities  of  SMEs,  the 
research therefore focused on this group of businesses.126  

While the inherent uncertainty around this assumption implies that more or fewer businesses may be 
impacted by the policy change, SMEs with less than EUR 500 000 of turnover only make up around 
8%  of  the  overall  turnover  in  the  EU  (this  proportion  is  less  than  3%  when  only  businesses  with 
turnover  below  EUR  100 000  are considered). Hence, while sensitivities  are carried out around this 
number, the overall impact is expected to be small.     

Data  collected  from  tax  authorities,  Ipsos  MORI  surveys  and  the  Flash  Eurobarometer  on  the 
Internationalisation  of  SMEs127  suggests  that  between  10%  and  30%  of  SMEs  trade  cross-border. 
However, the Flash Eurobarometer study gives data which enables for the calculation of estimates by 
businesses’ size classes, suggests that between 12% and 15% of the smallest SMEs (turnover below 
EUR  100  000,  which  are  more  likely  to  be  impacted  by  the  exemption  scheme)  trade  cross-border. 
Some country specific studies exist as well, for example, data from IfM Bonn suggests that in 2009, 
less  than  5%  of  SMEs  in  Germany  with  turnover  below  EUR  100  000  exported.128  A  comparison 
between the data obtained from the Flash Eurobarometer study and IfM Bonn is presented below. 

Table 132 – Comparison of Flash Eurobarometer and IfM Bonn data on exporting businesses 

Percentage of firms exporting 

Exports as a percentage of turnover 

Size class 

Flash 

Flash 

Eurobarometer 

IfM Bonn data 

Eurobarometer 

IfM Bonn data 

data 

12% 

data 

32% 

25% 

2.7% 

15% 

4.7% 

23% 

20% 

25% 

8.2% 

14.3% 

21% 

17% 

15% 

40% 

21.9% 

23% 

14% 

Less  than  EUR  50 

000 

EUR 50 000  – EUR 

100 000 

EUR  100  000  – 

EUR 250 000 

EUR  250  000  – 

EUR 500 000 

EUR  500  000  – 

EUR 1 000 000 

126  The  estimated  proportion  of  the  turnover  of  SMEs  with  less  than  EUR  100  000  of  turnover  generated  from  cross-border 
sales  is  consistent  with  another  study  carried  out  in  Germany  in  2009,  which  estimated  this  to  be  between  20%  and  24.5%. 
Source:  Taxud/2010/DE/328: “A retrospective evaluation of elements of the EU VAT system”   
127 Flash Eurobarometer 421, Internationalisation of Small and Medium-sized Enterprises (2015) 
128  Some  country  specific  studies  exist;  for  example,  data  from  IfM  Bonn  suggests  that  in  2009,  less  than  5%  of  SMEs  in 
Germany with turnover below EUR 100 000 exported. However, the Flash Eurobarometer study contains estimates for the EU 
as a whole, and makes the distinction between intra-EU trade and exports outside the EU. In addition, the study offers more 
recent data as the fieldwork was conducted in 2015. 

181 | P a g e  

 
 
 
                                                      
Percentage of firms exporting 

Exports as a percentage of turnover 

Size class 

Flash 

Flash 

Eurobarometer 

IfM Bonn data 

Eurobarometer 

IfM Bonn data 

data 

data 

EUR  1  000  000  - 

EUR 2 000 000 

30.9% 

15% 

Source:  Deloitte estimates based  on Flash  Eurobarometer 421, Internationalisation of  Small  and Medium-sized 

Enterprises (2015), Taxud/2010/DE/328: “A retrospective evaluation of elements of the EU VAT system”   

While differences exist, especially in the percentage of businesses exporting among very small firms, 
the  Flash  Eurobarometer  contains  estimates  for  the  EU  as  a  whole,  and  makes  the  distinction 
between intra-EU trade and exports outside the EU. In addition, the study offers more recent data as 
the  fieldwork  was  conducted  in  2015.  Therefore  when  considering  the  impact  of  exempting  cross-
border sales from VAT in the destination country, an assumption of 15% is made on the proportion of 
SMEs trading cross-border. Given the inherent uncertainty, sensitivities were carried out around this 
number to assess the impact of a smaller or larger amount of SMEs trading cross-border.  

However, as indicated above, B2B intra-EU cross border transactions will not be impacted by policy 
options  involving  cross-border  trade,  as  the  VAT  obligations  in  the  destination  country  lie  with 
business  customer.  These  transactions  therefore  need  to  be  excluded  from  the  calculations.  Data 
from  the  Flash  Eurobarometer  was  used  to  estimate  that  67%  of  trading  SMEs  sold  B2B  supplies. 
These businesses were not considered when assessing the impact of exempting cross-border sales 
from VAT. Note that when trading businesses recorded selling both B2C and B2B supplies, no data 
was available on the proportion of sales allocated to each type of supply. They were therefore given 
equal weighting to calculate the overall percentages of businesses to consider. In addition, the data 
revealed that among SMEs, i.e. businesses with less than EUR 2 000 000 of turnover, the average 
turnover  of  a  business  exporting  B2B  or  B2C  supplies  was  not  significantly  different  (less  than  3% 
different).129 

Hourly costs for the Standard Cost Model 

A key parameter for the calculation of administrative burden using the Standard Cost Model (SCM) is 
the  labour  costs  of  the  personnel  having  to  carry  out  the  tasks  for  businesses  to  comply  with  the 
information obligations identified as relevant.  

We  used  the  hourly  wage  rates  for  the  category  ISCO  2,  i.e.  for  management  accounts,  as  they 
make  up  the  personnel  responsible  for  VAT-related  procedures  in  businesses.  Management 
accountants  are  classified  under  the  code  2411  in  the  International  Standard  Classification  of 
Occupations elaborated by the ILO.  

We used the EU average hourly costs of EUR 32.1, which already includes the 20% overhead costs, 
as indicated by the Commission’s Impact Assessment Guidelines.  

129 Whilst less reliable given the smaller sample, the analysis gave the same conclusion amongst the different size classes of 
SMEs.  

182 | P a g e  

 
 
                                                      
Costs for businesses to use the MOSS 

Businesses  registering  for  and  using  the  MOSS  to  account  for  and  pay  VAT  on  intra-EU  B2C 
transactions face the costs of registering and using the online platform. These costs were estimated 
as part of a previous study130, based on the costs declared by businesses using the MOSS for TBE 
services in the first months of its functioning.  

We  used  the  same  estimations,  which  quantified  the  costs  of  using  the  MOSS  about  (on  average) 
EUR  690  per  company  on  an  annual  basis  for  the  first  Member  State  they  sell  cross-border.  In 
addition,  the  use  of  the  MOSS  entails  economies  of  scale  for  businesses,  estimated  to  be  of  about 
95% on an annual basis for filing and payment VAT returns for the subsequent Member State. 

I.3 Option 1 – Baseline scenario  

This  scenario  considers  the  costs  to  SMEs  at  the  EU  level  in  the  baseline  situation,  based  on  the 
following metrics: 

  Number of businesses in the baseline scenario; considering the following: 
o  Businesses inside and outside the SME exemption scheme 
o  Businesses inside and outside the flat-rate scheme  
o  Businesses inside and outside the graduated relief 

  Businesses’ compliance costs; and 
  VAT revenue collected for each Member State and at the EU level. 

The  following  paragraphs  outline  the  method  that  was  applied  to  conduct  the  calculations  including 
the technical assumptions needed. 

Number of businesses under the under the baseline scenario 

Number of businesses inside and outside the VAT exemption threshold 

Data  collected  via  surveys  to  Member  States’  tax  authorities,  Ipsos  MORI  survey  and  available 
literature provided the basis for the estimation of number of businesses in each turnover bracket and 
the take-up rate of the SME exemption scheme in Member States.  

Number of businesses inside and outside the VAT flat-rate threshold 

Data  collected  via  surveys  to  Member  States’  tax  authorities,  information  collected  as  part  of  the 
fieldwork and available literature provided the basis for the estimation of the number of businesses in 
each turnover bracket and the take-up rate of the VAT flat-rate scheme in the eight Member States 
implementing these131. 

Number of businesses inside and outside the VAT graduated relief threshold 

Data  collected  via  surveys  to  Member  States’  tax  authorities,  information  collected  as  part  of  the 
fieldwork and available literature provided the basis for the estimation of the number of businesses in 

(2016)  VAT  Aspects  of 

130  Deloitte 
https://ec.europa.eu/taxation_customs/sites/taxation/files/vat_aspects_cross-border_e-commerce_final_report_lot2.pdf.  
131 As the baseline and the policy options considered for the analysis concern the SME exemption scheme only, we will present 
the analysis of the number of businesses using the VAT flat-rate scheme (and related compliance costs) in Chapter 4 of the 
final report.  

for  modernisation,  available: 

cross-border  e-commerce 

-  Options 

183 | P a g e  

 
 
                                                      
each  turnover  bracket  and  the  take-up  rate  of  the  VAT  graduated  relief  thresholds  in  the  three 
Member States implementing these132.  

Number  of  businesses  trading  cross-border  within  and  outside  of  the  VAT  special 
schemes for SMEs  

The  proportion  of  businesses  trading  cross-border  in  the  EU  was  calculated  from  data  gathered  in 
surveys and fieldwork interviews and is included in the general assumptions above. We  applied this 
proportion to the number of businesses currently using the SME exemption scheme.  

Further,  we  assume  that  the  average  business  currently  trading  cross-border  trades  with  one  other 
Member  State  (generally,  a  neighbouring  country).  This  assumption  was  validated  via  expert 
assessment  (businesses  associations  were  contacted  to  test  this  assumption),  and  sensitivities 
around it were carried out. 

 Businesses’ compliance costs 

Costs for businesses inside and outside the SME exemption scheme 

The  average  cost  per  information  obligation  (IO)  was  based  on  the  SCM  data  gathered  from  the 
fieldwork countries plus data from the Deloitte Tax Network Survey.  

As  a  first  step,  the  IOs  relevant  for  the  application  of  the  scheme  were  selected.  For  these,  the 
average time was calculated from the data gathered from the fieldwork countries and the Deloitte tax 
network  survey.  The  results  were  put  in  context  with  available  literature  and  subject  to  sensitivity 
analysis (e.g. calculation of median values and standard deviation) to better qualify the results.  

The average time obtained was multiplied by the hourly wage costs as described in Section I.2. 

For  the  average  costs  per  IO,  the  most  common  frequency  per  IO  was  used.  The  most  common 
frequency of information obligations was derived from the data gathered for the SCM, the Deloitte tax 
network survey to each Member State and expert assessment. Final results  were also validated via 
expert assessment.  

The  same  procedure  was  repeated  to  estimate  the  compliance  costs  for  businesses  inside  and 
outside of the VAT exemption scheme.  

To  the  extent  possible,  the  analysis  of  compliance  costs  for  businesses  in  the  status  quo  included 
advisory  fees  that  businesses  face  to  obtain  the  support  of  accountants/advisors  with  VAT-related 
obligations. Data on advisory fees were collected for the eight Member States selected for fieldwork.  

However,  the  list  of  relevant  IOs  for  businesses  benefiting  from  the  VAT  exemption  scheme  differ 
among  Member  States,  as  not  all  countries  exempt  businesses  from  all  VAT-related  obligations.  In 
fact, eight Member States oblige businesses benefitting from the VAT exemption scheme to register 
for VAT and/or to issue invoices. In these cases, to calculate the cost of VAT registration for  SMEs 
under the exemption scheme at EU level, only the number of businesses in these countries obliging 
registration/issuing of invoices were taken into account.  

