Every small business selling online in the EU faces the same question sooner or later: at what point does turnover force VAT registration? The answer depends on three separate euro figures, not one, and picking the wrong path can mean charging the wrong VAT rate for months. This guide compares the three routes a small seller can take: staying under a domestic exemption, crossing the EU-wide distance-selling threshold, or using the new SME scheme introduced in January 2025. Each route carries its own limit, its own paperwork, and its own catch.
Staying under your domestic VAT threshold
Every EU country sets its own domestic VAT exemption for businesses established within its borders. Since the 2025 reform, the scheme establishes a common maximum domestic or national threshold of €85,000 for small business exemptions, though most member states fix their own limit well below that figure.
The actual numbers vary sharply from one country to the next. Austria sets its threshold at €42,000, Belgium at €25,000, and Germany at €22,000. Greece takes the opposite approach entirely: no threshold applies, meaning registration is mandatory from the very first sale.
Below the relevant figure, taxable persons who remain below the threshold are generally exempt from charging VAT on their supplies. The trade-off is that a business using the exemption usually cannot reclaim VAT paid on its own purchases, a point worth weighing before opting in.
Crossing the EU-wide threshold for cross-border e-commerce
Cross-border business-to-consumer sales follow a completely different rule. Since 1 July 2021, a single €10,000 EU-wide threshold applies to cross-border B2C distance sales of goods and electronic services; above it, VAT is due in the customer's country.
This limit is not per market. A shop selling €4,000 to France, €4,000 to Italy and €3,000 to Belgium has crossed it, even though no single country reached €10,000. The moment the combined figure tips over the line, the rules change for every sale that follows.
Once that happens, the VAT liability shifts to the EU country of destination, and the seller can either register for local VAT in that country or use the One Stop Shop system. There is an exception worth noting here too: a seller established outside the EU has no threshold at all, since VAT is due at destination from the first sale.
Using the new EU SME scheme to stay exempt abroad
A third route appeared only recently. As from 1 January 2025, EU small businesses established in another Member State than where VAT is due can use the special regime for small businesses (SME scheme) to VAT exempt their supplies cross-border, instead of charging VAT as soon as they cross a border.
To qualify, two conditions must both hold. Neither the Union annual threshold of EUR 100,000 nor the national annual threshold set by the Member State where the business wants to apply the exemption should be exceeded. Both figures get checked every year, not once.
Administration stays fairly light under this route. The business reports its exempt cross-border sales to its home authority, since it uses this number to report quarterly to their home tax authority the VAT exempt sales for the nominated EU states. The scheme has real limits, though: companies established outside the EU cannot register for the scheme, not even with a permanent establishment inside it, and opting in generally means losing the right to deduct input VAT, just as with the domestic exemption.
Who each option genuinely suits
A seller trading only inside one country should watch the domestic threshold and nothing else, since none of the cross-border rules ever come into play. A seller who already charges VAT at home and ships steadily across several EU countries usually gains more from OSS, because it allows sellers making B2C cross-border supplies within the EU to declare and pay VAT in a single Member State rather than filing in each one separately.
The SME scheme fits a narrower group well: small, occasional cross-border sellers who want to stay exempt rather than start charging VAT abroad, as long as their EU-wide turnover stays comfortably under the €100,000 cap and under each country's own national limit.
What actually decides the choice is not total revenue but where that revenue comes from, and how much of it crosses a border. A seller shipping across the EU needs to track the €10,000 figure every year, including the one before it, since if either year exceeds €10,000, destination-country VAT applies. Check your national tax authority's threshold page before each quarter ends, keep cross-border sales logged separately from domestic ones, and register for OSS or the SME scheme as soon as projected turnover comes within reach of the relevant limit, not after you have already crossed it.
