Term
SME VAT exemption
An EU scheme under which a small business need not charge VAT in another member state if its turnover stays under both national and EU-wide limits. It requires notification through the home tax office and quarterly reports.
Updated
What it means
The small business VAT exemption is a regime under which a business with low turnover need not be a VAT payer. It charges no VAT and files no VAT returns, but cannot deduct VAT on its purchases either. In Slovakia it applies to businesses whose turnover does not exceed a statutory threshold.
New EU rules have applied since 2025. Slovak law distinguishes an annual threshold, exceeding which over a calendar year leads to mandatory registration from the following year, and a higher threshold which, if exceeded during the year, triggers the duty to charge VAT immediately, from the very supply that crossed it.
A new feature is the cross-border exemption: a small business from one EU country can use the exemption in another member state if its total EU turnover stays below a common threshold and it signs up for the scheme in its home state. It receives a special identification number for this.
How it works in practice
For sole traders and small companies we monitor turnover every month and warn when it approaches the threshold. With the higher in-year threshold every day counts, because VAT must be charged on the very invoice that crossed it and registration filed without delay.
When considering voluntary registration we work out whether it pays. If the company’s customers are mostly VAT payers and it invests heavily, deducting input VAT may be better than the exemption. For sales to end consumers the exemption is usually cheaper.
If turnover falls, the company can apply for deregistration once the statutory conditions are met. On deregistration we deal with adjusting input VAT deducted on assets and inventory, which may mean a one-off payment.
What to watch out for
An exempt business that buys services from abroad or goods from the EU can still become a person registered for VAT and pay VAT on those purchases. The exemption does not mean VAT does not concern it at all.
Registering late after crossing the threshold means the company pays VAT on sales for which it did not charge it to customers, and is fined. Paying the tax out of its own pocket hurts a small business, so we monitor the threshold continuously, not only at year end.
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