Running a small or medium-sized enterprise (SME) is no easy task—especially when your customers or operations stretch across borders. While global markets offer exciting growth opportunities, they also bring a complex layer of tax responsibilities that many entrepreneurs aren’t prepared for.
Understanding the tax rules that apply to SMEs in different countries is essential for staying compliant, avoiding costly penalties, and ensuring smooth business operations.
One of the biggest tax considerations for small businesses selling internationally is whether they need to register for Value-Added Tax (VAT) or Goods and Services Tax (GST). Fortunately, many countries offer tax registration thresholds designed to reduce the tax burden for smaller companies.
Here’s a quick look at how these thresholds vary across major markets:
European Union (EU)
Threshold: €10,000 (applicable to sellers inside the EU)
In the EU, VAT registration rules can be complex. Most countries set specific thresholds for domestic sales. However, for cross-border sales of goods or digital services to consumers within the EU, the distance selling threshold is currently €10,000 in total annual sales. Once a seller located inside any EU member state exceeds this amount in sales to other EU countries, VAT registration becomes mandatory in the customer’s country or can be handled through the EU’s One Stop Shop (OSS) system.
United Kingdom (UK)
Threshold: £90,000 (applicable to sellers in the UK)
The UK currently sets its VAT registration threshold at £90,000 in taxable turnover. This threshold applies to sellers based in the UK. Once a seller’s business exceeds this threshold within a 12-month period, they are required to register for VAT and begin collecting it on applicable sales.
Australia
Threshold: AUD 75,000 (applicable to sellers in Australia)
In Australia, the threshold for mandatory GST registration is AUD 75,000 in annual turnover. If a seller located in Australia earns more than this amount, they must register for GST, charge it on their invoices, and file regular returns with the Australian Taxation Office (ATO).
Other Countries
Many other jurisdictions offer similar thresholds, though the amounts and rules vary significantly. For instance, New Zealand has a NZD 60,000 GST threshold, while some U.S. states impose sales tax rules based on economic nexus thresholds.
Simplified Tax Regimes for Small Businesses
Recognizing the challenges small businesses face, some countries provide simplified tax schemes to ease the burden of compliance.
These regimes typically offer:
- Simplified VAT/GST reporting requirements
- Lower or flat tax rates
- Optional registration for businesses below the standard threshold
- Quarterly or annual filing instead of monthly returns
For example:
- France has the “micro-entreprise” scheme, allowing small businesses to pay tax at a simplified rate based on turnover.
- Germany offers a small business exemption (“Kleinunternehmerregelung”) for companies below a certain turnover level, exempting them from charging VAT.
- Singapore allows certain small businesses to voluntarily register for GST even if they fall below the mandatory threshold, often to reclaim GST on business expenses.
However, it’s crucial to understand both the advantages and potential drawbacks of opting into such schemes, as they may limit VAT recovery or complicate future expansion.
Common Tax Pitfalls for SMEs Expanding Internationally
Many small businesses underestimate the complexity of cross-border taxes. Here are a few common mistakes:
- Missing Registration Deadlines: Many SMEs overlook foreign VAT obligations until they receive penalties or face customs issues.
- Misunderstanding Thresholds: Some businesses mistakenly assume they’re exempt, not realizing cross-border sales may trigger VAT elsewhere.
- Incorrect Invoicing: Failing to include correct VAT rates or numbers on invoices can lead to rejected transactions or audits.
- Language & Filing Barriers: Managing tax filings in foreign languages or unfamiliar systems can lead to costly errors.
How TaxDo Helps Small Businesses Stay Compliant, Stress-Free
At TaxDo, we specialize in helping SMEs navigate international tax obligations with confidence and ease.
Here’s how we support small businesses globally:
- VAT & GST Registration: We handle the entire process of registering your business for VAT or GST in countries where it’s required—whether you’re selling digital services in the EU or physical goods in Australia.
- Tailored Tax Filing Services: Our experts prepare and submit your VAT/GST returns accurately and on time, ensuring compliance and minimizing risks.
- Practical Advisory for SMEs: We provide clear, actionable advice tailored specifically to the needs of small businesses, helping you understand when and where you need to register and what options best fit your business model.
- Ongoing Compliance Support: As regulations evolve, we keep you updated and adjust your tax strategy to stay compliant with minimal disruption to your operations.
Whether you run a digital shop, a consulting firm, or a product-based business, we simplify the entire tax compliance process—so you can focus on growing your company.
Final Thoughts
Tax obligations shouldn’t be a barrier to your business success. With proper guidance and expert support, you can confidently expand across borders without worrying about tax surprises.
Let TaxDo help you navigate VAT, GST, and other small business tax rules worldwide—so your company stays compliant and competitive in the global marketplace.
Looking for peace of mind on your tax obligations?
Contact TaxDo today for a free consultation and see how we can simplify your international tax journey