VAT Committee – General Principle for Calculating Annual Turnover under the SME Scheme

1. General Principle

The VAT Committee unanimously agrees that the calculation of annual turnover for the SME scheme, as required under Articles 284a and 284b, must follow Article 288 of the VAT Directive. The taxable person shall include the value (exclusive of VAT) of the following categories of transactions:

2. Categories of Transactions to Include

Category 1: Taxable Supplies under SME Scheme

• Includes supplies covered by the SME scheme and those excluded under Article 283.
• Excludes transactions exempt under normal rules or outside VAT scope.

Category 2: Zero-Rated Transactions

• Supplies where zero rate applies under:
  • Article 98(2) (Annex III points (1)-(6), (10c)),
  • Article 101a,
  • Article 105a(1) or (2).

Category 3: Exempt Export Transactions

• Supplies exempt from 1 July 2028 under Articles 136a or 136b, including:
  • Exportation (Articles 146, 147),
  • International transport (Articles 148, 149),
  • Transactions treated as exports (Articles 151-153).

Category 4: Intra-EU Supplies

• Value of exempt intra-EU supplies under Article 138.
• Includes transfers treated as supplies under Article 17.

Category 5: Certain Exempt Transactions

• Real estate (Article 135(1)(j)-(l)),
• Financial services (Article 135(1)(b)-(g)),
• Insurance/reinsurance (Article 135(1)(a)).
• Ancillary transactions are excluded; determination is case-by-case.

3. Transactions to Exclude

The taxable person shall not include:

• Supplies with place of supply outside the EU,
• Disposal of capital assets,
• Intra-EU acquisitions,
• Services under reverse charge,
• Importations of goods.

4. Calculation Basis

Annual turnover must reflect the total value of supplies of goods and services made during the calendar year, per Article 280a.

Source ec.europa.eu

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Full text

GUIDELINES RESULTING FROM THE 127TH MEETING of 14 May 2025
DOCUMENT A – taxud.c.1(2025)12284123 – 1113 (1/3)

5. NEW LEGISLATION – MATTERS CONCERNING THE IMPLEMENTATION OF RECENTLY ADOPTED EU VAT PROVISIONS

5.1 Origin: Commission
References: New Articles 284a, 284b, 284c and 288 of the VAT Directive Subject: Calculation of the annual turnover serving as reference for the SME
scheme (Document taxud.c.1(2025)5901170 – Working paper No 1108 REV)

1. The VAT Committee unanimously agrees that consistent with the calculation of the annual turnover, the total value of supplies of goods and services to be indicated in the prior notification (the new Article 284a) and in the quarterly report (the new Article 284b) must be calculated in accordance with the new Article 288 of the VAT Directive.
In this calculation, the VAT Committee unanimously agrees that the taxable person must, in accordance with the new Article 288 of the VAT Directive, include the value, exclusive of VAT, of the following categories of transactions:
a. supplies of goods or services that would have been taxed if not made under the SME scheme (category 1);
b. zero-rated transactions (category 2);
c. exempt export transactions and transactions treated as export (category 3);
d. intra-EU supplies of goods where exempt (category 4);
e. exempt real estate transactions, financial transactions and insurance and reinsurance services unless those are ancillary (category 5).

Re category 1
The VAT Committee almost unanimously agrees that this category shall include not only the value of supplies of goods and services covered by the SME scheme but also the value of supplies excluded from that scheme by way of Article 283 of the VAT Directive.
Acknowledging that the category covers only transactions to be taxed if not falling under the SME scheme, the VAT Committee also agrees almost unanimously that the value of transactions which are exempt under the normal rules or which do not fall within the scope of VAT shall be disregarded.

Re category 2
The VAT Committee almost unanimously agrees that this category shall include the value of supplies of goods and services for which a zero rate is
• applied in accordance with Article 98(2) of the VAT Directive to transactions covered by Annex III, points (1) to (6) or (10c), of the VAT Directive, and
• applied in accordance with Article 101a of the VAT Directive, and
• authorised under Article 105a(1) or (2) of the VAT Directive.

Re category 3
The VAT Committee unanimously agrees that this category shall include the value of supplies of goods and services that are exempt from 1 July 2028, upon supply to a taxable person deemed under Articles 136a or 136b of the VAT Directive to have received and supplied those goods or services,
• on exportation pursuant to Articles 146 and 147 of the VAT Directive,
• when related to international transport pursuant to Articles 148 and 149 of the VAT Directive such as the supply, modification, repair, maintenance, chartering and hiring of certain vessels and aircraft as well as fuelling and provisioning thereof,
• when related to transactions treated as exports pursuant to Articles 151, 152 and 153 of the VAT Directive such as the supply of goods and services under diplomatic and consular arrangements or to recognised international bodies.

Re category 4
The VAT Committee unanimously agrees that this category shall include the value of intra-EU supplies of any goods when exempt under Article 138 of the VAT Directive. It is the almost unanimous view of the VAT Committee that account shall also be taken of the value of any transfer of goods when treated as a supply of goods for consideration under Article 17 of the VAT Directive.

Re category 5
The VAT Committee almost unanimously agrees that, unless otherwise specified, the value of transactions exempt without deductibility of the VAT paid at the preceding stage under Articles 132 to 136 of the VAT Directive shall be disregarded and not included in the calculation. With this in mind, the VAT Committee almost unanimously agrees that this category shall include the value of the following transactions:
• real estate transactions covered by Article 135(1), points (j), (k) and (l) of the VAT Directive,
• financial transactions covered by Article 135(1), points (b) to (g) of the VAT Directive, and
• insurance and reinsurance services covered by Article 135(1), point (a) of the VAT Directive.
Should these be ancillary transactions, the VAT Committee almost unanimously agrees that the value of such ancillary transactions shall be disregarded. Where transactions constitute the direct, permanent and necessary extension of the usual business activity of a taxable person, the VAT Committee agrees almost unanimously that these can however not be regarded as ancillary. Whether transactions are ancillary must, according to the almost unanimous view of the VAT Committee, be determined on a case-by-case basis and will be dependent on the circumstances of the taxable person.

2. The VAT Committee unanimously agrees that in the calculation, the taxable person shall in any event not include the value of the following transactions:
a. supplies of goods or services for which the place of supply is outside the EU;
b. disposals of tangible or intangible capital assets;
c. intra-EU acquisitions of goods;
d. services for which VAT is payable by the taxable person as recipient;
e. importations of goods.

3. The VAT Committee agrees unanimously that in line with the new Article 280a of the VAT Directive the calculation of the annual turnover shall be based on the total value of supplies of goods and services made during the calendar year.

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