Sell across the EU without charging VAT — if you're small enough. Since January 1, 2025, the EU's new SME VAT exemption scheme (Council Directive 2020/285) lets qualifying small enterprises sell goods and services cross-border to customers in other EU member states without charging their local VAT — and without registering for VAT in those countries. Bulgaria implemented the scheme from January 1, 2026, alongside its Euro adoption.
For freelancers, consultants, and small EOODs based in Bulgaria that sell to clients across the EU, this changes everything. No more OSS filings. No more foreign VAT registrations. One quarterly report to the NRA, and you're done.
What Is the EU SME VAT Exemption?
Before 2025, the VAT exemption for small enterprises was a purely domestic regime. If your Bulgarian EOOD was below the domestic VAT threshold, you didn't charge VAT in Bulgaria — but if you sold services to a client in Germany, you either had to register for German VAT or use the OSS (One-Stop Shop) to charge and remit German VAT (19%).
Council Directive (EU) 2020/285 changed this. It extended the SME exemption cross-border. Now, a qualifying small enterprise can apply the VAT exemption not only in its home country but in any EU member state where it makes supplies — provided it meets both the domestic and EU-wide thresholds.
The scheme entered into force across the EU on January 1, 2025. Bulgaria transposed it into its Value Added Tax Act (VATA) through amendments promulgated on December 30, 2025 (Chapter XXI "b" of the VATA), effective January 1, 2026, in line with its Euro adoption.
In plain terms: If your total EU-wide turnover is under EUR 100,000 and your Bulgarian turnover is under EUR 51,130, you can invoice clients in France, Germany, Netherlands, Spain — any EU country — without charging VAT. No foreign VAT registrations. No OSS. One quarterly report to the Bulgarian NRA.
The Two Thresholds You Must Meet
The scheme uses a dual-threshold system. Both must be met simultaneously, measured on a calendar-year basis (current year and previous year):
Threshold 1: Domestic Annual Turnover
Your taxable turnover within Bulgaria must stay below the national VAT registration threshold: EUR 51,130 per calendar year. This is the same threshold that applies to mandatory VAT registration in Bulgaria. If you exceed it, you must register for VAT under the standard procedure — and you cannot use the SME exemption domestically.
Important change for 2026: The threshold is now measured per calendar year (January 1 to December 31), not on a rolling 12-month basis as before. This is a significant change from pre-2026 rules.
Threshold 2: EU-Wide Annual Turnover
Your total annual turnover across all 27 EU member states — including Bulgaria — must not exceed EUR 100,000 in the current calendar year or the previous calendar year. This includes all supplies of goods and services in every member state where you operate.
How to calculate: Add up your invoiced revenue in every EU country where you make supplies. If you only sell from Bulgaria to EU clients, your EU-wide turnover equals your total revenue. If you also have a presence or make supplies in other EU countries, add those too.
| Threshold | Amount | Measured | What Happens If Exceeded |
|---|---|---|---|
| Domestic (Bulgaria) | EUR 51,130 | Calendar year | Mandatory VAT registration in Bulgaria; exemption lost domestically |
| EU-wide | EUR 100,000 | Calendar year (current + previous) | Excluded from SME scheme in all member states; EX number deactivated |
How It Works in Practice
Three scenarios to illustrate the scheme in action:
Example 1: Bulgarian IT Consultant Selling to Germany
Maria runs an EOOD in Sofia. She provides IT consulting to a German Mittelstand company. Her annual revenue is EUR 72,000 — all from the German client.
- Before the scheme: Maria had to either register for German VAT, use the OSS to charge 19% German VAT, or rely on the reverse-charge mechanism (B2B only). If her client was a consumer (B2C), she'd need OSS or German registration.
- With the SME scheme: Maria's EU-wide turnover (EUR 72,000) is under EUR 100,000. Her Bulgarian turnover from domestic supplies is EUR 0. She registers for the SME scheme with the NRA, receives her EX number, and invoices her German client without VAT. One quarterly report to the NRA. Done.
B2B note: For B2B services, the reverse-charge mechanism already meant your client accounted for VAT — so the SME scheme's biggest practical impact is on B2C cross-border sales, where the seller previously had to charge destination-country VAT.
Example 2: Freelance Designer with EU Clients
Stefan is a freelancer (svobodna profesiya) in Plovdiv. He designs websites for clients in France, Italy, and the Netherlands. Total annual revenue: EUR 38,000 — split across all three countries and some Bulgarian clients.
- EU-wide turnover: EUR 38,000 — well under EUR 100,000
- Bulgarian domestic turnover: EUR 8,000 — well under EUR 51,130
- Result: Stefan qualifies. He invoices all EU clients without charging their local VAT. No French, Italian, or Dutch VAT registration. One quarterly report to the NRA.
Example 3: Small E-Commerce Selling Physical Goods
A Bulgarian EOOD sells handmade cosmetics online to consumers across the EU. Annual revenue: EUR 55,000 from orders to 12 different EU countries, plus EUR 15,000 from Bulgarian customers.
- EU-wide turnover: EUR 70,000 — under EUR 100,000
- Bulgarian domestic turnover: EUR 15,000 — under EUR 51,130
- Result: The EOOD qualifies. It ships to German, French, and Spanish consumers without charging their local VAT. Previously, it would have needed OSS registration or individual VAT registrations once crossing the EUR 10,000 distance-selling threshold. Read our EOOD e-commerce guide for more on selling online from Bulgaria.
Not Sure If You Qualify?
We'll calculate your thresholds and tell you whether the SME scheme or voluntary VAT registration is the better option.