132 Ibid 

184 | P a g e  

 
 
                                                      
Costs for businesses inside and outside the flat-rate scheme  

Data  gathered  during  the  fieldwork  in  the  Member  States  provide  estimates  on  the  administrative 
burden for SMEs within and outside of the flat-rate scheme. The same procedure described above for 
estimating the compliance costs of businesses inside and outside of the VAT exemption scheme was 
followed133.  

Costs for businesses inside and outside the graduated relief 

Data  gathered  during  the  fieldwork  in  the  Member  States  provide  estimates  on  the  administrative 
burden  for  SMEs  within  and  outside  of  the  VAT  graduated  relief  scheme.  The  same  procedure 
described  above  for  estimating  the  compliance  costs  of  businesses  inside  and  outside  of  the  VAT 
exemption scheme will be followed134.  

Compliance costs for businesses trading cross-border within and outside of the VAT 
special schemes for SMEs  

As described in Section I.2, B2B cross-border transactions are out of scope, as it is assumed that the 
reverse charge mechanism would continue to apply for B2B transactions and supplier would not have 
VAT obligations in the destination Member State. As such, the compliance costs for B2B cross-border 
transactions are already included in the analysis of the domestic compliance costs for businesses.  

Compliance  costs  for  businesses  in  B2C  cross-border  trade  are  assumed  to  be  included  in  the 
estimations of domestic compliance costs, (provided that the turnover from cross-border sale is below 
the common EU threshold). Businesses face costs for monitoring the VAT exemption threshold, even 
if such costs are not captured by the SCM, as they do not correspond to any IO. Such ‘hidden costs’ 
were  accounted  for  in  the  estimations  as  an  ad-hoc  adjustment,  which  was  quantified  via  expert 
assessment.  We  contacted  a  sample  of  businesses  and  business  organisations  (especially  those 
already included in the fieldwork in a sample of eight Member States).  

The  case  of  a  business  benefiting  from  the  domestic  VAT  exemption  threshold  but  with  a  turnover 
from  cross-border  B2C  transactions  above  the  distance  sales  threshold  is  theoretically  possible, 
however unlikely (based on the data available and on expert assessment).  

VAT revenue collected  

Data on VAT revenue was collected from Member State tax authorities. 

I.4 Option 2 - SME exemption scheme extended to supplies from other Member 
States and including streamlined simplification measures 

Extending the SME exemption scheme to non-established businesses will impact businesses that: 

  Trade cross-border;  
  Whose  value  of  sales  taxable  in  a  single,  foreign  Member  State  falls  below  the  VAT 

exemption threshold in place in that Member State;; and 

133  As the baseline and the policy options considered for the analysis concern the SME exemption scheme only, we will present 
the analysis of costs for businesses using the VAT flat-rate scheme in Chapter 4 of the final report. 
134 Ibid 

185 | P a g e  

 
 
 
                                                      
  Choose to opt for the SME exemption scheme in the Member State of destination, instead of: 
o  Opting out and paying VAT in the Member State of destination while being subject to 

the simplified VAT obligations in place in that Member State;  

o  Declaring VAT via the MOSSMOSS; or 
o 

If  eligible,  using  the  common  EU  threshold  on  their  B2C  cross-border  supplies  and 
being subject to the VAT rules in the Member State of origin (home country rules).  

As explained previously, applying the VAT exemption in the Member State of destination is optional. 
We  assume  that  businesses  (and/or  their  advisors  and  accountants)  in  cross-border  transactions 
have knowledge of this option and of the eligibility requirements and functioning of the VAT exemption 
scheme in the Member State of destination. The acquisition of such knowledge requires an effort from 
businesses  (and/or  their  advisors  and  accountants)  to  collect  information  about  which  schemes  are 
available in neighbouring Member States, what are the  requirements and the related IOs, costs and 
benefits, in order to make a choice on whether to use them or not. Such effort (and related costs) are 
modelled as a one-off adjustment, which were quantified via expert assessment.  

Including  streamlined  simplification  measures  to  the  SME  VAT  exemption  scheme  will  impact 
businesses that: 

  Are  eligible  for  the  SME  VAT  exemption  scheme  in  their  country  of  establishment,  or  in 
another Member State in which they sell cross-border supplies, whether they choose to opt in 
or out of the scheme.  

The  proposed  measures  (presented  above)  will  have  a  number  of  impacts  on  the  VAT  revenues 
collected by Member States, the compliance costs faced by businesses and the knock-on impacts on 
the wider economy. The first step required in quantifying these impacts is to understand the number 
of businesses impacted by the policy change. 

Number  of  businesses  impacted  by  the  extension  of  the  threshold  to  non-

established businesses and turnover at stake 

As  a  first  step,  the  number  of  businesses  eligible  for  the  policy  change  was  quantified,  and  the 
methodology  and  assumptions  used  to  do  so  are  summarised  in  the  figure  below  and  explained  in 
more  detail  thereafter.  However,  this  gives  an  upper  bound  of  the  number  of  businesses  actually 
impacted by the policy change, as some may choose to opt out of the scheme as mentioned above. 
The approach to identify the number of businesses actually impacted is also discussed below.  

186 | P a g e  

 
 
Determining  the  number  of  eligible  businesses  for  the  extension  of  the  VAT 
exemption threshold  

Figure 26 – Summary of the assumptions needed to obtain the number of businesses eligible for the 
policy change in Option 2 

Source: Deloitte 

The  steps  taken  to  calculate  the  number  of  businesses  eligible  for  VAT  exemption  on  their  cross-
border  sales,  as  well  as  the  assumptions  used  are  described  in  more  detail  below.  To  mitigate  the 
inherent  uncertainty  of  the  final  estimates  due  to  the  number  of  assumptions  required,  a  number  of 
sensitivity scenarios were carried out on each of the key parameters forming the set of assumptions.   

1.  The data obtained from tax authorities is used to estimate the number of businesses and their 

average turnover within size classes as previously defined for all 28 Member States.  

2.  As  mentioned  in  the  general  assumptions  (Section  I.2),  15%  of  businesses  are  assumed  to 

trade-cross border. However, sensitivities were carried out around this assumption.   

3.  As  B2B  intra-EU  cross  border  transactions  will  not  be  impacted  by  this  policy,  only  the 
proportion of SMEs trading cross-border that sell B2C supplies are relevant for this analysis. 

187 | P a g e  

 
 
 
 
 
This number was estimated to be 33%, using data from a Flash Eurobarometer study on the 
internationalisation of SMEs.135  

4.  The  numbers  obtained  from  1.  2.  and  3.  were  used  to  calculate  the  number  of  businesses 
selling  B2C  supplies  cross-border,  and  their  generated  turnover.  However,  not  all  of  these 
businesses or their generated turnover will be impacted by the policy change as some of their 
cross-border  sales  might  fall  above  the  threshold  in  the  Member  State  of  destination.  Data 
from  the  Flash  Eurobarometer  study  mentioned  above136  was  used  to  estimate  that  on 
average, 27% of the turnover of SMEs that trade cross-border is made from sales in other EU 
countries.137  This  proportion  is  applied  to  the  average  turnover  of  businesses  in  each  size 
class estimated above to obtain the value of the cross-border sales. 

5.  However,  since  these  sales  may  take  place  in  several  Member  States,  only  a  proportion  of 
the overall value would be subject to the SME exemption threshold. As previously mentioned, 
based  on  stakeholder  feedback,  SMEs  trading  cross-border  and  selling  B2C  supplies  are 
estimated to trade with only 1 other Member State. The turnover of businesses from different 
size classes, made from B2C cross-border sales in a single Member State can therefore be 
obtained.  

6.  To assess whether these businesses will be eligible for the change in policy, the amount of 
sales  calculated  in  5.  was  compared  to  the  SME  VAT  exemption  threshold  in  the  Member 
State of destination. As explained earlier, a weighted average threshold of EUR 26 000 was 
used across the EU.138 Any cross-border sales from a non-established business falling below 
this threshold would be considered eligible to be exempted from paying VAT under the SME 
exemption scheme in this policy option.  

From the above methodology, it is estimated that around 1.64 million businesses would be potentially 
affected by the change in policy, or 33.9% of all businesses in the EU.139 These businesses generate 
only 0.11% of the overall turnover in the EU, and the turnover at stake (i.e. generated from the cross-
border sales and subject to exemption under this policy option) represents only 0.03% of EU turnover. 

These  estimates  are  however  dependent  on  a  number  of  assumptions  made  throughout  the 
calculations. To test how sensitive these numbers are to the assumptions made, each parameter was 
varied  in turn while holding the others constant, and the proportion of EU businesses  impacted and 
turnover at stake is reported in the table below.  

135 Flash Eurobarometer 421, Internationalisation of Small and Medium-sized Enterprises (2015) 
136 Flash Eurobarometer 421, Internationalisation of Small and Medium-sized Enterprises (2015) 
137  As  previously  mentioned,  this  estimate  is  consistent  with  another  study  done  in  Germany  (Taxud/2010/DE/328:  “A 
retrospective evaluation of elements of the EU VAT system”). However, sensitivities were carried out around this assumption to 
reflect the inherent uncertainty.  
138  The  weighted  average  is  calculated  based  on  the  thresholds  in  place  for  the  SME  exemption  schemes  across  the  EU 
(including  where  there  is  no  exemption  scheme,  so  that  the  threshold  is  effectively  0),  weighted  by  the  share  of  intra  EU 
imports. The UK was excluded as it is an outlier due to its unusually high threshold.  
139  Note  that  the  initial  estimates  were  calculated  excluding  Austria  and  Luxembourg,  for  which  the  data  obtained  from  tax 
authorities did not provide sufficient information to classify businesses within the turnover brackets specified. In order to adjust 
the  estimates  obtained,  an  uplift  was  applied  based  on  the  share  of  intra-EU  imports  in  Austria  and  Luxembourg  of  4.1%  in 
total.  

188 | P a g e  

 
 
 
 
 
                                                      
Table 133 – Sensitivities on the assumptions used to calculated the number of impacted businesses 
by Option 2 

Variable 

Main assumption 

(bold) and sensitivity 

analysis  

Proportion of EU 

businesses impacted 

Proportion of EU 
turnover at stake141 

and sensitivity 
analysis140  

and sensitivity 
analysis142   

Proportion of businesses 
trading cross-border 

Proportion of cross-border 
trading businesses selling 
B2C supplies 

Proportion of SMEs 
turnover which comes from 
cross-border sales  

Number of Member States 
that cross-border trading 
SMEs sell to 

Source: Deloitte analysis  

10% 

15% 

20% 

25% 

33% 

50% 

10% 

27% 

45% 

1 

2 

2.6% 

3.9% 

5.2% 

2.9% 

3.9% 

5.9% 

4.6% 

3.9% 

3.9% 

3.9% 

4.6% 

0.02% 

0.03% 

0.04% 

0.02% 

0.03% 

0.04% 

0.03% 

0.03% 

0.04% 

0.03% 

0.08% 

While  the  table  above  shows  how  the  results  are  sensitive  to  a  single  parameter,  it  is  possible  that 
multiple parameters take extreme values at the same time. It is however unlikely that all will deviate 
from their average values. Hence, as an additional sensitivity analysis, the following scenarios were 
tested: 

1.  Lower  bound:  given  that  the  results  seem  to  be  most  sensitive  to  the  proportion  of 
businesses trading cross-border and the proportion of cross-border trading businesses selling 
B2C supplies, the lower values were tested while keeping the other variables constant at the 
main assumption.  

2.  Upper bound: given that the proportion of EU turnover at stake seems to be sensitive to the 
number  of  Member  States  that  cross-border  trading  SMEs  sell  to,  this  variable  and  the 
proportion of cross-border trading businesses selling B2C supplies are varied. The high range 
values were tested for these while keeping other variables constant at the main assumption. 

