New EU Tax Regulations Reshaping Business and Individual Taxation

PHOTO BY LEELOO THE FIRST ON PEXELS

New EU tax regulations are changing the landscape of business and individual taxation across Europe. These changes aim to enhance transparency, ensure fair competition, and address tax avoidance, impacting how citizens and companies navigate their financial responsibilities.

Navigating this evolving framework will be crucial for anyone looking to stay compliant and informed in a dynamic economic environment.

Revised VAT Rules for Small Enterprises

Small businesses in the EU will see major VAT rule changes in 2025, aiming to simplify compliance. Spain, as indicated in the post below, will implement a special VAT exemption under Directive (EU) 2020/285. It allows self-employed workers and small businesses with annual revenue under €85,000 to skip quarterly VAT payments and reporting:

Parece que se confirma. A partir de 2025, España implementará un nuevo régimen especial de franquicia en el IVA, basado en la Directiva (UE) 2020/285, que eximirá a autónomos y pequeñas empresas con facturación anual inferior a 85.000 euros de declarar y pagar el IVA trimestral.… pic.twitter.com/8wiIDYWU8y
— MΛRC VIDΛL (@marcvidal) November 18, 2024

This change reduces administrative costs and could make products and services more competitive.

However, businesses opting for the exemption lose the right to deduct VAT on expenses. Annual controls will ensure continued eligibility.

Termination of Tax Breaks for Fossil Fuel Company Cars

According to the tweet below, the European Commission plans to accelerate electric vehicle adoption by ending tax breaks for gasoline and diesel company cars. A draft policy outlines the shift, aiming to push businesses toward greener fleets:

EU to promote EVs for corporate fleets with end to tax breaks for fossil fuel cars https://t.co/OL8WxFPojl pic.twitter.com/Ry3l7TFlqq
— AutoNews Europe (@AutoNewsEurope) March 5, 2025

Companies that previously benefited from fuel-powered vehicle incentives will now face higher costs. Many may consider switching to electric or hybrid options to offset expenses. Financial incentives could help ease the transition.

The policy reflects the EU’s broader goal of reducing emissions and promoting sustainability in corporate transportation.

Exemptions from the Carbon Border Adjustment Mechanism (CBAM)

The Carbon Border Adjustment Mechanism (CBAM) includes exemptions to help certain industries transition to greener practices. These exemptions aim to reduce compliance burdens while maintaining economic stability.

Industries like aluminum and zinc may qualify due to high energy consumption. Some basic chemical producers also receive exemptions because of their critical role in supply chains. Government-supported activities may be excluded to prevent double taxation and ensure competitiveness.

For a quick overview of CBAM and its impact, check out this short video explaining the mechanism in 60 seconds: