How important is "small"?
The Polo is a B-segment car, similar in size to Fiat's Punto. The 500 is an A-segment car, derived from (but smaller than) the Fiat Panda, which competes more closely with VW's Up.
If small is important, then the Polo may not be small enough.
Also bear in mind that neither have conventional epicyclic automatic transmissions with torque converters. Both use automated manual transmissions - a normal single-clutch unit for the Fiat and a "DSG" dual-clutch for the VW. These don't behave in the same way as a traditional epicyclic automatic, and if you are used to one of those you may have to adapt your driving style to suit, particularly during low-speed manoeuvring such as parking. The Polo's DSG transmission is technically a generation better than the Fiat's single-clutch unit.
The 500 is more stylish, but you pay for that style (the mechanically similar Panda is larger and more practical, but cheaper).
The Polo is larger and more practical, but more anonymous.
My choice of the two would be the Polo, as I feel the 500 is a Panda compromised by its styling and high price. If I wanted a car smaller than the Polo, I'd be looking at a Panda, Up, Hyundai i10 or Kia Picanto, not a 500.