In  addition,  the  impacts  were  tested  using  the  ImF  Bonn  data  on  the  percentage  of  businesses 
exporting and the percentage of turnover generated from exports. Note that the average of the data 
given for businesses with turnover between EUR 17 500 and EUR 50 000, and EUR 50 000 to EUR 
100 000 was considered.  

140 Sensitivity analysis is carried out on the main variable (proportion of EU businesses) holding other variables constant.  
141 Defined as the turnover which could be exempted from VAT under the new policy  
142 Sensitivity analysis is carried out on the main variable (proportion of EU turnover) holding other variables constant. 

189 | P a g e  

 
 
 
                                                      
The results of this additional sensitivity analysis are presented in the table below. 

Table 134 – Sensitivities on the number of businesses impacted by Option 2 

Main assumptions 

Lower bound 

Upper bound 

assumptions on 

assumptions 

assumptions 

exporting 

businesses 

ImF Bonn 

Proportion of 
businesses 
trading cross-
border 

Proportion of 
cross-border 
trading 
businesses selling 
B2C supplies 

Proportion of 
SMEs turnover 
which comes from 
cross-border sales  

Number of 
Member States 
that cross-border 
trading SMEs sell 
to 

Proportion of EU 
businesses 
impacted  

Proportion of EU 
turnover at 
stake143 

Source: Deloitte analysis  

15% 

10% 

15% 

4% 

33% 

25% 

50% 

33% 

27% 

27% 

27% 

22% 

1 

1 

2 

1 

3.9% 

2.0% 

7.0% 

1.2% 

0.03% 

0.01% 

0.12% 

0.01% 

The  above  sensitivity  shows  that  depending  on  the  assumptions  used,  the  proportion  of  EU 
businesses  eligible  for  the  policy  change  could  be  between  1%  and  7%,  and  the  turnover  at  stake 
could represent between 0.01% and 0.12% of the overall EU turnover.  

Determining the number of businesses choosing the exemption 

The  calculations  presented  above  estimated  the  total  number  of  businesses  that  can  potentially 
benefit from the extension of VAT exemption schemes to cross-border supplies. Assuming that all of 
these businesses take advantage of the change in policy and have their cross-border sales exempted 
from  VAT  in  the  destination  country,  the  above  calculations  give  an  upper  bound  to  the  number  of 
businesses impacted and the turnover at stake. However, not all eligible businesses will necessarily 
choose this option; as mentioned before some of these businesses might instead:  

143 Defined as the turnover which could be exempted from VAT under the new policy 

190 | P a g e  

 
 
 
 
 
 
 
 
 
 
                                                      
  Choose  to  pay  VAT  in  the  Member  State  of  destination  and comply  with  the  simplified  VAT 

obligations in that Member State;  

  Pay VAT in the Member State of destination but through the MOSS; or 

If eligible, make use of the common EU threshold of EUR 10 000 and have their B2C cross-
border supplies subject to the home country rules. This may imply that: 

o  Their  overall turnover,  including  the  B2C  cross-border supplies, falls below  the VAT 
exemption threshold in place in their home country and all supplies are exempt from 
VAT if the businesses opts to use the domestic scheme; or 

o  Their overall turnover falls above the VAT exemption threshold and they pay VAT in 

their home country.  

Determining  the  exact  number  of  businesses  impacted  is  therefore  challenging,  and  assumptions 

need to be made on businesses’ behaviours as little evidence is available at this level of granularity. 
While  it  is  therefore  difficult  to  obtain  a  precise  estimate,  it  is  possible  to  identify  some  businesses 
which are more likely not to use the VAT exemption scheme in the Member State of destination on 
their cross-border sales, and arrive at a new upper bound on the number of businesses impacted by 
the policy option.  

In particular, it is possible to estimate the number of businesses that are eligible to benefit from the 
option but are unlikely to do so given that they already qualify for their domestic exemption scheme. 
This is done by comparing their total turnover with the thresholds in place in their domestic country. 
Assuming  all  these  businesses  do  not  pay  VAT  currently,  and  will  continue  to  be  exempt  with  the 
introduction of the policy option 2 would give a new upper bound on the revenue at stake144.  

The remaining businesses either: 

  Have B2C cross-border sales above EUR 10 000, in which case they must be paying VAT in 
the country of destination (via the MOSS or direct registration) and can now benefit from the 
exemption; or 

  Have  B2C  cross  border  sales  below  EUR  10  000  but  a  total  turnover  above  their  domestic 

VAT exemption threshold. In this case, they must be paying VAT: 

o 
o 
o 

In the country of destination via the MOSS; 
In the country of destination via direct registration; 
In the country of origin, by making use of the common EU threshold.  

These businesses can continue to pay VAT, or benefit from exemption in the country of destination. 

The  figure  below  illustrates  the  situations  described  above  and  the  expected  impacts  on  different 
groups. 

144 Note that this makes the implicit assumption that all of the businesses considered and which are eligible for the domestic 
SME exemption take advantage of the scheme and are exempt from paying VAT. While data from tax authorities revealed that 
the  take-up  rate  of  this  option  is  around  63%  across  the  EU,  the  businesses  considered  here  are  restricted  to  businesses 
generally  selling  B2C  supplies.  Interviews  with  relevant  stakeholders  (tax  authorities  and  businesses)  revealed  that  the 
businesses most likely to opt out of the scheme were B2B businesses or start-ups. Hence, is it likely that the take-up rate of the 
businesses considered is higher than that of the general population. 

191 | P a g e  

 
 
 
 
 
                                                      
Figure 27 – Illustration of the VAT revenue at stake from policy option 2 

Source: Deloitte 

As  previously  discussed,  when  given  the  choice  between  using  the  MOSS  or  the  exemption  in  the 
country of destination, a number of factors will be considered by SMEs such as the compliance costs 
faced, the competitive advantage from not paying VAT or the number of Member States they trade to.  

Hence, the impact on the VAT revenue was calculated as an upper bound as illustrated in the figure 
above.  Using  this  methodology,  it  is  estimated  that  up  to  1.4%  of  all  EU  businesses  would  be 
impacted  by  the  policy  change  and  the  turnover  at  stake  up  to  0.02%  of  the  overall  turnover 
generated in the EU.  

Number of businesses impacted by the Streamlined Simplification Package 

Businesses impacted by the streamlined simplification package are businesses that: 

  Are eligible for the VAT exemption scheme in their domestic country, whether they choose to 

opt in or out of the scheme;  

  Trade  cross-border,  are  eligible  for  the  VAT  exemption  scheme  in  the  Member  State(s)  in 

which they trade, and do not make use of the MOSS or common EU threshold.  

Businesses eligible for the domestic VAT exemption scheme were calculated in the following way: 

  When this data was provided directly by tax authorities, these estimates are used; 

192 | P a g e  

 
 
 
 
  When  it  was  not  provided,  the  number  of  exempted businesses  in  each  Member  State  was 
estimated, as well as an average take-up rate of the scheme across the EU of 63%, allowing 
for the number of eligible businesses to be calculated.  

Note  that  around  60%  of  eligible  businesses  were  derived  from  data  obtained  directly  from  tax 
authorities.  In  addition,  the  methodology  used  to  estimate  the  number  of  exempted  businesses  in 
Member States where tax authorities did not provide this data was tested, by applying it to  Member 
States where data was provided and compare the estimates to the actual data. This analysis showed 
that  whilst  the  estimates  tended  to  over-  or  under-estimate  the  number  of  actual  businesses 
exempted, there was no systematic over- or underestimation.  

Based  on  this  methodology,  the  number  of  businesses  eligible  for  the  domestic  VAT  exemption 
schemes is estimated to be around 39.9% of all EU businesses.  

As part of the General Assumptions, the number of businesses trading cross-border and eligible for 
the  VAT  exemption  in  the  Member  State  of  destination  were  calculated.  The  average  turnover  of 
these businesses can be compared to their domestic thresholds to assess whether they are already 
eligible for the scheme domestically, and therefore already accounted for in the previous step. Based 
on this methodology, it is estimated that an additional 1.4% of all EU businesses would be impacted 
by the streamlined simplification package. 

Therefore, in total around 41.3% of all EU businesses would be impacted by this policy option. Not all 
of these businesses will be impacted in the same way however: some may see their compliance costs 
rise due to new obligations arising from this package, while some may see their compliance costs fall 
due to the new package being simpler than their current obligations. This is further discussed below.  

Impact on businesses compliance costs 

Under  Option  2,  the  extension  of  the  VAT  exemption  scheme  to  non-established  businesses  from 
other  Member  States  is  accompanied  by  a  package  of  streamlined  simplification  measures.  These 
measures  are  expected  to  mitigate  the  costs  for  businesses  while  providing  tax  authorities  with  the 
necessary information to monitor the compliance of these businesses. The implication of this option is 
different at domestic and cross-border level for reasons explained below. 

Member  States  will  be  required  to  offer  the  same  set  of  obligations  to  domestic  and  non-domestic 
businesses.  While  they  have  other  means  to  monitor  domestic  businesses  (for  example  through 
registration for other tax purposes), this is not necessarily the case for non-established businesses. It 
is  therefore  plausible  that  Member  States  currently  requiring  minimal  or  no  information  about 
businesses exempted from paying VAT under the scheme may seek to increase these obligations to 
improve  monitoring  of  non-established  businesses  now  eligible  for  the  scheme.  At  the  same  time, 
Member  States  generally  limit  most  of  the  simplification  measures  currently  to  domestic  businesses 
benefitting  from  the  SME  scheme.  Therefore  the  compliance  cost  of  eligible  businesses  not 
benefitting  from  the  scheme  ought  to  decrease,  however  the  extent  of  the  decrease  will  depend  on 
the current set of obligations and the choice of Member State on the simplification package under this 
option. Hence, the compliance costs may change for domestically established businesses eligible for 
the  scheme.  Given  the  inherent  uncertainty  around  what  Member  States  will  choose  to  do,  and  the 
fact that they each already impose a different set of obligations, a range of scenarios were considered 
to assess the impact of this option on businesses.  

193 | P a g e  

 
 
However, businesses trading B2C cross-border supplies under the baseline and not using the MOSS 
must register for VAT in the Member State(s) of destination and fulfil all the required obligations. With 
the  introduction  of  a  simplification  package,  these  businesses  are  likely  to  see  a  reduction  in  their 
compliance costs.  

The two situations are discussed in turn below.  

Determining the impact on compliance costs of extending the VAT exemption scheme 
for domestic businesses  

Currently, Member States differ substantially in the way in which they implement the VAT exemption 
scheme, and in the administrative obligations they impose on businesses benefiting from this scheme. 
As  discussed  above,  there  is  some  inherent  uncertainty  around  the  changes  Member  States  may 
make  to  their  obligations  following  the  extension  of  the  SME  exemption  scheme  to  non-established 
businesses. However, a range of scenarios can be considered to analyse the magnitude of the impact 

on  businesses’  compliance  costs,  from  Member  States  moving  towards  a  very  simple  package  to  a 
more complicated one. The impact for businesses currently using the scheme in each Member State 
will  therefore  depend  on  the  pre-existing  set  of  obligations  and  on  the  content  of  the  streamlined 
simplification measures adopted under each scenario, for example:  

  A  generalised  simplification  scenario,  under  which  simplification  packages  move  towards  a 
very simple set of obligations, i.e. where compliance costs in every country would be similar 
to  the  current  lowest  range.  The  change  in  compliance  costs  would  therefore  be  neutral  for 
countries with such obligations already, and decrease for others.  

  A middle ground simplification scenario, where obligations include registration, reporting and 
simplified  bookkeeping.  Under  this  scenario,  domestic  compliance  costs  for  businesses  are 
likely to decrease in some Member States and increase in others.  

  A minimum simplification scenario, where the measures introduced align with the higher set of 
obligations  allowed  under  the  option.  Under  this  scenario,  domestic  compliance  costs  for 
businesses  would  generally  increase  or  stay  constant,  depending  on  the  changes  in 
obligations with respect to the current ones.  

