COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Council Directive amending Directive 2006/112/EC on the common system of value added tax as regards the special scheme for small enterprises
Date: 2018-01-18
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: VAT, administrative formalities, liberalisation of trade, simplification of legislation, small business, tax exemption, tax harmonisation, tax law, tax offence

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   EUROPEAN COMMISSION  Brussels, 18.1.2018  SWD(2018) 11 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document Proposal for a Council Directive amending Directive 2006/112/EC on the common system of value added tax as regards the special scheme for small enterprises  {COM(2018) 21 final} - {SWD(2018) 9 final}  
 
 
Executive Summary Sheet 
Impact assessment on Proposal for a Council Directive amending Directive 2006/112/EC on the common system 
of value added tax as regards the special scheme for small enterprises 

A. Need for action 

Why? What is the problem being addressed?  
The  current  rules  on  the  VAT  treatment  of  SMEs  result  in  1)  disproportionate  compliance  costs  for  small 
enterprises as compared to large enterprises (while SMEs spend on average 2.6% of their sales revenues on tax 
compliance costs, for large enterprises these costs represent only 0.02%), 2) lack of neutrality, in particular, in 
relation  to  suppliers  from  other  Member  States  (MS)  and  3)  revenue  losses  for  MS.  The  current  VAT  SME 
scheme does not reflect legal and economic reality in which SMEs function already now and will become even 
more inadequate when the evolution of the VAT system towards taxation at destination is completed. 

What is this initiative expected to achieve?  
The review will contribute to: 

 
 
 

reduction of compliance costs,  
creation of more level playing field for small enterprises and  
fight against VAT fraud. 

What is the value added of action at the EU level?  
A  modification  in  the  Directive  is  necessary  to  change  the  current  rules  on  the  VAT  treatment  of  small 
enterprises which have reached their limits. 

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  
Option 1:  Status quo, including e-Commerce changes (baseline scenario) 
Option 2:  SME  exemption  extended  to  supplies  from  other  MS  and  including  streamlined  simplified  VAT 

obligations 

Option 3:  Option 2 plus measures to reduce the negative impact of transition from exemption to taxation  
Option 4:  Option 3 plus mandatory common treatment of occasional traders 

Option 3 is the preferred one. 

Who supports which option?  
There is broad support for Option 3 on the  side of both stakeholders and MS. While small enterprises support 
more harmonisation of both SME exemption and simplification measures, MS remain more reserved. 

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)?                                       

  Reduction in compliance costs of up to 18%  
 
  Longer  term positive revenue  impact  due  to  positive  impact  on  SMEs’  output and  to positive  effect  on 

Increase in SMEs’ cross-border trading activity of about 13% 

voluntary compliance 

What are the costs of the preferred option (if any, otherwise main ones)?                                       
Minor  temporary  negative impact on  VAT  revenue of  MS  due  to  the  extension  of  application  of  the  exemption 
(fraction of a percentage point). 

Environmental and social impacts are not significant. 

How will businesses, SMEs and micro-enterprises be affected?  
Overall compliance cost reduction for SMEs of up to 18%, more level playing field in the Internal Market.  
Positive impact on SMEs’ output (about 16%) and on SMEs’ cross-border activity (about 13%). 

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Will there be significant impacts on national budgets and administrations?  
Minor  overall  effect  on  VAT  revenue  (fraction  of  a  percentage  point),  no  significant  impacts  on  administrative 
costs, positive impact on voluntary compliance. 

Will there be other significant impacts?  
MS,  stakeholders  and  the  Commission  will  need  to  adapt  to  the  new  rules  as  regards  implementation  and 
control. 

Proportionality?  
The  preferred  option  has  been  elaborated  in  a  way  to  effectively  address  the  original  problems  without  going 
beyond what is needed to achieve the objectives. 

D. Follow up 

When will the policy be reviewed?  
A retrospective evaluation of the functioning of the Directive will be carried out five years after its entry into force. 

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