Special scheme for small enterprises under the VAT Directive 2006/112/EC : options for review : final report; Volume I

SMEs are the backbone of the European economy and thus have a specific focus in EU policy. The EU's current SME policy places great emphasis on the reduction of compliance costs on businesses and their free access to markets. The Single Market access and business burdens are intricately linked to their tax treatment, including the application of VAT to SMEs. Under the VAT Directive, Member States can adopt specific schemes and measures to reduce administrative burdens on SMEs. Regarded as territorial and unsuitable for trade in a cross-border environment and given recent developments in taxation at destination and the proposal for modernising VAT for e-Commerce, an in-depth review of the special scheme for small enterprises ("SME schemes") and measures is appropriate. This study analyses the functioning of the SME schemes and measures for SMEs against the backdrop of the SME environment. Based on findings from literature, tax authorities, businesses and experts, four policy options are formulated and assessed in accordance with European Commission Better Regulation Guidelines. Impacts of these options are reported on businesses, Member States of the EU and the wider economy.