EU Warns Belgium, France & Malta Over SME VAT IT Gap

The European Commission published its regular package of infringement decisions, in which it takes legal action against EU countries that fail to comply with their obligations under EU law. The key action decisions are presented and grouped by policy area, including taxation. In this October infringements package, the European Commission issued a letter of formal notice to Belgium, France, and Malta for failing to fully implement the IT systems required under the new EU VAT SME rules.

Infringement Details and Further Steps

As of January 1, 2025, the rules set out in Directive 2020/285/EU, which introduce a simplified VAT regime allowing small businesses to make sales without charging VAT and reduce their administrative burden, came into effect. More specifically, this Directive enables SMEs operating across borders within the EU to benefit from the same VAT exemptions as those available to domestic SMEs.

To make this EU SME scheme function properly, EU countries were obliged to have IT infrastructures capable of exchanging information effectively across the EU by January 1, 2025. However, the European Commission determined that not all EU countries complied with this requirement. Notably, Belgium, France, and Malta have not yet ensured all necessary IT functionalities are in place. Consequently, the European Commission issued them formal notices giving two months to comply.

If these EU countries do not respond adequately to these notices, the European Commission may escalate the matter further by issuing a reasoned opinion as the next step in the infringement process. If the matter further escalates, the Commission may decide to refer the cases to the Court of Justice of the European Union, requesting financial sanctions.

Conclusion

Belgium, France, and Malta have two months to comply with the European Commission's request to upgrade their IT systems to ensure that all necessary IT functionalities are in place. However, what these EU countries will do and whether the situation will intensify further remains to be seen. Nevertheless, until this matter is settled, the small businesses may face specific difficulties when applying the EU VAT SME scheme.

Source: European Commission