European Commission Introduces New Measures to Support SMEs

On September 13, the European Commission announced a series of initiatives to address the needs of Europe’s small and medium-sized enterprises (SMEs) in a form of SME Relief Communication, which includes measures that will provide short-term relief, boost SMEs’ long-term competitiveness, and strengthen fairness across the Single Market.

As part of these measures, the Commission presented amendments to the Regulation on late payments in commercial transactions and a Directive establishing a Head Office Tax System for SMEs. These are aimed at improving the business environment and supporting SMEs’ growth to uncover their full economic potential.

Head Office Tax System for SMEs

The Head Office Tax System for SMEs will give SMEs operating cross-border through permanent establishments the option to interact with only one tax administration (the Head Office) instead of reporting to multiple tax systems. This proposal will increase tax certainty and fairness, reduce compliance costs and distortions in the market that influence business decisions, while minimizing the risk of double and over taxation and tax disputes. SMEs operating in different Member States will be able to maximize the freedom of establishment and the free movement of capital.

General Recommendations for the Support of SMEs

The SME Relief Communication contains several non-legislative steps which will contribute to the growth of the EU SMEs:

• Improve the current regulatory environment for SMEs through the application of the “one in, one out principle” (this approach ensures that regulation achieves benefits, is targeted, easy to comply with and does not add unnecessary regulatory burden), improving the application of the SME Test and consistently considering SME needs across future EU legislation, for example through longer transition periods for SMEs.

• Simplify administrative procedures and reporting requirements for SMEs by launching the Once-Only Technical System (part of the Single Digital Gateway) by the end of 2023, allowing SMEs to complete administrative procedures across the Single Market without the need to re-submit documents. The Commission will simplify and digitalize complex procedures, such as declarations and certificates for the posting of workers.

• Increase investments available for SMEs, on top of more than €200 billion available to SMEs under the EU’s various funding programs running until 2027. A simple methodology will support SMEs in reporting on sustainability topics, thereby facilitating access to sustainable finance.

• Ensure a skilled workforce for SMEs by continuing to support training actions provided by the Large Skills Partnerships under the European Pact for Skills and other support initiatives, in order to ensure relevant employees’ skills are available for corresponding enterprises.

• Support SMEs’ growth during their business life cycle by reviewing, by the end of 2023, the current SME definition thresholds and developing a harmonized definition and adapting certain obligations for small mid-cap companies to reach their full economic potential.

Press release 

Q&A about SMEs Relief Package