New Year’s VAT Compliance Resolutions for Businesses in 2025

With 2025 now upon us, businesses across the European Union face notable changes in VAT regulations. Keeping up with these changes is essential not only for VAT compliance but also for exploring new business opportunities and gaining a competitive edge. The following resolutions offer a roadmap for businesses aiming to stay on top of VAT requirements, optimize their tax management, and make the most of the 2025 updates.

Embrace the new SME VAT scheme

Starting January 1, 2025, the EU is introducing a new SME VAT scheme designed for small and medium-sized enterprises (SMEs). This initiative aims to reduce the compliance burden for SMEs and offer incentives for cross-border growth.

• Review your EU-wide turnover: Assess if your EU-wide turnover is below the €100,000 threshold. This is a critical qualifier for exemption eligibility under the new scheme, making it a vital step in your VAT planning.
• Explore cross-border opportunities: If eligible, you can expand into new EU markets without the immediate need for VAT registration, streamlining VAT automation for hassle-free cross-border operations.
• Obtain an 'EX' VAT identifier: Prepare to register for the new "EX" VAT identifier, essential for managing VAT-exempt activities across EU borders efficiently.

Adapt to place of supply changes

The 2025 updates also include revisions to the place of supply rules, particularly for virtual services. These changes will impact how businesses calculate and report business VAT.

• Reassess your virtual offerings: From 2025, virtual services will be taxed based on the consumer’s location. This shift requires adjustments in pricing, reporting, and marketing strategies to align with the updated EU VAT regulations.
• Consider the One Stop Shop (OSS): The OSS scheme can simplify VAT compliance for businesses offering virtual services to EU consumers, allowing for centralized reporting through a single EU country.

Leverage the single VAT registration system

A new reporting framework aims to streamline VAT guidance for businesses operating across multiple EU countries.

• Evaluate your EU operations: Assess if the new scheme’s simplified reporting for the movement of goods across borders benefits your business.
• Prepare for domestic reverse charge updates: Changes to the domestic reverse charge mechanism will affect how VAT is accounted for in specific transactions. Updating accounting/tax systems in line with these VAT regulations will ensure smooth compliance.

Review reduced VAT rates

The expansion of goods and services eligible for reduced VAT rates in 2025 presents an opportunity for businesses to optimize pricing and target new customer segments.

• Check your product/service catalog: Identify offerings that might now qualify for reduced VAT rates, such as sustainable products or certain health services, and adjust your VAT planning accordingly.
• Consider pricing strategies: Use reduced VAT rates to refine your pricing strategies, attract more customers, and enhance competitiveness while maintaining compliance with EU VAT regulations.

Enhance VAT compliance processes

The complexity of VAT changes requires robust systems and proactive approaches to ensure smooth compliance.

• Implement robust VAT software: Invest in software that supports VAT automation and compliance with new reporting requirements. Automated systems reduce human error and streamline processes.
• Regular compliance checks: Conduct periodic compliance reviews to ensure alignment with evolving VAT guidance and regulations.
• Staff training: Equip your finance and accounting teams with the latest knowledge on VAT regulations through targeted training sessions.

Prepare for digital reporting

While mandatory adoption of e-invoicing and digital reporting is set for 2028, early preparation can ensure a seamless transition.

• Assess current systems: Evaluate if your IT infrastructure can support digital reporting requirements and upgrade as needed.
• Budget for upgrades: Include investments in software solutions for VAT automation in your financial plans to avoid last-minute expenses.

Focus on international VAT

For businesses operating globally, understanding and managing international VAT is crucial to maintain compliance and avoid potential penalties.

• Understand non-EU VAT rules: Familiarize yourself with VAT regulations in non-EU jurisdictions where your business operates. Different countries have varying thresholds, rates, and reporting requirements.
• Centralize VAT management: Use software tools that support VAT automation for multiple jurisdictions, enabling efficient handling of complex international VAT requirements.
• Monitor cross-border transactions: Ensure accurate reporting for cross-border transactions, especially in regions where VAT regulations differ significantly from EU standards.
• Seek professional guidance: Engage with VAT consultants who specialize in international VAT to help navigate the intricacies of compliance in multiple regions.

Stay informed

With VAT changes occurring frequently, staying informed is critical for effective VAT planning and compliance.

• Monitor official sources: Keep up-to-date with announcements from the European Commission and national tax authorities to stay ahead of regulatory updates.
• Engage VAT professionals: Partner with tax consultants for expert VAT guidance on navigating changes and maximizing compliance opportunities.

Develop a digital-first VAT strategy

Digitalization is transforming how businesses manage VAT compliance, and embracing a digital-first strategy can help future-proof your operations.

• Explore automation tools: Leverage software solutions to automate filing, data entry, and reporting. These tools align with VAT automation trends and simplify compliance.
• Invest in data security: Strengthen your cybersecurity to protect sensitive financial data as digital reporting becomes the norm.

Build a future-proof compliance framework

The updates in 2025 mark one phase of ongoing transformations in EU VAT regulations. A forward-looking compliance framework is essential to adapt seamlessly to these.

• Adopt scalable tax solutions: Use VAT software that grows with your business, accommodating new markets, products, and regulatory changes.
• Foster a compliance-driven culture: Promote a proactive approach to compliance across your organization to embed readiness for future VAT changes.

Conclusion

By focusing on these resolutions, businesses can navigate 2025 VAT regulations effectively, mitigate risks, and capitalize on opportunities. Whether it’s adapting to place of supply updates, embracing VAT automation, or planning for digital reporting, proactive measures are the cornerstone of successful business VAT management.

Remember, VAT compliance is not just a legal obligation; it’s a strategic advantage for businesses aiming to thrive in a dynamic tax environment.

Do you need help with your VAT compliance? Book a free call with one of our VAT experts to find bespoke solutions for your business, optimize your VAT costs, and reach millions of new potential customers.