VAT Exemption Scheme for Small Businesses: Rules & Eligibility 2025

Belgium VAT exemption scheme allows eligible small enterprises with annual turnover below €100,000 across the EU (and below each country’s national threshold) to supply goods and services without charging VAT. The main goal is to reduce administrative and compliance burdens for micro and small businesses, as they are no longer required to submit regular VAT returns or charge VAT on sales. However, businesses under this scheme cannot reclaim input VAT on their purchases.

While the scheme eases tax obligations, certain compliance and reporting requirements still apply, especially for cross-border activities within the EU. This scheme helps small businesses streamline their VAT processes and reduce costs.

What is the VAT Exemption Scheme in Belgium?

From 1 January 2025, Belgium has implemented the VAT exemption scheme for small businesses (SME scheme) according to the EU-wide reform of VAT. Under the scheme, eligible small firms can supply goods and services VAT free, thus lowering their administrative and compliance costs.

But this VAT exemption has trade-offs. The companies in this regime cannot deduct input VAT on purchases that are related to exempt supplies. Although most of the duties associated with VAT are abolished, certain reportorial and compliance requirements still exist.

Principal Conditions and Requirements:

• The customers are not burdened with VAT, and periodic VAT returns are dispensed with.
• The companies are still VAT-registered and require a valid VAT identification number.
• A starting, change, or cessation of trading statement (Form e604 A, B, or C) needs to be filed.
• Intra-Community supply statements need to be filed for relevant cross-border supplies.
• A statement summarising UK transactions for the previous year needs to be filed on 31 March (from 2026, for activity in 2025).
• Special VAT returns continue to be needed for intra-Community acquisitions or services where the business will charge VAT.
• A customer list must be reported unless there were no transactions to report.
• VAT cannot be reclaimed under this scheme.

This relief is designed to be non-intrusive and to enable simplification of tax compliance for micro and small businesses, without prejudicing fundamental transparency in cross-border or domestic VAT reporting.

Who Is Eligible for the VAT Exemption Scheme?

From 2025, small businesses can benefit from the VAT exemption scheme if they meet the following conditions:

• The registered seat of the business is in Belgium.
• The annual turnover across the European Union does not exceed EUR 100,000.
• The turnover in any other Member State does not exceed that country’s national exemption threshold.
• The business activities are not excluded from the exemption (e.g. certain construction or catering services).

You can also apply for the exemption scheme in another EU Member State if you are registered in Belgium under either the VAT exemption scheme or the standard VAT regime.

How to Apply for a VAT Exemption Scheme in Belgium?

Businesses opting for the VAT exemption scheme for small enterprises must complete a formal administrative process before benefiting from the regime, especially when applying it cross-border.

Key formalities include:

• Prior Notification: You must inform the Belgian tax authority in advance, specifying the Member States where you intend to apply the exemption and the estimated turnover in each country. The Belgian authority will then communicate this data to the relevant Member States. 
• EX-Suffix VAT Number: Upon registration, you will receive a VAT identification number ending with “EX”, signifying eligibility under the SME exemption scheme. 
• Quarterly Reporting: A quarterly report must be filed in Belgium stating the total value of supplies made both domestically and in other Member States. No separate VAT reporting is required in those other countries.

SME Web Portal

The EU’s SME Web Portal provides up-to-date resources, including the SME Guide, Explanatory Notes, and national rules applicable across Member States. By 2025, the portal will also host the SME-on-the-web database, enabling businesses to verify the VAT registration status of exempt SMEs operating cross-border.

Pros and Cons of the VAT Exemption Scheme in Belgium

The VAT exemption scheme is extremely soothing to administrative burdens for small companies, but at the same time poses restraints that companies need to weigh carefully before joining.

Advantages

• Simple VAT Compliance: Exempted bodies are not required to file regular VAT returns, invoice additional VAT, or remit all VAT to the treasury, thereby reducing administrative load.
• Reduced Consumer Prices: Since no VAT is payable, commodities and services are able to be sold at reduced prices, thus improving marketability.
• No Burden of VAT Payment: Exempted enterprises will not have any VAT payment burden on sales, thus freeing cash flow constraints.

Disadvantages

• No VAT relief on input: Companies cannot reclaim VAT on business expenses and purchases, thereby increasing costs, especially for input-based industries.
• Exemption from Specific Activities: Catering, construction, and second-hand dealership firms are exempted, due to which the scheme's coverage is narrowed.
• Turnover Restrictions: Strict national and EU-scale turnover limits are applied. On violation, companies will have to exit the scheme and return to the normal VAT regime.
• Limited Cross-Border Flexibility: Although cross-border exclusion is permitted under the reform of the 2025 SME scheme, it involves additional notifications and quarterly reports in Belgium.

