Key takeaways
- The VAT franchise scheme is an optional regime reserved for small businesses whose annual turnover does not exceed €25,000 excluding VAT.
- Under it you charge no VAT and file no periodic return, but you also cannot recover the VAT on your purchases.
- Some duties remain: a VAT number, the e604 declaration and an annual client listing due by 31 March.
- Since 2025, the SME scheme lets you extend the franchise to other member states, under a €100,000 Union-wide ceiling.
The VAT franchise scheme, designed for small businesses
The VAT franchise scheme is a special regime that relieves the smallest businesses of most VAT duties. In concrete terms, a business under it charges no VAT on its invoices, pays none to the state and files no periodic return. That is a real simplification for a self-employed person starting out or running a modest activity.
The regime is nothing exceptional: it flows from EU law. Directive 2006/112/EC provides for a special scheme for small businesses, which each member state transposes within its own limits. In Belgium it sits in articles 56bis and following of the VAT Code.
The trade-off fits in one sentence: whoever does not charge VAT does not deduct it either. Understanding that balance is the key to deciding whether the franchise suits you. This article sets out the threshold, the conditions, what changes day to day and the duties that remain in place.
Who can use the VAT franchise scheme
The central test is turnover. A business whose annual turnover does not exceed €25,000 excluding VAT can opt for the franchise. The ceiling is assessed over the calendar year; specific rules apply when the activity starts mid-year.
Exceeding the threshold has precise consequences. As long as the overshoot stays within 10% of the ceiling (up to €27,500), the franchise still holds for the current year and is only lost from 1 January of the next. Beyond 10%, the switch to the normal regime is immediate: it takes effect within the same year, from the transaction that crosses the threshold. Some activities are, in addition, excluded from the scheme regardless of turnover.
The conditions for applying the franchise
Turnover under the ceiling
€25,000 excluding VAT over the calendar year; specific rules apply when the activity starts mid-year.
An eligible activity
Some operations (construction work, the hospitality sector with a registered cash system, among others) remain excluded.
A voluntary step
The franchise applies by option; the business declares its choice through the e604 form.
The threshold overshoot rule
Up to 10% over the threshold, the franchise is lost the following year; beyond 10%, the switch to the normal regime is immediate, within the year.
What the franchise changes for your invoicing
The most visible change is on the invoice itself: no VAT appears on it. Instead, the invoice carries a note stating that the franchise scheme applies. A VAT-registered client therefore recovers no VAT on that purchase, since none was charged.
In practice, the regime lifts three duties at once: no VAT to collect on sales, no payment to the state, no periodic VAT return to file. But it closes one that matters: the right to deduct. The VAT paid on purchases, equipment or investments stays a cost for the business.
| Normal regime | VAT franchise scheme | |
|---|---|---|
| VAT charged on sales invoices | ||
| Deduction of VAT on purchases | ||
| Periodic VAT return | ||
| Annual client listing | ||
| Active VAT number |
turnover threshold
annual ceiling excluding VAT
overshoot tolerance
beyond it, an immediate switch to the normal regime
client listing deadline
each year for the previous year
The duties that remain despite the franchise
The franchise simplifies, but it does not make every duty disappear. The business keeps an active VAT number and must file a start, change or cessation-of-activity declaration through the e604 form. It still has to issue compliant invoices, with the mandatory particulars and the note specific to the franchise scheme.
Each year, by 31 March, it submits a listing of the VAT-registered clients to which it supplied goods or services. Where relevant, duties tied to intra-Community transactions apply too, along with a special declaration when the business is itself liable for the tax on a purchase.
Advantages and limits of the scheme
The franchise is attractive for an activity with low VAT costs: intellectual services, consulting, small shops without heavy investment. The administrative simplification there is real and immediate. Conversely, an activity that invests a great deal or buys taxed goods loses, along with the deduction, a benefit that weighs more than the simplification.
The core trade-off is between lighter admin and the lost right to deduct. Before opting in, weigh your VAT-bearing costs against the returns and payments you would otherwise avoid: the more you invest or buy under VAT, the less the franchise serves you.
Compliant invoicing, franchise or not
YouInv handles your invoices with the right particulars for your VAT regime and receives your supplier invoices over Peppol.
The European dimension: the SME scheme
The EU reform of small businesses added a possibility from 1 January 2025. The SME scheme, introduced by Directive (EU) 2020/285, lets a business established in Belgium apply the franchise not only at home, but also in one or more other member states.
Access to that cross-border option is framed by a European ceiling: the business's annual turnover across the whole Union must not exceed €100,000. On top of that Union ceiling, each state where the franchise is claimed also applies its own national threshold. That is a useful opening for a small structure selling to clients in several countries without wanting to handle each one's VAT. For trade between EU businesses, see also our article on intra-Community VAT.
Further reading
- E-invoicing for the self-employed and small structures: what the mandate changes for a small activity.
- The periodic VAT return in Belgium: the duty the franchise relieves you of.
- Mandatory particulars of an invoice in Belgium: what an invoice must contain, including under the franchise.
The reference source is authoritative: the VAT franchise scheme for small businesses page from the FPS Finance.
What is the VAT franchise scheme in Belgium?
The VAT franchise scheme is a special regime reserved for small businesses. Under it, the business charges no VAT on its invoices, pays no VAT to the Treasury and files no periodic return. In exchange, it cannot deduct the VAT paid on its purchases. The scheme rests on articles 56bis and following of the Belgian VAT Code.
What is the threshold for the VAT franchise scheme?
The threshold is an annual turnover of €25,000 excluding VAT. Exceeding it by up to 10% (up to €27,500) means the franchise is lost from 1 January of the following year; exceeding it by more than 10% triggers an immediate switch to the normal regime, from the transaction that crosses the threshold.
Can you deduct VAT under the franchise scheme?
No. The trade-off of the franchise is the absence of a right to deduct: the business does not recover the VAT paid on its purchases and investments. The scheme is therefore most attractive when VAT-bearing costs are low.
Does the VAT franchise scheme remove every duty?
No. The business keeps its VAT number, files a start, change or cessation-of-activity declaration (the e604 form) and submits, by 31 March each year, a listing of its VAT-registered clients. It must also be able to receive its suppliers' e-invoices.
Can a small business under the franchise benefit from the exemption in other EU countries?
Yes, since 1 January 2025, thanks to the SME scheme introduced by Directive (EU) 2020/285. The business can apply the franchise in one or more other member states as long as its annual turnover across the whole European Union does not exceed €100,000 and it stays under each host state's national threshold.