Book Free Consultation →How to Register for the Scheme
To use the cross-border SME exemption, you must notify the National Revenue Agency (NRA) and receive approval. Here are the steps:
- Submit a prior application to the NRA. You apply at the competent territorial directorate, declaring your intent to use the EU SME scheme. The application includes your turnover data for the current and previous calendar year across all EU member states.
- Receive your EX identification number. Upon approval, the NRA issues a special identification number with the suffix "-EX". This number is valid across all 27 EU member states and must be indicated on invoices for supplies made under the scheme.
- Start invoicing without foreign VAT. Once you have your EX number, you can supply goods and services to customers in other EU member states without charging their local VAT. Your invoices should reference the SME exemption and include the EX number.
- File quarterly reports. You submit a single quarterly report to the NRA, listing your turnover in each EU member state — including zero values for countries where you had no activity. The report is due within one month after the end of each calendar quarter (i.e., by April 30, July 31, October 31, and January 31). Reports must be filed electronically and in EUR.
Don't miss the quarterly reports. Failure to submit quarterly reports may lead to non-compliance consequences, including the risk of losing the right to apply the EU SME VAT exemption. The NRA monitors compliance actively.
Need Help Registering for the SME Scheme?
We handle the NRA application, threshold calculations, and quarterly reporting setup. Included in our tax packages.
Book Free Consultation →What Happens If You Exceed the Thresholds
The rules are strict. There is no grace period.
If You Exceed EUR 100,000 EU-Wide
- You are excluded from the SME scheme in all member states.
- The exemption ceases from the supply that causes you to exceed the threshold. That specific transaction — and all subsequent ones — must be taxed under standard VAT rules.
- Your EX number is deactivated.
- A quarantine period of one calendar year applies. You cannot re-enter the scheme until the quarantine year has passed and you again meet both thresholds.
- You must register for VAT under standard rules or use the OSS for cross-border B2C supplies.
If You Exceed EUR 51,130 Domestic (Bulgaria)
- You lose the exemption only in Bulgaria — you can still use the SME scheme in other member states (provided the EUR 100,000 EU-wide threshold is not exceeded).
- You must register for mandatory VAT in Bulgaria within 7 days of exceeding the threshold.
- A quarantine period applies before you can re-enter the domestic SME exemption.
Bulgaria-specific rule: Bulgaria does not apply a transitional period when the national threshold is exceeded during the current calendar year. The obligation to register kicks in immediately. Also, related or "concertedly acting persons" have their turnover attributed to whoever commenced the activity first — you cannot artificially split turnover across multiple entities to stay below the threshold.
SME Exemption vs. OSS vs. Voluntary VAT Registration
| Feature | SME Exemption | OSS (One-Stop Shop) | Voluntary VAT Registration |
|---|---|---|---|
| VAT charged to EU customers | None (exempt) | Destination country rate | Bulgarian 20% (domestic); destination rate via OSS (cross-border B2C) |
| Turnover cap | EUR 100K EU-wide + EUR 51,130 domestic | No cap | No cap |
| Foreign VAT registrations | None needed | None (single portal) | Possibly, if not using OSS |
| Input VAT recovery | No | Yes (via home country return) | Yes |
| Filing frequency | Quarterly (1 report) | Quarterly (OSS return) | Monthly (Bulgaria) + quarterly OSS if applicable |
| Best for | Small businesses, low expenses, B2C cross-border | Growing businesses above EUR 100K, need VAT deductions | B2B-focused, high expenses, want input VAT recovery |
| Complexity | Low | Medium | High |
Can you use both SME and OSS? The schemes coexist but cannot be applied simultaneously in the same member state. For example, you could use the SME exemption for countries where you qualify, and register for OSS for countries where you've exceeded the national threshold. In practice, most small businesses will use one or the other — not both.
Who Should Use the SME Scheme — and Who Shouldn't
Ideal Candidates
- Freelancers and consultants selling services to clients across the EU — especially B2C (coaching, design, translation, online courses)
- Small EOODs with EU-wide revenue under EUR 100,000 and low business expenses
- Small e-commerce businesses selling to consumers in multiple EU countries — below the EUR 100,000 cap
- Service providers who want to avoid the complexity of OSS registration and multi-country VAT compliance
Who Should NOT Use It
- Businesses with significant expenses — Under the SME exemption, you cannot recover input VAT. If you spend EUR 30,000/year on VAT-able purchases (equipment, office, software), that's EUR 6,000 in unrecoverable VAT. Voluntary VAT registration would let you claim that back.
- Businesses above or near the thresholds — If your revenue is close to EUR 100,000 EU-wide, you risk mid-year disqualification with no grace period. Better to register for VAT from the start.
- B2B-only service providers — For B2B services, the reverse-charge mechanism already means your client accounts for VAT. The SME scheme adds minimal value in pure B2B scenarios. Read our freelancer tax rate guide for the full picture.
- Businesses planning rapid growth — If you expect to cross EUR 100,000 within a year, the disruption of losing the exemption mid-year outweighs the simplicity benefits.
SME Scheme or Voluntary VAT?
The right choice depends on your client mix, expenses, and growth plans. We'll model both scenarios for your business.
Book Free Consultation →Frequently Asked Questions
What is the EU SME VAT exemption scheme?
What are the two thresholds I need to meet?
Can a Bulgarian freelancer use this scheme?
What is the EX identification number?
How often do I file reports under the scheme?
What happens if I exceed the EUR 100,000 EU threshold?
Can I recover input VAT under the SME exemption?
What's the difference between the SME scheme and OSS?
Disclaimer: This article provides general information about EU and Bulgarian VAT law and does not constitute legal or tax advice. The SME VAT scheme involves specific NRA registration procedures that may evolve — confirm current requirements with your accountant or the NRA before applying. For the annual costs of running an EOOD including VAT compliance, see our dedicated guide. Last updated: April 8, 2026.