As of January 1, 2025, the European reform of the small business VAT exemption scheme has officially taken effect across the European Union.
Originating from Directive (EU) 2020/285 of 18 February 2020, this reform aims to harmonize exemption thresholds and simplify VAT compliance for micro-enterprises, SMEs, and self-employed professionals operating within the EU single market.
France implemented the directive through the 2024 Finance Law and Decree No. 2024-1195 of December 21, 2024, making the new framework applicable from January 2025.
The purpose of the 2020/285 Directive
The European reform seeks to:
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Reduce administrative burdens on small businesses;
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Simplify cross-border trade within the EU;
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Standardize VAT thresholds between Member States;
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Modernize an outdated regime to match today’s digital economy.
Until 2025, each business had to obtain a separate VAT registration in every EU country where it traded. Under the new rules, eligible companies may now apply for a single small-business VAT exemption that can be recognized in multiple EU Member States.
Implementation in France: Updated thresholds for 2025
The following exemption thresholds apply from January 1, 2025:
| Activity Type | Base Threshold | Higher Tolerance Threshold |
|---|---|---|
| Sales of goods, accommodation, catering | €85,000 | €93,500 |
| Service providers | €37,500 | €41,250 |
| Lawyers, authors, performing artists | €50,000 | €55,000 |
| Other specific activities | €35,000 | €38,500 |
A global EU turnover ceiling of €100,000 (excluding VAT) applies to all activities conducted within the European Union.
Key changes under the 2025 reform
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End of the two-year tolerance period: VAT becomes due as soon as the threshold is exceeded.
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Eligibility extended to foreign EU businesses that remain below the turnover ceilings.
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Introduction of an EU-wide small business scheme, allowing French businesses to benefit from the exemption in other EU Member States.
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Mandatory notification to tax authorities when applying the EU franchise regime abroad.
Temporary suspension in France for 2025
The French 2025 Finance Law initially proposed a uniform €25,000 threshold across all sectors. Following strong opposition, this measure has been suspended until December 31, 2025.
As a result, the higher 2025 thresholds (€85,000 / €37,500) will remain in place throughout the year. A bill under discussion may permanently retain these levels.
Impact on small businesses
Main advantages:
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Simplified VAT management across the EU;
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Reduced compliance costs and fewer registrations;
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Easier cross-border operations.
Points to watch:
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Exceeding a threshold immediately triggers VAT liability;
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Businesses must monitor total EU-wide turnover;
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Invoice wording must comply with Article 293 B of the French Tax Code.
In summary, the 2025 reform is a major step toward a more consistent and accessible VAT system for small businesses, combining simplification with increased compliance obligations.