VAT exemption scheme: check eligibility and monitor thresholds

You are starting a small business and hear that, below a certain turnover, “there is no VAT”. This phrase is too simplistic to manage your business. The exemption scheme can simplify invoicing, but it also changes the cost of purchases and does not eliminate all formalities. Let us look at the questions to address before setting up your first invoices.

Understanding the real cost of the exemption scheme

The VAT exemption scheme covers certain sales without VAT being charged and excludes deduction of the corresponding tax on purchases. In your budget, an expense of 1,170 euros including 170 euros of non-recoverable tax should therefore not be compared with an expense of 1,000 euros. Consider what the business actually bears, by having the treatment of each significant category confirmed.

The choice is not limited to the number of returns. Your customer base, level of investment and expected growth also matter. Prepare two pricing and margin scenarios with your professional adviser. Private customers and those with a right to deduct do not always view price in the same way. No scheme alone guarantees better profitability.

Monitoring the right turnover figure

Do not simply take the total of bank receipts. Transfers may include advances, reimbursements or other movements requiring classification. Organise a table of transactions, their location and whether they count towards the threshold. Have the items included and excluded for your activity explained; retain this method with your records.

Update the monitoring before accepting a significant order, not only at closing time. Add a forecast of upcoming transactions and an internal alert sufficiently far in advance. Your room for manoeuvre depends on contracts already concluded. An order that seems commercially attractive may require adjustments to prices, software and the administrative timetable.

Preparing the application and invoice

The national scheme is requested from the AED, in particular by means of the initial declaration when starting up. Covered invoices do not show VAT and include the statement: “VAT not applicable – Article 57bis of the amended law of 12 February 1979”. Check that your template corresponds to the scheme actually applicable and to the transaction.

Keep the application, correspondence and information received in a file accessible to the manager and the firm. In the software, avoid a simple “zero VAT” box used indiscriminately for exemption scheme, exemption and reverse charge. These situations do not have the same basis. The person preparing invoices must know which cases should be removed from the usual process for validation.

Reviewing purchases and sales abroad

A digital subscription purchased from a foreign supplier may raise an obligation different from that of your local sales. Report the countries, suppliers and nature of the services before concluding that the exemption scheme dispenses with all formalities. The scheme does not remove situations in which you become liable for the tax or must provide information.

To benefit from the exemption scheme in another Member State, the cross-border arrangement requires, in particular, prior notification and compliance with the applicable thresholds. The identification includes an EX suffix. The effect of the scheme depends on the required communication or confirmation, and quarterly monitoring of turnover is required. A customer located abroad does not, in itself, mean that this scheme applies to your transaction: its place of taxation must first be determined.

Anticipating exit and retaining the remaining obligations

The national exemption scheme still involves annual monitoring with the AED. Cross-border purchases or services may trigger additional returns. Prepare a personalised calendar based on the transactions actually carried out; do not reuse another entrepreneur’s calendar because their turnover appears similar to yours.

In the event of growth, have the date and transactions affected by exit determined. Review quotes already accepted, deposits, recurring contracts and any adjustments. Inform the people who issue invoices and those who monitor purchases. Waiting until the next annual return to deal with an overrun risks multiplying the documents that need to be revised.

The table for taking action

Your preparation checklist

• Have the scope of transactions included in the thresholds confirmed.
• Keep the application and response relating to the scheme.
• Budget purchases including non-deductible tax.
• Set up an appropriate invoice statement.
• Report foreign transactions as soon as they are being prepared.
• Monitor actual turnover and upcoming orders.
• Prepare for exit before the software continues invoicing under a scheme that has become unsuitable.

Frequently asked questions

Is the national threshold still 35,000 euros?

No. Since 2025, the national threshold has been 50,000 euros, subject to the scheme’s conditions. Older content referring to 35,000 euros should not be used to set up your current situation.

Does the exemption scheme avoid all returns?

No. Information obligations and specific situations remain, particularly cross-border ones, which require formalities.

Can VAT on purchases be recovered because the supplier charged it?

Paying it does not create the right to deduct it. Under the exemption scheme, the corresponding tax remains, in principle, non-deductible.

Useful terms in this guide

• VAT exemption scheme
• VAT taxable person
• Right to deduct VAT
• Registration Duties, Estates and VAT Authority (AED)

Questions to ask the professional

• Which transactions are included in each of our thresholds?
• Which foreign purchases create obligations?
• How should we prepare prices and invoices if we exit the scheme?

To clarify the engagement to be entrusted, also consult our taxation section.

And for your situation?

To take stock, bring your turnover for the previous year, the tracking for the current year and expected orders. Add the list of purchases and sales abroad. A professional found in our directory can review these elements with you and prepare an invoicing scheme consistent with your activity.