What Are My Obligations Under the VAT Exemption Scheme?

The VAT exemption scheme for small enterprises in Belgium comes with distinct obligations, whether applied domestically or across borders. Understanding these compliance rules is essential to maintain eligibility and avoid penalties.

Applying the Cross-Border SME Scheme

From 2025, small enterprises may apply the SME exemption scheme across EU Member States, provided the following conditions are met:

• Union Turnover Threshold: The total annual turnover in all 27 EU Member States (Union turnover) must not exceed EUR 100,000 in the current and previous calendar years.
• National Thresholds: Turnover in each Member State where the exemption is sought must not exceed the local national or sectoral threshold in the relevant years.
• Prior Notification: A single prior notification must be submitted in the Member State of Establishment (MSEST), identifying the countries of intended exemption and expected turnover per Member State. Once validated, the enterprise is granted an EX number to apply the exemption.
• Activation Timeline: The full registration process should not exceed 35 working days from the date of notification. The SME can begin applying the exemption from the date of confirmation.

Example:
If a Belgian SME submits its notification on 3 February 2025 and receives confirmation on 5 March 2025, it may start applying the exemption in the selected Member State from 5 March 2025.

Quarterly Reporting Requirement:
SMEs must file a single quarterly report in their home country (MSEST), disclosing the turnover for each member State. There are no VAT reporting obligations in other Member States.

Voluntary Cessation or Exclusion:

• SMEs may exit the scheme voluntarily in one or more Member States, subject to potential quarantine periods.
• Automatic exclusion applies if the Union turnover exceeds EUR 100,000 or national thresholds are breached in specific countries. Bankruptcy or cessation of economic activity may also result in exclusion.

Applying the Domestic SME Scheme

Small enterprises operating exclusively in their home Member State can opt for the domestic SME scheme, provided they:

• Have an annual turnover not exceeding the national threshold, capped at EUR 85,000.
• Comply with sectoral thresholds if applicable, as determined by the tax authorities of the Member State of Establishment (MSEST).
  
   

Registration Requirements:
Some Member States may waive the need for registration under this scheme. Where registration is required, the process must be completed within 15 working days.

Compliance Obligations:

• The extent of compliance (e.g., VAT returns or invoicing rules) is at the discretion of the Member State.
• Some Member States may release SMEs from all VAT-related obligations under the domestic exemption scheme.

Exiting the Scheme:

• Voluntary withdrawal requires prior notification to the MSEST and may lead to a quarantine period.
• Breaching the national threshold triggers exclusion. The effective date of exclusion and quarantine duration (1–2 years) depends on national rules.

Note: To expand the exemption to other EU countries, the SME must switch from the domestic scheme to the cross-border SME scheme, following the relevant procedures outlined above.

What is the Double Turnover Threshold?

From 1 January 2025, Belgium’s updated SME VAT exemption scheme introduces a double turnover threshold for cross-border activities:

• EU-wide threshold: Annual turnover across all Member States must not exceed EUR 100,000.
• National threshold: Turnover in each Member State must stay below its local exemption limit (max EUR 85,000).

This allows Belgian and EU-based SMEs to apply VAT exemption in multiple countries, provided both thresholds are respected.

What is an SME Web Portal, and how does it work?

The SME Web Portal, launched by the European Commission, is a centralised digital platform designed to support small enterprises in navigating the updated VAT exemption scheme across the EU.

It offers:

• General information on the SME scheme
• Access to Explanatory Notes and the SME Guide
• Country-specific VAT exemption rules
• (From 2025) Access to the SME-on-the-web database, which verifies the VAT registration status of SMEs applying the cross-border exemption

The portal streamlines compliance, offering transparency and clarity for businesses and tax authorities across Member States.

Conclusion

To use the VAT exemption scheme, businesses must be registered in Belgium and have an annual turnover below €100,000 across the EU and also below the national threshold in each country where they operate. They must tell the Belgian tax authority in advance and get a VAT number that ends with “EX.” Businesses also have to submit a quarterly report, and special rules apply if they do business in more than one EU country. One important downside is that businesses cannot get back the VAT they paid on their purchases.

This scheme makes VAT rules easier and lowers paperwork and costs, but there are some disadvantages. Some sectors, like construction and catering, cannot use the scheme. If a business goes over the €100,000 EU turnover limit or the national limits, it will be removed from the scheme. The SME Web Portal offers help and information, but businesses must follow all reporting and notification rules to keep their eligibility and avoid penalties.