The businesses eligible, but not benefiting from the VAT exemption scheme in the baseline scenario 
are subject to more burdensome VAT obligations in the baseline than businesses using the scheme. 
Since the simplification package will be applied to all eligible businesses, their compliance costs are 
expected  to  decrease  from  the  introduction  of  this  policy  option.  Their  compliance  costs  in  the 
baseline were calculated as part of the baseline analysis and compared to the estimates calculated 
above in each scenario to quantify the extent of this reduction.   

Given  that  the  proposed  package  of  simplification  measures  has  not  yet  been  defined  and  the 
inherent uncertainty over whether some Member States would retain a reduced set of obligations, we 
cannot  determine  which  of  those  scenarios  will  prevail.  However,  the  analysis  provides  an  order  of 
magnitude  for  the  impact  of  the  worst  and  best  case  scenarios,  as  well  as  for  a  possible  middle-
ground.  

Determining the impact on compliance costs of Streamlined Simplification Measures 
on intra-EU trading businesses  

Businesses engaged in cross-border B2C trade are faced with the following options: 

194 | P a g e  

 
 
  Use  the  MOSS:  The  cost  of  using  the  MOSS  was  estimated  to  be  EUR  690  on  an  annual 
basis  for  filing  and  paying  VAT  returns  in  one  Member  State,  with  significant  economies  of 
scale when used to file VAT declarations for more than one country.  

  Register  for  VAT  in  the  country  of  destination:  The  cost  of  full  VAT  registration  in  another 
Member  State was estimated to be EUR  4 700 per Member  State on  an  annual basis, with 
the possibility to recover input VAT directly.  

  Use the VAT exemption in the country of destination: The cost of using the VAT exemption for 
the  Member  State  of  destination  is  the  same  as  that  estimated  for  the  domestic  VAT 
exemption scheme under the streamlined simplification measures.  

  Use  the  common  EU  threshold:  The  smallest  businesses  with  cross-border  turnover  of  less 
than  EUR  10  000  may  make  use  of  the  common  EU  threshold  and  have  their  B2C  cross-
border supplies subject to their home country rules. Such businesses are likely to be making 
use  of  domestic  schemes  and  their  supplies  will  fall  under  the  scope  of  the  domestic 
discussion above.  

Therefore,  a  comparison  of  the  costs  (and  the  benefits  associated  with  VAT  exemption)  of  each  of 
these possibilities will determine the choice of businesses, and therefore the overall compliance costs 
associated with Option 2.  

We used the middle ground simplification scenario described above as the basis for this assessment, 
under the assumption that it will be the set of streamlined simplification measures applied uniformly by 
all  Member  States,  and  calculated  the  average  costs  for  this  scenario  at  EU  level.  This  estimation 
method  allowed  us  to  obtain  a  realistic  estimate  at  EU  level,  given  that  data  available  do  not  allow 
more precise assessment of the trade patterns of businesses (for instance, with how many countries, 
and  which  ones,  businesses  trade  with).  The  other  two  scenarios  were  included  as  sensitivity 
analysis.  

Impact on the VAT revenue collected 

Only  the  extension  of  the  SME  exemption  threshold  to  non-established  businesses  will  have  an 
impact  on  the  VAT  revenue  collected,  as  the  streamlined  simplification  measures  do  not  affect  the 
level  or  amount  of  taxation.  A  methodology  was  described  above  to  estimate  the  number  of 
businesses  impacted  as  well  as  the  turnover  at  stake  in  each  Member  State  (that  is,  the  turnover 
made from cross-border sales which would be exempted from VAT under the new policy). However, 
calculating  the  exact  foregone  VAT  revenue  requires  holding  information  on  which  VAT  rates  are 
used on which supplies (as Member states typically have a standard rate, a reduced rate and a zero 
rate) and in which specific Member States sales are made to.  

As  previously  mentioned,  the  data  at  hand  is  not  granular  enough  to  gather  the  required  evidence, 
and it was explained in the general assumptions section that an effective VAT rate in the EU of 12.3% 
was  used  for  the  purpose  of  these  calculations.145  Applying  this  rate  on  the  revenue  at  stake  will 
therefore  give  the  change  in  VAT  revenue  due  to  the  policy  option.  In  addition,  since  the  Member 
States which import the most from other EU countries will be the most impacted by this policy option, 
the impact on each Member State’s VAT revenue was calculated by allocating the EU-wide fall in VAT 
revenue  to  each  country  based  on  their  share  of  intra-EU  import  (as  a  percentage  of  total  intra-EU 
imports in the EU). 

145 The effective rate is calculated by dividing the total VAT revenues obtained in the EU with final consumption.  

195 | P a g e  

 
 
                                                      
Impact on the wider economy 

The  effects  of  the  policy  options  on  the  wider  economy  was  tested  using  a  dynamic  general 

equilibrium  model  of  the  EU.  Changes  to  VAT  revenues,  compliance  costs  or  businesses’  activities 
are entered as inputs, and the model then calculates the knock-on impact on the wider economy. 

The impacts of the extension of the VAT exemption threshold to non-established businesses and the 
introduction of streamlined simplification measures were assessed as follows: 

  The change in VAT revenue resulting from the policy was entered into the model, which then 
estimated how this change flows through to the wider economy. As estimating the number of 
businesses  impacted  and  the  resulting  change  in  VAT  revenue  required  a  number  of 
assumptions,  the  range  of  values  obtained  from  the  different  sensitivities  were  also  entered 
into  the  CGE  model  to  check  how  the  impact  on  the  wider  economy  varied  with  the 
assumptions used. 

  The  change  in  compliance  costs  faced  by  businesses  was  entered  into  the  model  as  a 
change in the proportion of time/labour which is allocated to VAT compliance activities, which 
in  turn  affects  average  labour  productivity.  The  number  of  businesses  impacted  included 
sensitivities to check how the overall impact varies with the assumptions used.  

  The  reduction  in  labour  costs  and  the  removal  of  VAT  will  in  turn  be  expected  to  reduce 
prices, which are determined  endogenously in the model. There may be differential impacts 
on domestic and export prices: 

o  The extension of the domestic SME exemption scheme to importing businesses will 
reduce  the  costs  of  trade  for  those  businesses  that  cannot  take  advantage  of  their 
domestic  scheme.  By  removing  VAT,  this  can  potentially  reduce  the  prices  charged 
by  such  businesses  and  make  them  more  competitive.  However,  given  that  the 
exemption is estimated to affect 0.03% of activity the impact on the overall price level 
will not be significant.  

o  The  proposed  simplification  measures  will  benefit  both  domestic  and  exporting 
businesses.  While  not  changing  their  VAT  obligations,  these  proposals  can  reduce 
labour  costs  and  hence  prices  in  those  markets  that  currently  have  significant 
obligations for businesses using the exemption scheme; however, there is a risk that 
the  imposition  of  a  registration  requirement  across all  EU  Member  States  increases 
the burden in a majority of countries. The SCM was used to estimate the net direction 
and  magnitude  of  these  effects  and  hence  the  impact  on  prices.  However,  the  fact 
that businesses using the SME scheme account for just 0.3% of total turnover – and 
eligible  businesses  account  for  about  0.5%  of  turnover  –  again  suggests  that  the 
impact on the overall price level will be small.   

The outputs of the SCM were used to understand the impact on labour costs (as described above), 
which in turn feeds into both domestic and export prices. The effects of enabling exporting businesses 
to  benefit  from  VAT  exemption  schemes  in  the  countries  to  which  they  trade  is  reflected  through  a 
reduction in the average VAT rate on such transactions.  

If  the  extension  of  the  VAT  exemption  threshold  leads  to  a  decrease  in  administrative  burden  from 
cross-border  trade, SMEs  may increase their cross-border  activities. It is  however difficult to predict 
the  exact  magnitude  of  this  effect,  and  it  is  therefore  tested  based  on  the  proportional  change  in 
compliance costs and sensitivities around the magnitude of the impact.  

196 | P a g e  

 
 
I.5 Option 3 - Option 2 plus mandatory treatment of occasional traders as non-
taxable person 

This  policy  option  builds  on  Option  2.  It  proposes  to  extend  the  SME  exemption  threshold  to  non-
established  businesses  and  to  introduce  streamlined  simplification  measures,  and  in  addition  it 
proposes to treat occasional traders as non-taxable persons.  

The  businesses  which  would  be  impacted  by  the  extension  of  the  threshold  to  non-established 
businesses  and  the  introduction  of  streamlined  simplification  measures  have  been  previously 
discussed. Treating occasional traders as non-taxable persons will impact businesses that: 

  Carry  out  economic  activity  on  occasional  basis  or  whose  economic  activity  is  incidental, 

where 

  The amount of VAT potentially collected would be minimal (or negligible), and where 
  Their treatment as non-taxable persons would not create significant distortions of competition. 

Businesses  identified  as  occasional  traders  would be  fully  kept out  of  the  VAT  system  and  as such 
would  not  have  any  VAT  related  obligations,  including  on  intra-EU  purchases.  They  would  have  no 
right to register for VAT or claim input VAT refunds, unless they prove planned or existing continuous 
and non-incidental business activity.  

The identification of sole traders is  problematic, also in consideration of the different definitions and 

VAT treatment in Member States. This problem is  described in the ‘problem assessment’ section of 
Volume I, where relevant examples are also mentioned (e.g. the case of solar panels in houses and 
private households becoming taxable persons for the purposes of VAT in the Netherlands (see CJEU 
case C-219/12).  

The  key  challenge  in  estimating  the  impact  of  this  option  is  to  identify  the  occasional  traders  and 
quantify  the  VAT  revenue  they  generate  and  the  compliance  costs  they  face.  As  for  Option  2,  very 
granular  data  on  SMEs’  activities  is  required  to  appropriately  identify  the  businesses  impacted, 
however  such  data  is  lacking.  A  number  of  sources  were  investigated  to  form  estimates  of  the 
proportion  of  businesses  that  could  be  classified  as  occasional  traders,  their  compliance  costs  and 
generated VAT revenue, and are described below.  

Number  of  businesses  impacted  by  the  treatment  of  occasional  traders  as 

non-taxable person  

Identifying  these  occasional  traders  is  a  challenging  task  as  no  granular  data  is  available  on  SMEs 
activities  to  analyse  the  frequency  of  their  economic  activity.  However,  it  is  expected  that  only  the 
smallest businesses identified from the data obtained from tax authorities (i.e. turnover below EUR 5 
000) will potentially classify as occasional traders. These represent about 38% of all businesses in the 
EU,  but  only  0.04%  of  the  generated  turnover.  In  addition,  occasional  traders  are  more  likely  to  be 
single individuals without employees rather than legal entities. Tax authorities in 4 Member States146 
were  able  to  provide  the  percentage  of  their  businesses  that  are  sole  traders.  Based  on  the 
information  received,  it  is  estimated  that  around  40%  of  businesses  with  less  than  EUR  5  000 
turnover  could  classify  as  occasional  traders.  However,  sensitivities  were  carried  out  around  this 
assumption  given  the  inherent  uncertainty.  The  table  below  shows  the  percentage  of  businesses 

146 Belgium, Ireland, Finland and Lithuania  

197 | P a g e  

 
 
                                                      
potentially  identified  as  occasional  traders,  when  the  percentage  of  sole  traders  assumed  for 
businesses with less than EUR 5 000 of turnover is varied.  

