6 key details of the new VAT franchise regime for small businesses in Belgium starting 2025

In 2025, Belgium is set to introduce significant changes to the VAT exemption regime for small businesses (‘SME scheme’), aiming to simplify administrative burdens and foster a more competitive environment within the EU. This reform follows the EU Directive 2020/285, which seeks to modernize the VAT system for small enterprises and reduce the disparities caused by the previous regulations.

6 key details of the VAT franchise regime  

  1. Expansion of VAT exemption eligibility: 
    • Small businesses established in any EU member state can now apply for VAT exemption on their operations in Belgium, provided they meet specific conditions.
    • Belgian VAT taxable persons are also eligible to apply the SME scheme in other EU member states, promoting cross-border business activities.
  2. Annual turnover thresholds from a Belgian perspective:
    • Domestic SME scheme: applies to Belgian businesses with an annual turnover in Belgium not exceeding €25,000. Not all VAT taxable persons are eligible, and certain exceptions apply.
    • SME cross-border scheme: for EU-based businesses operating in Belgium, the combined annual turnover within the EU must not exceed €100,000, with Belgian turnover not surpassing €25,000.
  3. Simplified administrative requirements in the SME cross-border scheme:
    • EU businesses not established in Belgium applying for VAT exemption in Belgium must notify their home state and will be identified by a unique VAT number marked with an "EX" suffix.
    • These businesses do not need to register for VAT or file periodic VAT declarations in Belgium.
  4. Obligations in the home member state in the SME cross-border scheme:
    • Businesses must submit a quarterly report in their member state of establishment entailing supplies carried out in all other member states.
    • Any changes in business operations or intent to apply the VAT exemption in additional member states must be promptly reported to the home state’s VAT authority.
  5. Transparancy and compliance:
    • The new articles, 56ter to 56undecies, outline the procedures for applying the VAT exemption across member states, ensuring transparency and ease of compliance for businesses.
    • Detailed quarterly and annual reporting obligations are specified to maintain oversight and prevent tax evasion or fraud.
  6. Input VAT deduction 
    • Businesses applying the domestic SME scheme or SME cross-border scheme are not entitled to any input VAT deduction on purchases used to make these supplies.
      If a taxable person uses a combination of a domestic SME scheme and a normal regime for cross-border operations (or vice versa), they may have a partial right to deduct input VAT on the costs incurred for the VAT taxable operations.


Impact and preparation for businesses


These changes are designed to reduce the administrative burden on small businesses and support their expansion across EU borders. 


Ask our advice or support 


If you are considering whether these new VAT exemption regulations apply to your business and would like to gain insight into the specific implications for your operations, please do not hesitate to reach out for professional guidance. 

Contact one of our VAT experts indicated below and we will be pleased to assist you in understanding how these changes could benefit your business and guide you through the necessary steps to compliance. Our team is ready to provide tailored advice and support tailored to your unique business needs.