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European Commission (EC) published in the EU Official Journal, on 21 December, the final Delegated Act (DA) that adjusts SME financial thresholds in the Accounting Directive to inflation. This means that the DA is now a part of EU law and can be implemented by EU Member States.
The DA faced no objections from either the European Parliament (EP) or Member States in the Council during the mandated 2-month scrutiny period.
Among other objectives, the DA reduces the number of companies obligated to comply with mandatory reporting requirements. This is achieved by raising the financial thresholds that determine the size of a company classified as an SME. The new thresholds are applicable from January 2024 in principle, but Member States may choose to apply the new size thresholds retroactively from January 2023.
See also Accountancy Europe’s SME update from October 2023 for more details on the initial DA.
This draft report published in December and prepared by MEP Roza Thun (RE/Poland), proposes several changes to the original EC proposal from September 2023. See also Accountancy Europe’s SME update from October 2023 for more details on the proposal.
In her draft report, MEP Thun proposes mandatory public reporting of payment practices for large undertakings. Additionally, she calls for a 12-month delay to the application of the 30-day payment deadline for micro-undertakings where they are debtors, as well as on Member States to set up independent enforcement authorities.
As a next step, MEPs of the EP Committee on Internal Market and Consumer Protection (IMCO) will table amendments to the proposal (see article below), and then vote on its position. As of now, the IMCO vote is set for February 22.
A group of MEPs from the European People’s Party (EPP) published on 6 December a Motion for Resolution objecting to EC’s proposed DA to increase SME thresholds (see article above).
While they welcome the reduction in administrative burden for SMEs in principle, SMEs feel that the EC hasn’t gone far enough and urged the EC to issue a new DA with additional elements:
However, the EP could only object to the initial DA, not amend its contents. The Motion’s adoption would have resulted in the EP rejecting the DA entirely, requiring the EC to issue a completely new proposal. This process taking several months at best, would have coincided with the EU elections in June 2024.
On 13 December, the EP Plenary voted on the Motion, rejecting it with a large majority of 501 against, just 120 in favour and 10 abstentions. This means that EP did not object to the DA, thus paving the way for the EC to publish it in the EU Official Journal (see article above).
Accountancy Europe provided feedback to the MEPs working on the file, emphasising the need for stronger enforcement of the provisions and proportionality for SMEs. Many of the proposed amendments align with our feedback.
For example, several amendments propose longer payment period limits for SME or micro-undertaking debtors, or at the very least, temporarily delaying the application of the 30-day period. Additionally, some amendments propose to make bad practice complaints from SME creditors to enforcement authorities anonymous by default. Several other amendments also set strict time limits for enforcement authorities to address and resolve a complaint or a dispute.
As a next step, IMCO Committee will vote on the amendments on 22 February.
Belgium’s Council Presidency started in January, and will last until July. SMEs feature high in the Presidency’s priorities. For example, Belgium aims to foster SMEs’ access to capital and digitalisation. Additionally, it will take stock of the implementation of the EU SME strategy and work on the Late Payment Regulation.
On 14 November, the International Federation of Accountants (IFAC) released its Small Business Sustainability Checklist.
This diagnostic tool is customisable for each business based on its distinct circumstances, encompassing industry sector, lifecycle, and provided products and services. It lists a comprehensive range of initiatives and actions to be considered in terms of environmental, social, and governance (ESG) factors. IFAC highlights that small and medium-sized accountancy practices (SMPs) are ideally placed to help SMEs on this journey because of their deep business knowledge and expertise.
The paper was released in cooperation with Ecopreneur.eu, the European sustainable business association, and supported by the European Association of Cooperative Banks (EACB). It details 5 reasons for why SMEs should not wait to start transitioning to more sustainable business models. The reasons range from expectations from finance providers and value chain partners to access to finance and business enhancement opportunities.
Accountancy Europe issued its response to the proposal, outlining changes that would make it even better for SMEs. Additionally, Accountancy Europe published a factsheet describing the proposal’s main features, aiming to familiarise SMEs and their accountants to the new rules.
HOT is currently under negotiation in the Council, requiring unanimous approval from Member States for the proposal to be adopted.
The Head Office Tax System (HOT) proposal was launched by the EC in September 2023. See Accountancy Europe’s October SME update for further details.