Table 135 – Number of businesses identified as occasional traders and sensitivities 

Variable 

Main assumption (bold) and 

sensitivity analysis  

Proportion of EU businesses 

impacted and sensitivity 
analysis147 

Proportion of businesses with less 
than EUR 5 000 of turnover 
considered to be occasional traders 

Source: Deloitte analysis 

20% 

40% 

60% 

7.5% 

15.1% 

22.6% 

Note  that  while  these  businesses  will  be  impacted  by  this  policy  change  as  they  will  now  be 
considered  as  occasional  traders  and  as  such,  as  non-taxable  persons,  a  proportion  of  these 
businesses will already be exempt from paying VAT under the SME VAT exemption scheme. Hence, 
not all of the turnover generated will be subject to a change in VAT revenue collected.  

Impact on businesses’ compliance costs 

To calculate the impact on the business compliance costs, the costs in option 2 were firstly taken into 
account. 

For treatment of occasional traders as non-taxable persons, an estimate on the number of occasional 
traders is required (which is provided above).  

Therefore, the number of occasional traders quantified were not taken into account for the estimate of 
the  businesses’  compliance  costs  in  option  3,  as  occasional  traders  would  qualify  as  non-taxable 
persons, their supplies being not subject to VAT. At an EU level, the number of businesses affected 
by  compliance  costs  will  decrease  therefore  reducing  the  overall  business  compliance  costs  across 
the EU. 

As  indicated  above,  to  calculate  the  reduction  in  compliance  costs,  costs  currently  associated  with 
businesses in the lower turnover bracket (i.e. turnover below EUR 5 000) were used. 

Impact on the VAT revenue collected  

The data obtained from tax authorities was used to obtain estimates on the average net VAT revenue 
generated by businesses in each size class. However, it is not clear how the VAT revenue collected 
from an occasional trader would differ  from other businesses. While tax authority data revealed that 
businesses with less than EUR  5 000 of turnover on average contributed negatively to the net VAT 

147 Note that data obtained from tax authorities in Austria and Luxembourg was not granular enough to identify the number of 
businesses  with  less  than  EUR  5  000  of  turnover.  The  analysis  was  therefore  initially  carried  out  excluding  these  2  Member 
States  and  an  uplift  based  on  the  shares  of  SMEs  in  Austria  and  Luxembourg  compared  to  the  rest  of  the  EU  was  applied.  
Eurostat estimates of the number of businesses with 0 to 9 employees was used. Based on this data, Austria and Luxembourg 
were estimated to contribute to 1.47% of SMEs in the EU.   

198 | P a g e  

 
 
 
                                                      
revenue collected at the EU level, this wasn’t the case in every Member State. In addition, it could be 
due  to  a  combination  of  start-ups  making  large  initial  investments  and  recovering  VAT  on  these  as 
well as occasional traders registering as taxable persons in order to recover VAT paid on their inputs 
or engaged in input VAT fraud.  

Given  the  inherent  uncertainty,  it  was  unclear  whether  the  impact  of  this  option  on  VAT  revenues 
collected will be positive, by successfully treating fraudulent occasional traders (e.g. engaged in input 
VAT  fraud)  as  non-taxable  persons,  or  negative,  as  it  will  also  treat  as  non-taxable  persons 
occasional traders which were generating positive VAT revenues for the government. However, given 
that the businesses considered, with turnover below EUR 5 000, make up a negligible amount of the 
overall EU turnover (0.04%) this impact is expected to be limited. To estimate its potential magnitude 
the following was considered: 

  Where tax authorities provided data on the net VAT revenues generated by businesses below 
EUR  5  000  of  turnover  which  were  overall  negative,  it  was  estimated  that  these  make  up  -
1.3% of the overall net VAT revenue generated.148 An upper bound on the positive impact that 
this policy option could have on VAT revenues was therefore calculated. Given that only 40% 
of  these  businesses  would  potentially  classify  as  occasional  traders,  it  is  estimated  that  the 
positive revenue impact of this policy option could be an increase in revenues of up to 0.52%. 
  Where tax authorities provided data on the net VAT revenues generated by businesses below 
EUR 5 000 of turnover which were overall positive, it was estimated that these made up 0.6% 
of the overall net VAT revenue generated.149 Similarly, this could be used to calculate a lower 
bound  on  the  negative  impact  that  this  policy  option  can  have  on  VAT  revenues,  which  is 
estimated to be a decrease of 0.24% if 40% of these businesses were to be treated as non-
taxable persons.  

Impact on the wider economy 

As per Option 2, the impact on the wider economy was tested through the use of a CGE model. To 
compare against the status-quo, the changes from Option 2 were considered as part of this option as 
well,  with  the  additional  changes  in  VAT  revenues  and  compliance  costs  calculated  above  as 
additional inputs. The model then calculated how these changes flow through to the wider economy to 
estimate their impact.  

I.6 Option 4 - Option 3 plus measures for transition period reducing the 
negative impact of the ‘threshold effect’  

This  policy  option  encompasses  the  changes  proposed  in  Options  2  and  3  which  were  described 
previously. In addition, this policy option will extend the SME exemption scheme to businesses: 

  Which exceed the SME exemption threshold for one calendar year; or 
  Whose turnover exceeds the SME exemption threshold by 50%, whichever is earliest.  

148  This  is  based  on  data  obtained  for  Belgium,  Denmark,  Estonia,  Finland,  Ireland,  Italy,  Lithuania,  Malta,  Poland,  Slovenia, 
Spain and Sweden. Slovakia was excluded from the calculations as they were found to be an outlier in terms of the magnitude 
of the negative net VAT revenues generated by this group of businesses, for which the tax authorities were unable to provide 
an explanation.   
149 This is based on data obtained for Bulgaria, Czech Republic, France, Hungary, Latvia and the Netherlands.  

199 | P a g e  

 
 
  
                                                      
This  extension  gives  SMEs  a  period  of  time  to  prepare  for  the  application  of  a  full  set  of  VAT 
obligations, both financially and  administratively. Compared to the status-quo, this implies  that each 
year  some  businesses  which  were  previously  moved  onto  the  VAT  system  will  now  still  be  exempt 
from  paying  VAT  and  complying  with  the  full  VAT  obligations.  This  will  have  an  impact  on  the  VAT 
revenue collected by Member States and on the compliance costs faced by businesses.  

Number of businesses impacted by measures for the transitional period  

As per Option 3, the key challenge in estimating the impact of this option is to identify the businesses 
which are affected in a given year. In order  to quantify these businesses  the following methodology 
was used: 

  Mint Global data was used to estimate the number of businesses with turnover between the 
VAT exemption threshold and 150% of the threshold in a given Member State. This was done 
by taking the number of businesses in each relevant bracket estimated as part of the status-
quo  analysis,  and  using  Mint  Global  data  to  estimate  the  proportion  lying  between  the 
lower/upper  bound  of  this  bracket  and  the  relevant  thresholds.  This  was  done  for  every 
Member  State,  except  Austria  and  Luxembourg  where  the  data  provided  by  tax  authorities 
could not be used to infer these estimates. 

  Tax authorities in some Member States150 were able to provide the proportion of businesses 
between  their  VAT  exemption  threshold  and  150%  of  the  threshold  which  are  newly  VAT 
registered  businesses  each  year.  Based  on  the  data  received,  this  was  estimated  to  be 
around 11.4%. 

  Combining  the  above  two estimates,  11.2%  of  the  businesses  in each  Member  State which 
have turnover between the relevant VAT exemption threshold and 150% of this threshold are 
assumed to be impacted by policy option 4.  

Based  on  the  above  methodology,  the  proportion  of  businesses  impacted  at  an  EU-level  and  by 
Member State was obtained.  

Table 136 – Proportion of businesses impacted by policy option 4, EU-level and by Member State 

Member State 

Proportion of businesses impacted by 

the policy change 

EU-28 

Austria 

Belgium 

Bulgaria 

Croatia 

Cyprus 

Czech Republic 

Denmark 

Estonia 

150 Belgium, Finland, Ireland, Malta 

0.6% 

0.3% 

0.8% 

0.6% 

1.0% 

0.5% 

0.3%** 

0.3% 

0.6% 

200 | P a g e  

 
 
 
                                                      
Member State 

Proportion of businesses impacted by 

the policy change 

Finland 

France 

Germany 

Greece 

Hungary 

Ireland 

Italy 

Latvia 

Lithuania 

Luxembourg 

Malta 

Netherlands 

Poland 

Portugal 

Romania 

Slovakia 

Slovenia 

Spain 

Sweden 

United Kingdom 

Source: Deloitte analysis 

0.4% 

0.5% 

0.8% 

0.4% 

0.8% 

0.8% 

1.3% 

0.5% 

0.5%** 

0.5% 

0.8% 

0%* 

1.3% 

0.5% 

0.7% 

0.4% 

0.6% 

0%* 

0%* 

0.7% 

*Note:  the  Netherlands,  Spain  and  Sweden  do  not  have  the  SME  VAT  exemption  scheme  in  place,  hence  no 

businesses in their countries will be impacted by the extension of the threshold for a temporary period.  

**Note:  Mint  Global  data  did  not  identify  enough  businesses  in  the  Czech  Republic  and  Lithuania  to  obtain 

reliable estimates. In these two instances, EU-estimates were collected from Mint Global instead to derive these 

estimates. 

The variation of the proportion of businesses impacted between Member States depends on several 
factors, such as the thresholds in place, the number of businesses overall within the turnover brackets 
specified,  and  the  proportion  of  businesses  lying  within  the  relevant  brackets,  identified  using  Mint 
Global data. For example, Denmark has one of the lowest thresholds in the EU with EUR 10 000, and 
only 0.3% of businesses are expected to be impacted by this measure. 

Impact on businesses’ compliance costs 

To calculate the impact on the business compliance costs, the costs in option 3 are firstly taken into 
account. 

For treatment of businesses benefitting from this option, an estimate on the number of businesses in 
transition period on a yearly basis is required (as calculated above).  

201 | P a g e  

 
 
Businesses  in  the  transition  period  only  have  to  face  compliance  costs  from  trespassing  the  VAT 
exemption in a later period. Until the end of the transition period then, their compliance costs are the 
same as benefiting from the VAT exemption threshold. However, the transition period shall be used 
by  businesses  to  prepare  for  the  larger  set  of  obligations  deriving  from  trespassing  the  VAT 
exemption  threshold.  Therefore,  businesses  in  the  transition  period  will  face  transition  costs  to 
prepare for the larger set of obligations in the following period. Such transition costs were modelled as 
a one-off adjustment, quantified via expert assessment.  

As  a  result,  at  EU  level,  the  number  of  businesses  facing  VAT  compliance  costs  will  decrease 
therefore reducing the overall business compliance costs across the EU. 

Furthermore,  it  is  likely  that  monitoring  businesses  in  such  transition  period  will  increase  the 
monitoring  tasks  (and  possibly  costs)  for  tax  authorities  in  Member  States.  A  qualitative  analysis  of 
this aspect is provided in the section on impact on compliance and fraud for option 4 of Volume I.  

Impact on the VAT revenue collected  

Whilst the number of businesses impacted by this option will change every year, there will be a fall in 
VAT  revenue  collected  due  to  the  introduction  of  a  transition  period  for  the  SME  VAT  exemption 
scheme  compared  to  the  status-quo.  This  is  due  to  the  fact  that  each  year,  a  proportion  of  the 
businesses which under the current rules would be obliged to register and pay VAT due to exceeding 
the threshold would remain exempted for, at most, another year.   

The  number  of  businesses  impacted  by  this  policy  change  in  each  Member  State  was  estimated  in 
the section above. In addition, an estimate of the average turnover generated by these businesses is 
obtained by taking the average of the VAT exemption threshold and 150% of this threshold in each 
country.  An  effective  VAT  rate  for  the  EU  of  12.3%  was  used  to  calculate  the  resulting  fall  in  VAT 
revenue collected, at the EU-level and by Member State.  

