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European Small Business Administration (EU-KOR): what does it mean for your online store?

Written by Marc
 

From January 1, 2025, there will be a new scheme for small business owners within the European Union: the European Small Business Act (EU-KOR). This scheme is designed to help small businesses doing business in other EU countries through a VAT exemption.

What is the EU-KOR?

The EU-KOR is a VAT exemption scheme for small entrepreneurs trading in the EU. Like the Dutch Small Business Administration (KOR), the EU-KOR offers tax benefits such as:

- Not filing VAT returns in participating EU countries.

- Not charging VAT to customers in these countries.

Note: Within this scheme, you are not entitled to deduct input VAT in the EU countries where you apply the scheme.

Participation in the EU-KOR

To be eligible for the EU-KOR, your company must meet certain conditions:

  1. Country of establishment: You must be established in the Netherlands.
  2. Maximum turnover: Your annual EU-wide turnover must not exceed €100,000.
  3. National turnover limit: Your turnover must not exceed the national turnover limit of the EU country where you do business. Each EU country determines this limit itself.
  4. Import scheme: You do not use the Import scheme.

How does it work?

You choose in which EU countries you apply the exemption. This means that you can choose Belgium or Germany, for example, depending on where your webshop operates. For these countries you do not charge VAT to your customers and you do not have to file a VAT return.

Advantages of the EU-KOR:

- Less administration: No need to file VAT returns in the selected countries.

- Cost savings: No VAT payments to foreign tax authorities.

However, there are also some disadvantages, such as:

- No right to deduct VAT on business expenses in the participating countries.

- Obligatory quarterly report of your EU turnover to the Dutch tax authorities.

Conclusion

The European Small Business Scheme offers a number of advantages, but there are also areas of concern. The scheme helps to reduce administrative burdens and can also contribute to cost savings for small entrepreneurs operating across borders. However, it is important to carefully consider which countries are relevant to you and to keep an eye on the turnover thresholds. You can read more about this scheme on the tax authorities' website.