SME Update

• European Commission proposes DEBRA with additional SME support
• G7 finance ministers call for proportionate sustainability standards for SMEs
• EFRAG issues call for SME experts to join its sustainability standard-setting work

European Commission

Accountancy Europe responds to public consultation on VAT in the digital age

The public consultation on value-added tax (VAT) in the digital age, launched by the European Commission (EC), was open until 5 May. The consultation seeks stakeholders’ views on whether the current VAT rules are adapted to the digital age, and on how digital technology can be used both to help Member States fight VAT fraud and to benefit businesses.

Views are sought in particular on:

• VAT reporting obligations and e-invoicing
• VAT treatment of the platform economy
• The use of a single EU VAT registration

In its consultation response, Accountancy Europe notes the potential benefits of pan-EU digital reporting requirements (DRR) for SMEs, but proposes a phased approach where domestic transactions could still be reported on according to the relevant Member State’s arrangements. It also calls for allowing the recovery of VAT input through the One Stop Shop (OSS) and Import One Stop Shop (IOSS) systems to increase their benefits for SMEs.

Commission publishes report on tax compliance costs for SMEs

The study provides an estimation of the administrative burden for SMEs and large enterprises in the EU and UK stemming from the fiscal rules for tax filing. Tax legislation is often written in a way that addresses all types and sizes of enterprises similarly. SMEs face a comparative disadvantage to large-scaled enterprises (LSEs) as the burden of compliance falls disproportionately on them and because they often do not have sufficient financial and human resources to manage their regulatory obligations. The study argues even small improvements in the regulatory environment for SMEs may have a large positive impact on the EU economy.

Accountancy Europe has provided insight and experience for the study, drawing on the experience of our small practitioner members who service SME clients. Read more

Commission proposes DEBRA with extra support for SMEs

The EC proposed on 11 May its anticipated proposal on a debt-equity bias reduction allowance (DEBRA).

DEBRA’s aim is to foster the development of EU Capital Markets Union by granting companies incentives to use equity, rather than debt, to finance their activities. It stipulates that increases in a taxpayer’s equity from one tax year to the next should be deductible from its taxable base, similarly to what happens to debt. On the debt end, the proposal introduces a reduction of debt interest deductibility by 15%.

SMEs would benefit from a higher notional interest rate under the proposed rules.

As a next step, the EU Council needs to approve the proposal through unanimity, while the European Parliament (EP) must provide its legally non-binding opinion. Read more

European Parliament

How COVID influenced CMU initiatives help diversify SME access to finance and greener economy

The EP has published a new study focusing on EU’s Capital Market Union (CMU) proposals launched in the COVID context. It assesses how these CMU policies can help diversify SMEs’ funding sources and green transition.

The study argues that specific measures sometimes in combination with public support are necessary to enhance SMEs’

access to capital markets. It also stipulates that more financing might be needed for larger, more cross-border schemes to reach the economies of scale required for an integrated European capital market. Read more

New OECD report shows loans to SMEs hit new heights during the pandemic

The report, focusing on financing of SMEs, shows that outstanding SME loans increased significantly during the first year of the pandemic. The median stock of SME loans increased by 4.9%, the highest upturn registered since the OECD Scoreboard was created 10 years ago. This was underpinned by a strong increase in government-provided loan guarantees (up 110% y-o-y in 2020), debt moratoria, as well as direct lending to SMEs (up by 17% y-o-y in 2020). Read more

DIGITAL SME launches Funding Opportunities Portal – a new service for SMEs

Many different European funding opportunities for SMEs exist, but the good ones are often hidden in a jungle of too much information, as pointed out by the European Digital SME Alliance. To help interested parties navigate through this jungle, European Digital SME Alliance has launched a new one-stop-shop tool in which it filters out the best funding calls suitable for SMEs. This will also be useful for accountants advising SME clients on accessing finance. Read more

ECA finds room for improvement in supporting SMEs’ internationalisation

The European Court of Auditors (ECA) has published a report assessing the key European instruments aimed at supporting SMEs go global, such as the Enterprise Europe Network and Startup Europe. ECA’s audit of these instruments found that the EU’s strategy correctly identified the main obstacles to SME internationalisation and numerous actions have been set up to support SMEs’ internationalisation. However, important actions have also not been successfully implemented. In particular, there is no up-to-date inventory of all relevant actions in this field which would allow to identify gaps, overlaps and potential synergies among existing actions, the report finds. Read more

G7 finance ministers call for proportionate sustainability standards for SMEs

G7 finance ministers issued the usual Communique at the end of their meeting, which took place on 20 May. In it, the finance ministers call for a ‘baseline’ for international sustainability standards. This baseline should be “practical, flexible and proportionate and ultimately suitable for small and medium-size enterprises”. This is a strong and explicit political call for standards that consider SMEs’ needs. Read more

EFRAG calls for experts to support its SME sustainability standard-setting

In its meeting of 13 April 2022, the European Financial Reporting Advisory Group (EFRAG) Sustainability Reporting Board (SRB) appointed 22 members of the EFRAG Sustainability Reporting Technical Expert Group (SR TEG). This composition includes a wide range of expertise and specialisations in the Environmental, Social, and Governance (ESG) domain.

To have well-balanced expertise, experience and knowledge, EFRAG has decided to have two additional seats to enhance the social (with deep technical expertise on international standards) and direct practical SME sustainability-reporting expertise in EFRAG SR TEG.

Submissions – setting out the name, CV and motivation letter – should be sent by 20 June 2022 via email to EFRAG, to the attention of Jean-Paul Gauzès, EFRAG Administrative Board President. Email address: [email protected]. Early applications are encouraged. Read more