Impact on the wider economy 

As  per  the  other  options,  the  impact  on  the  wider  economy  was  tested  through  the  use  of  a  CGE 
model. To compare against the status-quo, the changes from Options 2 and 3 are considered as part 
of this option as well, with the additional changes in VAT revenues and compliance costs calculated 
above as additional inputs.  

In addition, this option may increase the amount of economic activity carried out by SMEs, by making 
the  transition  from  the  SME  VAT  exemption  scheme  to  more  burdensome  VAT  obligations  easier. 
However,  the  exact  magnitude  of  this  increase  is  very  uncertain  as  it  is  challenging  to  predict  the 
response of businesses. As such, a few  scenarios  were tested from no change in activity  to a 10% 
increase  to  assess  the  impact  on  the  wider  economy  and  the  sensitivity  of  the  results  to  this 
assumption.  

202 | P a g e  

 
 
 
 
 
Annex J – Assessment of policy 
options – Compliance costs 

This annex presents the detailed set of compliance costs for businesses estimated as part of 
the assessment of the policy options.  

For  each  of  the  policy  options,  the  estimation  of  the  compliance  costs  for  businesses  included  the 
classification  of  the  impacts  on  different  groups  of  businesses,  the  identification  of  the  relevant 
administrative  obligations  imposed  by  Member  States  and  the  assessment  of  the  related  costs 
(including advisory costs, hidden costs and one-off adjustment costs, as applicable).  

The analysis focuses on a specific sub-set of SMEs, those that are more likely to be directly impacted 
by the provisions of the policy options, i.e. those eligible for the VAT exemption threshold. This sub-
set  of  businesses  have  been  identified  as  those  below  the  turnover  threshold  of  EUR  100 000, 
estimated in approximately 32 million (31 932 639)151.  

The details of these estimations are provided below of each of the policy options.  

J.1   Baseline scenario  

Under the baseline scenarios, three main groups of SMEs were identified as relevant, namely:  

  Businesses using domestic VAT exemption schemes;  
  Businesses opting out of domestic VAT exemption schemes; and  
  Businesses engaged in cross-border trade likely using the MOSS.  

In  addition,  a  sub-set  of  businesses  (still  in  the  same  turnover  range)  were  taken  into  account,  i.e. 
businesses not eligible for the VAT exemption scheme in their Member State.  

Below we describe the compliance costs for businesses active in their Member State of establishment 
only, and for those engaged in cross-border trade separately.  

Impact on businesses trading domestically 

The  compliance  costs  for  businesses  trading  domestically  only  and  opting  for  the  VAT  exemption 
scheme were assessed as the same as under the Status Quo.  

Similarly,  the  compliance  costs  for  businesses  trading  domestically  only  and  opting  out  of  the  VAT 
exemption scheme were assessed as the same as under the Status Quo.  

151 More details are provided on Volume II Annex D. 

203 | P a g e  

 
 
 
 
                                                      
Such estimates are provided already in Volume I Section 6.2 and in Volume II Annex .I.3.  

Impact on businesses trading cross-border  

Within  the  baseline  scenario,  SMEs  engaged  in  intra-EU  B2C  trade,  have  different  options  for 
accounting for and paying VAT, depending on whether their turnover from intra-EU trade falls below 
or above the common EU threshold of EUR 10 000.   

In the first case (i.e. turnover from intra-EU B2C trade below EUR 10 000), SMEs can:  

  Treat  these  sales  as  domestic  supplies,  and  be  subject  to  VAT  obligations  in  their  home 

country152;  

  Declare and pay VAT using the MOSS; or  
  Register  for  VAT  in  the  Member  State(s)  of  destination,  and  the  subject  to  the  standard  VAT 

regime in this country (or countries).  

In the second case (i.e. turnover from intra-EU B2C trade above EUR 10 000), SMEs can:  

  Declare and pay VAT using the MOSS; or  
  Register  for  VAT  in  the  Member  State(s)  of  destination,  and  the  subject  to  the  standard  VAT 

regime in this country (or countries).  

The following costs were estimated:  

  Treating  cross-border  sales  are  domestic  sales:  costs  already  included  in  the  domestic 

compliance costs;  

  Declare  and  pay  VAT  using  the  MOSS:  EUR  690  per  year,  with  economies  of  scale  for 
businesses,  estimated  to  be  of  about  95%  on  an  annual  basis  for  filing  and  payment  VAT 
returns for the subsequent Member State. 

  Register  for  VAT  in  the  Member  State(s)  of  destination,  and  the  subject  to  the  standard  VAT 
regime  in  this  country  (or  countries):  same  costs  as  the  standard  VAT  regime  (i.e. 
approximately EIR 3 000 per year).  

J.2   Option 2 - SME exemption scheme extended to supplies from other 
Member States and including streamlined simplification measures 

Within policy option 2, the following groups of SMEs were identified as relevant, namely:  

  Businesses  only  trading  domestically,  either  benefiting  from  the  domestic  VAT  exemption 
scheme, or using the streamlines simplification package or being in the standard VAT regime; 
and  

  Businesses  engaged  in  cross-border  trade,  and  using  the  MOSS  or  the  cross-border  VAT 

exemption scheme.  

In  addition,  three  different  scenarios  were  identified  for  the  streamlined  simplification  measures, 
namely:  

152 In this case, sales might be exempt from VAT if the business is eligible and opts for the SME exemption in its home country.  

204 | P a g e  

 
 
 
 
                                                      
  A  generalised  simplification  scenario,  under  which  the  streamlined  simplification  package 
move  towards  a  very  simple  set  of  obligations,  i.e.  where  compliance  costs  in  every  Member 
States are similar to the lowest range in the Status Quo;  

  A medium simplification scenario, where the set of obligations include registration, reporting 
and simplified book-keeping (and VAT returns and payment for non-exempt businesses); and  
  A minimal simplification scenario, where the measures introduced align with the highest set 

of obligations allowed under the option.  

The table below summarises the set of obligations included in each of the scenarios above  

Table 137 – Scenarios for streamlined simplification packages under policy option 2 

Generalised 
simplification scenario 

Medium 
scenario 

simplification 

Minimal 
scenario 

simplification 

Businesses trading domestically 

Using  VAT 
exemption 
scheme 

Opting  out 
VAT 
of 
exemption 
scheme 

  IO1: VAT registration;  
  IO9: Book-keeping 

  IO1: VAT registration;  
  IO6a: VAT return;  
  IO9: Book-keeping 

  IO1: VAT registration;  
  IO6a: VAT return;  
  IO8a: VAT payment;  
  IO9: Book-keeping 

  IO1: VAT registration;  
  IO6a: VAT return;  
  IO8a: VAT payment;  
  IO9: Book-keeping 

Business trading cross-border 

Using  VAT 
exemption 
scheme 

Opting  out 
of 
VAT 
exemption 
scheme 

  IO1: VAT registration;  
  IO9: Book-keeping 

  IO1: VAT registration;  
  IO6a: VAT return;  
  IO9: Book-keeping 

  IO1: VAT registration;  
  IO6a: VAT return;  
  IO8a: VAT payment;  
  IO9: Book-keeping 

  IO1: VAT registration;  
  IO6a: VAT return;  
  IO8a: VAT payment;  
  IO9: Book-keeping 

  IO1: VAT registration;  
  IO5a: Invoicing;  
  IO6a: VAT return;  
  IO9: Book-keeping 

  IO1: VAT registration;  
  IO5a: Invoicing;  
  IO6a: VAT return;  
  IO8a: VAT payment;  
  IO9: Book-keeping  

  IO1: VAT registration;  
  IO5a: Invoicing;   
  IO8a: VAT payment;  
  IO9: Book-keeping 

  IO1: VAT registration;  
  IO5a: Invoicing;  
  IO6a: VAT return;  
  IO8a: VAT payment;  
  IO9: Book-keeping  

As  well  as  these  specific  obligation,  eligible  businesses  face  the  hidden  cost  of  monitoring  the 
threshold, as in the baseline scenario (option 1).  

In  addition,  the  extension  of  the  VAT  exemption  scheme  to  non-established  businesses  implies 
additional  learning  costs  for  businesses  (or,  most  likely  for  their  accountants  and  advisors).  The 
decision  on  whether  to  apply  the  VAT  exemption  scheme  in  another  Member  State  requires  the 
knowledge (by businesses and/or their accountants and  advisors) of the eligibility requirements and 

205 | P a g e  

 
 
 
 
 
 
obligations  related  to  such  schemes.  Such  costs  are  estimated  to  amount  to  approximately  EUR 
1 500,  i.e.  the  cost  of  a  training153  course  on  VAT  exemption  schemes  in  place  in  neighbouring 
countries.  This  is  a  one-off  cost,  that  businesses  (most  likely  their  accountants  and  advisors)  incur 
when the schemes are extended, but do not constitute an administrative obligation. In addition, it is 
likely  that accountants  and  advisors  will  distribute  the  costs  of such  training  on  all  their  clients, with 
minimum  impact  on  businesses’  advisory  costs  (if  any).  In  the  medium-term,  such  costs  (e.g.  for 
updating knowledge of cross-border exemption schemes) are likely to become running costs, as  for 
updates on national schemes.  

Impact on businesses trading domestically  

With regard to the businesses trading only domestically and  opting for the VAT exemption scheme, 
three different sets of compliance costs were estimated, depending on the simplification scenario.  

As a general provision, the compliance costs for businesses trading domestically and subject to the 
standard VAT regime were assessed as the same as under the Status Quo.  

Generalised simplification scenario 

The  tables  below  provides  the  overview  of  the  estimated  compliance  costs  for  businesses  trading 
domestically under the generalised simplification scenario.  

153 It is assumed that accountants do not have to become certified in other Member States.  

206 | P a g e  

 
 
 
 
 
                                                      
Table 138 – Compliance costs for businesses trading domestically and applying the VAT exemption scheme under option 2 (Generalised simplification 
scenario) 

IO# 

Administrative task 

Tariff 
(national) 

Time 
(minute) 

Wage 
cost 

Tot. 
WAGE 
costs 

External Fees 

Frequency 
(annual) 

Other costs 

TOTAL 

IO1 

VAT registration 

IN-HOUSE 

IO5a 

IO6a 

IO8a 

IO9 

Invoicing 

VAT return 

VAT payment 

Book-keeping 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN_HOUSE 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

OUTSOURCE  

TOTAL 

Hidden costs  Monitoring threshold 

IN-HOUSE 

Total 

Source: Deloitte estimates 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

280 

150 

0 

0 

280 

150 

2 

20 

24 

0 

8 

4 

20 

1 

11 

13 

0 

4 

2 

11 

15 

0 

15 

257 

11 

13 

0 

51 

26 

128 

225 

225 

320 

320 

7 

7 

10 years 

10 years 

10 years 

240 per year 

Yearly  

Yearly 

Yearly 

Yearly 

Monthly 

Monthly 

Monthly 

Monthly 

22.50 

22.50 

320 

320 

80 

80 

15 

23 

37 

0 

0 

0 

51 

80 

131 

128 

297 

207 | P a g e  

 
 
  
 
 
  
  
  
  
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
Table 139 – Compliance costs for businesses trading domestically and opting out of the VAT exemption scheme under option 2 (Generalised simplification 
scenario) 

IO# 

Administrative task 

Tariff  

Time 
(minute) 

Wage 
cost 

Tot. 
WAGE 
costs 

External Fees 

Frequency 

Other costs 

TOTAL 

IO1 

VAT registration 

IN-HOUSE 

IO5a 

IO6a 

IO8a 

IO9 

Invoicing 

VAT return 

VAT payment 

Book-keeping 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN_HOUSE 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

OUTSOURCE  

TOTAL 

Hidden costs  Monitoring threshold 

IN-HOUSE 

Total 

Source: Deloitte estimates 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

280 

150 

0 

0 

280 

150 

2 

20 

24 

5 

8 

8 

20 

1 

11 

13 

3 

4 

4 

11 

15 

0 

15 

257 

11 

13 

3 

51 

51 

128 

225 

225 

320 

320 

7 

7 

10 years 

10 years 

10 years 

240 per year 

Yearly 

Yearly 

Yearly 

Yearly 

Monthly 

Monthly 

Monthly 

Monthly 

0,00 

22,50 

22,50 

0 

0 

320 

320 

80 

80 

15 

23 

37 

257 

11 

320 

331 

3 

51 

80 

131 

128 

887 

208 | P a g e  

 
 
  
 
  
  
  
  
 
 
  
  
  
  
  
  
  
  
 
 
 
 
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
Medium simplification scenario 

The  tables  below  provides  the  overview  of  the  estimated  compliance  costs  for  businesses  trading 
domestically under the medium simplification scenario.  

