Cross-Border Selling as a Small Business

The €10,000 Micro-Business Threshold (Article 59c)

When you sell goods or digital services (TBE: telecommunications, broadcasting, and electronically supplied services) to private consumers (B2C) in another EU Member State, the general rule of EU tax law is taxation at destination — meaning VAT is due in the customer's country at their local VAT rate.

However, to protect micro-businesses from immediate international tax complexity, Article 59c of the EU VAT Directive establishes an EU-wide threshold of €10,000 per calendar year:

≤ €10,000

Cross-Border Sales Under Cap

Taxed in your home Member State at your home country's VAT rules & rates

> €10,000

Cross-Border Sales Over Cap

Taxation shifts to destination Member State (Triggers SME Scheme or OSS)

How the €10,000 Rule Works Under €10k: If your total cross-border B2C distance sales across all 26 other EU countries combined stay under €10,000 per year (in both current and previous calendar year), and you are established in only one EU country:

• You charge your home country's VAT rate to all EU buyers.
• If you use a domestic SME VAT exemption in your home country, those cross-border sales are covered by your home country's exemption.
• You do not need foreign VAT registrations or OSS filings.

Crossing €10,000: Choosing Between SME Scheme & OSS

The moment your total cross-border EU sales cross the €10,000 threshold, the place of supply legally shifts to the customer's destination Member State. You can no longer apply your home country's VAT rate.

At this stage, EU law gives small businesses three compliance pathways:

Path 1: Cross-Border SME Scheme (Article 284 Exemption)

VAT-Exempt Option

If your total EU turnover (home + cross-border) is ≤ €100,000 and within national thresholds: You apply for a single EX number in your home country. Your cross-border sales become 100% VAT-exempt in destination states (0% VAT charged, no foreign filings).

Path 2: One-Stop Shop (Union OSS Scheme)

VAT-Taxable Option

If you are VAT-registered or exceed €100,000 turnover: You register for OSS in your home portal. You charge destination VAT rates (e.g. 21% BE, 20% FR) at checkout and submit 1 quarterly OSS return centrally.

Path 3: Local Foreign VAT Registrations

Registering for VAT individually in each destination Member State. (Extremely costly and complex — rarely chosen by small enterprises).

Feature	Under €10,000 Cap	RecommendedOver €10,000: SME Scheme	Over €10,000: OSS Scheme
Place of Supply	Home Member State	Destination Member State	Destination Member State
VAT Charged to Buyer	Home Country VAT Rate	0% (VAT Exempt under Art 284)	Destination Country VAT Rate
Required Registration	None (Home VAT ID only)	Single EX Number in home portal	OSS Registration in home portal
Reporting Burden	Domestic filings only	1 Single Quarterly Turnover Report	1 Single Quarterly OSS Return
Input VAT Deduction	Standard home rules	No input VAT deduction	Full input VAT recovery

Statutory Priority Rule: Article 284 Prevails Over Article 59c

Section 7.1.2 of the European Commission Explanatory Notes clarifies a vital statutory principle:

Article 284 Overrides Distance Selling Rules: Under EU tax law, the VAT exemption under the SME scheme (Article 284) prevails over standard distance selling rules (Article 59c). If an SME holds an EX number for a destination Member State, supplies to consumers in that state are VAT-exempt under Article 284 regardless of whether the seller has crossed the €10,000 threshold or opted for destination taxation.

Official EC Explanatory Scenarios (Section 7.1.2)

The European Commission Explanatory Notes outline four official legal scenarios for cross-border sales:

Feature	Scenario	Taxation Location
1. Cross-border sales ≤ €10k, no OSS	Home Member State (MS 1)	Exempt under home domestic SME scheme
2. Cross-border sales > €10k, no OSS	Destination Member State (MS 2)	Exempt in MS 2 if registered in Cross-Border SME Scheme
3. Sales ≤ €10k, but registered for OSS	Destination Member State (MS 2)	Taxed via OSS return UNLESS seller opts into SME scheme for MS 2
4. Sales > €10k, using Cross-Border SME Scheme	Destination Member State (MS 2)	VAT Exempt in MS 2 under EX number (Reported in SME quarterly report)

Automated Real-Time Tracking: Euro SME automatically tracks your cross-border sales against the €10,000 distance selling threshold, national destination thresholds, and the €100,000 Union cap — ensuring you always apply the correct tax treatment per country.

Official Sources & Legal References

•EU VAT Directive 2006/112/EC — Article 59c (Distance sales threshold) & Article 284 (SME exemption).
•European Commission Explanatory Notes — Section 7.1.2 (Distance sales of goods and TBE services to consumers: place of supply, Figures 55–56, Scenarios 1–4).