Special VAT exemption regime for small businesses
The Greek VAT legislation provides for a special VAT exemption regime for small businesses, which is regulated in article 39 of L. 2859/2000-Greek VAT Code, which has been amended since 1/1/2019 in order to improve and simplify the regime as well as fully harmonize it with the EU VAT law. Moreover, Circular E. 2012/2019 was issued communicating the new provisions and giving various clarifications on the regime in the context of the amended article 39.
Herein below we provide the main points of the special VAT exemption regime for small businesses:
- The regime is optional; the new (amended) provisions aim at rendering the regime fairer and more efficient, alleviating the truly small businesses from the burden and difficulty of complying with the normal VAT regime.
- The regime provides for an exemption from the obligation of filing VAT returns and paying VAT, regardless of the category of accounting books kept.
- The regime does not apply to a) farmers falling under the special regime for farmers, b) taxable persons not established in Greece and c) supplies of new means of transport.
- The threshold for qualifying for the regime is supplies of goods or services not exceeding the amount of 10.000 Euros (excluding VAT) per tax year.
- With regard to the determination of the threshold of 10.000 Euros, it is clearly stipulated that transfers of tangible or intangible capital (investment) goods and transactions exempt from VAT that do that do not grant the right of deduction of input VAT (e.g. educational services qualifying for the VAT exemption) are not taken into account when determining the 10.000 Euros threshold.
- The regime applies:
- To taxable persons who have supplied goods and have provided services in the amount not exceeding 10.000 Euros (excluding VAT) during the past tax year. In n this case, they must file a relevant declaration for amendment of the normal regime and inclusion in the special regime within 30 days from the commencement of the tax year i.e. until 30/1, with effective date the 1/1. The 30-day deadline is mandatory.
- To new taxable persons who, upon filing of their business commencement declaration, wish to be included in this regime. This is a novelty compared to the previous provisions, which did not allow direct inclusion to the regime from the first year of commencement of the business activity. In this case, they must file their declaration of commencement of business activity timely and not retroactively, otherwise they cannot be subjected to the regime (even if all substantial conditions are met (ECJ C-566/16).
- The taxable persons that fall under this regime do not exercise the right to deduct input VAT (VAT on their expenses) and are obliged to indicate on their accounting records (invoices) issued the reference “without VAT-exemption for small businesses article 39 L. 2859/2000”.
- In case where the taxable person carries out his business activity for less than a year, and for the purposes of examining the 10.000 Euros threshold of that previous year in order to be included in the regime for the following year, the value of the supplies is annualized.
- If a taxable person exceeds the threshold of 10.000 Euros during a tax year, their reclassification to the normal VAT regime within that tax year is mandatory and it takes place within the same year and for the total value of the supply upon which the threshold was exceeded. In that case, the filing or non-filing of a relevant declaration for transition back into the normal regime does not affect the transition back into the normal regime.
- Once the special regime is chosen, it is no longer obligatory to remain in the special regime for at least 2 tax years.
- In case the taxable person that is under the special regime, chooses optionally to be transitioned back under the normal regime, he can remain there for the current year, but can again be included in the special regime as of the following tax year, if the 10.000 Euros threshold is not exceeded.
- Upon the transition under the special regime, the taxable person must record and file an inventory list for any trading or capital goods for which the 5-year VAT settlement period has not lapsed, until the last working day of the second month following the transition, stating their value per VAT rate and the corresponding VAT, so as to make any necessary settlements (payment back to the State of any required portion of deducted VAT). The opposite applies in case of transition from the special regime to the normal one, i.e. the filing of the inventory list concerns the refund to the taxable person of any portion of the VAT not deducted.
As a final point, we would like to note that the special VAT exemption regime for small businesses is an option in case the expected gross income from the activity is up to 10.000 Euros per year (not inclusive of VAT) but is only relevant in case the services provided are taxable services or exempt with the right to deduct input VAT or in case of a mixed business activity where both such services as well as exempt services without the right to deduct input VAT are provided. On the other hand, in the case where the only services provided are exempt without the right to deduct input VAT, there is no scope of applying for the small business’ exemption regime.
* The information is accurate to the best of our knowledge as at the time of writing. We have no obligation to update it. We accept no responsibility against any third party who is not a client of the firm and has not signed the terms of our engagement.