209 | P a g e  

 
 
 
Table 140 – Compliance costs for businesses trading domestically and applying the VAT exemption scheme under option 2 (Medium simplification scenario) 

IO# 

Administrative task 

Tariff  

Time 
(minute) 

Wage 
cost 

Tot. 
WAGE 
costs 

External Fees 

Frequency  

Other costs 

TOTAL 

IO1 

VAT registration 

IN-HOUSE 

IO6a 

VAT return 

IO9 

Book-keeping 

OUTSOURCE  

TOTAL 

IN_HOUSE 

OUTSOURCE  

TOTAL 

IN-HOUSE 

OUTSOURCE  

TOTAL 

Hidden costs  Monitoring threshold 

IN-HOUSE 

Total 

Source: Deloitte estimates 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

350 

187 

0 

645 

24 

24 

8 

4 

25 

0 

345 

13 

13 

4 

2 

13 

19 

0 

35 

13 

13 

51 

26 

161 

0 

225 

225 

360 

360 

0 

8 

10 years 

10 years 

10 years 

Yearly 

Yearly 

Yearly 

Monthly 

Monthly 

Monthly 

Monthly 

0,00 

22.50 

22.50 

360 

360 

0 

90 

19 

23 

41 

13 

360 

373 

51 

90 

141 

161 

716 

210 | P a g e  

 
 
  
  
  
  
  
 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
Table 141 – Compliance costs for businesses trading domestically and opting out of the VAT exemption scheme under option 2 (Medium simplification 
scenario) 

IO# 

Administrative task 

IO1 

VAT registration 

IN-HOUSE 

IO5a 

IO6a 

IO8a 

IO9 

Invoicing 

VAT return 

VAT payment 

Book-keeping 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

OUTSOURCE  

TOTAL 

Hidden costs  Monitoring threshold 

IN-HOUSE 

Total 

Source: Deloitte estimates 

Tariff  

Time 
(minute) 

Wage 
cost 

Tot. 
WAGE 
costs 

External Fees 

Frequency 

Other costs 

TOTAL 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

350 

187 

0 

0 

645 

345 

2 

24 

24 

5 

8 

4 

25 

1 

13 

13 

3 

4 

2 

13 

19 

0 

35 

257 

13 

13 

3 

51 

26 

161 

0 

225 

225 

0 

0 

360 

360 

0 

0 

8 

0 

10 Years 

10 Years 

10 Years 

240 per year 

Yearly 

Yearly 

Yearly 

Yearly 

Monthly 

Monthly 

Monthly 

Monthly 

0,00 

22.5 

2.50 

0 

0 

360 

360 

0 

0 

90 

0 

19 

23 

41 

257 

13 

360 

373 

3 

51 

90 

141 

161 

975 

211 | P a g e  

 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
Minimal simplification scenario 

The  tables  below  provides  the  overview  of  the  estimated  compliance  costs  for  businesses  trading 
domestically under the minimal simplification scenario.  

212 | P a g e  

 
 
 
Table 142 – Compliance costs for businesses trading domestically and applying the VAT exemption scheme under option 2 (Minimal simplification scenario 

IO# 

Administrative task 

IO1 

VAT registration 

IN-HOUSE 

IO5a 

IO6a 

IO8a 

IO9 

Invoicing 

VAT return 

VAT payment 

Book-keeping 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

OUTSOURCE  

TOTAL 

Hidden costs  Monitoring threshold 

IN-HOUSE 

Total 

Source: Deloitte estimates 

Tariff  

Time 
(minute) 

Wage 
cost 

Tot. 
WAGE 
costs 

External 
Fees 

Frequency  

Other costs 

TOTAL 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

450 

241 

24 

450 

241 

2 

30 

1 

16 

24 

257 

16 

24 

13 

13 

10 

4 

25 

5 

64 

2 

13 

26 

161 

225 

225 

400 

400 

8 

8 

10 years 

10 years 

10 years 

240 per year 

Yearly 

Yearly 

Yearly 

Yearly 

Monthly 
Monthly 

Monthly 

Monthly 

0,00 

22.50 

22.50 

400 

400 

100 

100 

24 

23 

47 

257 

16 

400 

416 

0 

64 

100 

164 

161 

1044 

213 | P a g e  

 
 
 
  
 
  
  
 
 
 
  
  
 
 
 
 
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
Table 143 – Compliance costs for businesses trading domestically and opting out of the VAT exemption scheme under option 2 (Minimal simplification 
scenario) 

IO# 

Administrative 
task 

Tariff  

Time 
(minute) 

Wage 
cost 

Tot. WAGE 
costs 

Extern
al Fees 

Frequency 
(annual) 

Other 
costs 

TOTAL 

IO1 

VAT registration 

IN-HOUSE 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IO5a 

IO6a 

IO8a 

IO9 

Invoicing 

VAT return 

VAT payment 

Book-keeping 

Monitoring 
threshold 

Hidden costs 

Total 

Source: Deloitte estimates 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

450 

241 

450 

2 

30 

30 

5 

10 

10 

25 

241 

1 

16 

16 

3 

5 

5 

13 

24 

24 

257 

16 

16 

3 

64 

64 

161 

225 

225 

400 

400 

8 

8 

10 years 

10 years 

10 years 

240 per year  

Yearly 

Yearly 

Yearly 

Yearly 

Monthly 

Monthly 

Monthly 

Monthly 

22.50 

22.50 

400 

400 

100 

100 

24 

23 

47 

257 

16 

400 

416 

3 

64 

100 

164 

161 

1047 

214 | P a g e  

 
 
  
 
 
  
  
 
 
 
  
  
 
 
 
 
  
  
  
  
  
  
  
  
 
 
 
 
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
Impact on businesses trading cross-border  

With regard to the compliance costs for businesses trading cross-border, the following estimates were 
defined:  

  Costs of using the MOSS: same as under the baseline scenario (Option 1);  

  Compliance  costs  for  businesses  using  the  cross-border  VAT  exemption  scheme:  same  as 
those for businesses opting out the VAT exemption scheme under the different scenarios for 
the streamlined simplification packages.  

J.3   Option 3 - Option 2 plus mandatory treatment of occasional traders as 
non-taxable person 

Option 3 does not modify the administrative obligations imposed on businesses, therefore the same 
compliance costs adopted for option 2 were used.  

J.4   Option 4 - Option 3 plus measures for transition period reducing the 
negative impact of the ‘threshold effect’ 

Within  option  3,  an  additional  sub-set  of  impacted  businesses  was  identified,  i.e.  those  businesses 
within the transitional period.  

Such  businesses  are  expected  to  use  the  transitional  period  to  prepare  for  the  full  set  of  VAT 
obligations, which includes at least some of the following:  

  Understanding of the VAT system (use of advisors/accountants);  
  Change from annual to quarterly (or even monthly) accounting;  
  Information to the tax authorities; and  
  Re-calculation of sales prices (and possible new pricing policy).  

It is therefore estimated that the compliance costs for this group of businesses will increase during the 
transitional period, up to EUR 1 325 (i.e. a 36% increase from the streamlined simplification package). 
This way, the further expected increase to the full set of VAT obligations (quantified at EUR 2 964 per 
year) is expected to be less complex.  

The table below provides the overview of the information obligations and related costs estimated for 
this group.  

215 | P a g e  

 
 
 
 
 
 
 
 
Table 144 – Compliance costs for businesses within the transitional period under option 4  

IO# 

Administrative task 

IO1 

VAT registration 

IN-HOUSE 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IN-HOUSE 

OUTSOURCE  

TOTAL 

IN-HOUSE 

IO5a 

IO6a 

IO8a 

IO9 

Invoicing 

VAT return 

VAT payment 

Book-keeping 

Hidden costs  Monitoring threshold 
Bcoming familiar with 
the full set of VAT 
obligations 

One-off 
adjustment 

Total 

Source: Deloitte estimates 

Tariff  

Time 
(minute) 

Wage 
cost 

Tot. 
WAGE 
costs 

External Fees 

Frequency 

Other costs 

TOTAL 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

32.10 

350 

187 

0 

0 

645 

345 

2 

24 

24 

5 

8 

4 

25 

1 

13 

13 

3 

4 

2 

13 

19 

0 

35 

257 

13 

13 

3 

51 

26 

161 

0 

225 

225 

0 

0 

360 

360 

0 

0 

8 

0 

10 Years 

10 Years 

10 Years 

240 per year 

Yearly 

Yearly 

Yearly 

Yearly 

Monthly 

Monthly 

Monthly 

Monthly 

0,00 

22.5 

2.50 

0 

0 

360 

360 

0 

0 

90 

0 

19 

23 

41 

257 

13 

360 

373 

3 

51 

90 

141 

161 

Yearly 

350 

350 

1 325 

216 | P a g e  

 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annex K – CGE model 

This  annex  outlines  the  theoretical  aspects  of  the  computable  general  equilibrium  (CGE) 
model  that  was  employed  to  evaluate  the  potential  impacts  of  the  different  policy  change 
options. 

K.1 Multi-sector Computable General Equilibrium (CGE) model   

The figure below illustrates the structure of a typical CGE model. The CGE model is based on a set of 

simultaneous equations describing the behaviour of the key segments in the economy – households, 

firms in different sectors, the government and the foreign sector – and the interactions between these 

segments  within  each  region.  The  interactions  between  these  agents  determine  equilibrium  output, 

factor demands, consumption and prices in each sector. This equilibrium is based on the principle that 

one  agent’s  expenditure  is  another  agent’s  income  and  therefore  all  spending  throughout  the 

economy are accounted for. Prices are determined by the equilibrium between demand for and supply 

of goods and services and factors of production.  

Figure 28 - Circular Flow of Income 

Below we describe the components of the model:  

217 | P a g e  

 
 
 
  Households own the factors of production, labour and capital, which they supply to firms for 

their use in the production process. Income from these factors is used for the consumption of 

goods and services, which may be supplied by either foreign or domestic firms. Income that 

is  not  used  for  consumption  is  saved,  contributing  towards  total  investment  and  the  capital 

stock as a result. 

  Firms  purchase  capital  and  labour  from  households  and  intermediate  goods  from  other 

domestic  sectors  and  the  foreign  sector.  These  are  used  as  inputs  to  production,  with  the 

final goods being sold to either the domestic or the foreign sector.  

  The  government  receives  tax  revenues  from  households  and  firms  that  it  uses  to  provide 

public  goods  for  the  use  of  households  and  firms  and  purchase  goods  and  services  for 

government  consumption.    The  government  may  also  save  a  share  of  its  income,  thereby 

contributing to the capital stock of the economy.  

  The foreign sector, i.e. non-EU companies and households, completes the circular flow of 

income  by  representing  the  flows  into  and  out  of  the  domestic  economy.  Foreign  agents 

purchase exports from domestic firms and domestic households and firms purchase imports 

from the foreign sector.     

