Special scheme for small and medium-sized enterprises in the EU; A useful tool for European businesses or a risk for abusive practices

Abstract: This study examines the special for small and medium-sized enterprises (SME) in the European Union (EU) provided for in the Sixth Directive and the VAT Directive. The author goes through three problems regarding the special scheme and thereby the thesis is divided in three parts. The aim of the first part is to analyze the current provisions regarding the special scheme for SME by following the historical development of the scheme as well as the proposed amendments. By doing this analysis the author wants to extract the main characteristics of the scheme . Once the main characteristics and provisions of the scheme are clear, the author tests whether this scheme is beneficial for the SMEs and the Member States. To comply with this task the author examines different scenarios a small-scaled undertaking might face. He also checks whether this scheme can be beneficial for the Member States as well. In the third part the author examines whether there is a risk from abusive practices if the scheme is used. This is done by analyzing two cases from the Court of Justice of the EU (CoJ). Namely Schmelz case and joint case Direct Cosmetics Ltd. and Laughtons Photographs Ltd. The scheme for SME has undergone a lot of changes through the years. The purpose of these changes have always been to introduce a common policy and clearer rules regarding the scheme within the EU. With regard to the benefits a SME can take by using the scheme, they are not unconditional. It depends on whether the small-scaled undertaking trades mainly with final consumers and non-taxable persons or with taxable persons . The scheme is also beneficial for the Member States. By introducing it a Member State can cut from administrative costs. After the analyses of the case law, it becomes clear that the Member States have useful tools to fight against abusive practices and protect their revenues.