The CGE model used for this analysis was an extension of a model previously developed in order to 

support a separate project investigating the economic impacts of change to the VAT treatment of e-

commerce.  This  model  has  been  developed  with  the  support  of  academic  experts  and  has  the 

following features, which will also be included in the CGE model for this analysis: 

  The  model  is  a  single-region  model  of  the  EU.  Impacts  at  the  national  level  are  calculated 

outside the model based on the contribution of each sector to the economy.  

  The  model  distinguishes  between  domestic  (within-country), 

intra-EU  and  non-EU 

transactions  in  order  to  reflect  the  fact  that  these  transactions  may  differ  in  their  VAT 

treatment and hence in the effective VAT rate faced by consumers.  

The  model  reflects  both  fixed  and  variable  costs  of  VAT  compliance  facing  firms.  Again,  these 

costs  are  allowed  to  differ  depending  on  whether  firms  are  selling  domestically,  within  the 

EU, or outside the EU.  

Outputs of the model 

Some of the key economic outputs that were estimated by the CGE model at the EU aggregate level 

are: 

  The output and growth of the different sectors;  

Investment in different sectors of the economy; 

  Employment by different types of labour (skilled, unskilled); 

218 | P a g e  

 
 
 
 
  Demand and consumer prices; 

  Government revenues. 

The model is fully dynamic and forward-looking. It can therefore cover the short-, medium- and long-

run impacts of a potential policy change. The dynamics of the model are calibrated using historic data 

on the contribution of SMEs to the economy and expert insights into trends in this market.  

K.2 Data strategy 

The CGE model draws on three main sources of data: 

  Macro-economic data for the EU-27: The majority of the data required for the baseline CGE 

model  can  be  found  in  a  social  accounting  matrix  (SAM);  this  is  a  square  matrix  that 

represents  the  various  transactions  made  between  commodities,  factors  and  institutions 

taking  place  in  an  economy.  This  matrix  is  constructed  using  supply  and  use  tables  and 

national accounts data from Eurostat154. 

  Data  on  the contribution  of  SMEs:  data  was collected on  the  contribution  of  SMEs  to  the 

EU economy. This was used to assess the extent to which the policy options affect the size of 

the market and employment.  

  Data  on  the  administrative  burden:  The  information  required  for  the  scenario  analysis 

comes  from  the  outputs  of  the  Standard  Cost  Model.  This  data  includes  the  administrative 

burden  associated  with  the  different  policy  options  and  estimates  of  the  impact  of  changing 

the VAT threshold.   

K.3 Macro-economic data 

The  primary  source  of  data  used  for  the  development  of  the  core  CGE  model  is  found  in  a  Social 

Accounting Matrix for the EU. This matrix accounts for flows of income expenditure between different 

actors in the economy – firms, households, the government and the foreign sector – and is based on 

the principle that one agent’s income must be another another’s expenditure. The Social Accounting 

Matrix therefore contains the following information: 

  Production activity by sector; 

  Demand for intermediate inputs by sector (the Input-Output table); 

  Payments to capital and labour by sector; 

  Final consumption expenditure by sector; 

  Capital formation and inventory investment by sector; 

Imports and outputs by sector; 

  Taxes and subsidies by sector and by revenue base; 

154  Supply  and  Use  data  is  not  available  for  Croatia;  the  estimates  will  therefore  be  adjusted  upwards  based  on  Croatia’s 
estimated contribution to EU GDP and its contribution to e-Commerce (from the consumer survey).  

219 | P a g e  

 
 
 
                                                      
  Direct taxation and transfers by domestic actors; 

  Payments made/received by domestic actors to/from the rest of the world; 

  Domestic actors’ net savings and the net savings from the rest of the world;  

K.4 Construction of the EU Social Accounting Matrix 

At present, a Social Accounting Matrix for the EU is not available and so its construction  was a key 

task for the development of the CGE model. The information required to construct the matrix can be 

found in Supply and Use tables for the EU-27 and in National Accounts data for each of the Member 

States.  Both  have  been  made  publicly  available  by  Eurostat,  albeit  with  the  Supply  and  Use  tables 

only being updated to 2011.155  

An important characteristic of the Social Accounting Matrix is that it is ‘balanced’ – i.e. for every actor, 

institution  and  activity,  total  income  received  must  equal  to  total  expenditure  made  (inclusive  of 

savings). This requires a certain level of consistency and completeness in the data sources that is not 

always  possible  due  to  a  lack  of  sufficient  detail,  measurement  accuracy,  or  differences  in  data 

collection/collation  methodology.  The  following  is  a  general  data  reconciliation  strategy  to  ensure 

consistency of the data sources used to complete the Social Accounting Matrix: 

  Where  possible,  data  points  from  the  Supply  and  Use  tables  are  used  without  further 

assumptions or reconciliation156;  

  Where the Supply and Use tables have gaps in data points required, National Accounts data 

is used; 

  Where  National  Accounts  data  is  lacking  in  sufficient  granularity,  suitable  assumptions  are 

made to estimate the data points required157; 

  Where  for  the  same  data  point  the  Supply  and  Use  tables  are  significantly  different  from 

National Accounts data, suitable assumptions are made using information from both sources 
to  estimate a  single  data point158.  If  the  differences  are  small,  Supply  and  Use table  data  is 

used; 

  As  a  last  resort,  if  the  Social  Accounting  Matrix  is  complete  but  does  not  balance,  an 

estimation procedure involving re-weighting of the data in the matrix can be conducted. 

Figure  29  illustrates  the  basic  structure  of  the  Social  Accounting  Matrix  as  well  as  the  sources  for 

each  data  point  required.159  Columns  represent  expenditures/outlays  made,  while  rows  represent 

incomes  received.  For  example,  reading  down  from  the  Households  column  and  across  to  the 

155 Due to the latest Supply and Use tables being updated only to 2011, Croatia is not included in the tables and so only an EU-
27 aggregate can be calculated. 
156 The tables have been constructed by Eurostat with a high level of consistency (i.e. total supply of a good or service is equal 
to total use/demand) and in most cases a significant level of granularity. 
157 National Accounts data tables in Eurostat often do not provide data points in sufficiently granular detail. 
158 Due to differences in definitions or data collection methodologies, the Supply and Use tables and National Accounts data do 
not always report the same value for the same data point.  
159 Implied data points are calculated residually after filling the SAM with all other data points. 

220 | P a g e  

 
 
                                                      
Commodities row represents household final consumption expenditure on goods and services. Table 

145  describes  the  primary  data  inconsistencies  encountered  and  the  specific  data  reconciliation 

strategy used to correct for these inconsistencies.  

221 | P a g e  

 
 
Figure 29: Basic structure of the Social Accounting Matrix 

222 | P a g e  

SocialAccounting MatrixActivitiesCommoditiesLabourfactorCapital factorNet taxes on productionNet indirect taxesHouseholdsGovernmentRest of theWorldSavings-investmentActivitiesOutputCommoditiesIntermediate consumption(Derived from Input Output table)Household final consumption expenditureGovernmentfinalconsumption expenditureExportsGross CapitalFormationLabourfactorPayments to capitalCapital factorPayments to labourNet taxes on productionNet taxes on productionNetindirect taxesNet Indirect taxes on products (i.e. VAT receipts and other taxes)HouseholdsTotalpayments to capitalTotal payments to labourPayments from government to households(i.e. SocialBenefits and other transfers)Net payments from ROW to householdsGovernmentNet taxes on productionTaxes less subsidies on products (i.e. VAT receipts and other taxes on products)Totaldirect taxespaid by householdsRest of theWorldImportsNet payments from government to ROWNet foreignsavingsSavings-investmentNet Household SavingsNet Government SavingsNational Accounts dataSupply and Use tablesMix of National accounts data and Supply and Use tablesImplied data points 
 
 
Table 145 - Primary data inconsistencies encountered and the specific data reconciliation strategy 

Data point 
Payments  to/from 
Rest of World  

Final 
consumption 
expenditure 
at 
market  prices  by 
households, 
government  and 
gross 
capital 
formation 

Data inconsistency/challenge 
National Accounts data: 
Provides payments to/from Rest of World 
Supply and Use tables: 
Provides no data on payments to/from Rest of 
World  
National  Accounts  data  relative  to  Supply 
and Use tables: 
Reports  slightly  higher 
expenditure for households and government. 
Reports even higher gross capital formation 
Reports  slightly  higher  total  final  consumption 
expenditure.  

final  consumption 

Data reconciliation strategy 
National Accounts data used.  

Supply and Use tables used in conjunction 
with  an  assumed  actor  disaggregation  of 
mixed 
the 
differences. 

to  compensate 

income 

for 

Direct 
and transfers 

taxation 

National Accounts data: 
Reports 
total 
Reports 
Reports 
social 
Reports social benefits. 

tax  on 

current 

income  and  wealth; 
transfers; 
contributions; 

Supply and Use tables: 
Provides  no  data  on  direct 
transfers 

taxation  and 

Indirect taxes: 
VAT by sector 

National Accounts data: 
Reports total VAT but not by sector or by actor.  

Supply and Use tables: 
Reports  taxes  less  subsidies  on  products  paid 
households, 
in 
government  and  gross  capital 
formation. 
However, does not report by sector  

consumption 

final 

by 

National Accounts data used. 

taxes 

VAT  receipts  in  National  Accounts  data 
used as total VAT in SAM. 
to  be  contained  completely 
Assumed 
within 
final 
less  subsidies  on 
consumption  products  reported  in  Supply 
and Use Tables.  
After  netting  out  VAT  from  taxes  less 
subsidies,  assumed 
is 
other net taxes on products. 
VAT and other net taxes disaggregated by 
sector  and  by  agent  using  suitable 
assumptions. 

that  remainder 

to 

Payments 
capital: 
Gross  operating 
surplus,  mixed 
income 

National Accounts data: 
Provides  both  gross  operating  surplus  and 
mixed income but not by sector. 

Mixed  income  calculated  by  subtracting 
Supply and Use tables data from National 
Accounts data. 
Gross  operating  surplus 
reported  by 
Supply and Use tables used in conjunction 
with an assumed sector disaggregation of 
mixed income as payments to capital. 

223 | P a g e  

 
 
 
 
 
 
 
Annex L – Bibliography 

Studies produced at international level 

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6 
on 
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consulted 

Journal 

67(2), 

Tax 

Engelshalk  M,  Small  Business  Taxation  in  Transition  Countries,  2005,  World  Bank,  available: 
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OECD, 
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Guidelines 

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OECD,  Report  on  the  Taxation  of  SMEs.  Key  Issues  and  Policy  considerations,  2009,  available  at   
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OECD,  Taxation 
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PWC and World Bank, Paying Taxes, 2016, available at: 
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at 
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helping  SMEs, 

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how 

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Directive  2009/132/EC  as  regards  certain  value  added  tax  obligations  for  supplies  of  services  and 
distance sales of goods. 

Council  Directive  2002/38/EC  of  7  May  2002  amending  and  amending  temporarily  Directive 
77/388/EEC  as  regards  the  value  added  tax  arrangements  applicable  to  radio  and  television 
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place of supply of services.  

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place of supply of services. 

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for  a  Council 

Proposal 
Implementing  Decision  amending  Decision  2013/677/EU  authorising 
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system of value added tax. 

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agreement 

(federal 

de 

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Information on Swedish SME exemption scheme: https://data.riksdagen.se/fil/BABBC8C1-C310-432D-
9C10-08801D44891F. 

Single Market Strategy, available: http://ec.europa.eu/growth/single-market/index_en.htm. 

VAT Committee Consultations, available: 
http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/key_documents/vat_committe
e/consultations_vat_committee_en.pdf , consulted on 15 June 2016. 

Case Law 

CJEU Case C-219/12 Finanzamt Freistadt Rohrbach Urfahr 

CJEU Case C-97/09 Schmelz 

230 | P a g e  

 
 
 
 
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2017 

Directorate-General for Taxation and Customs Union 

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