Press release
Reducing red tape for smaller companies
Economic and monetary affairs - 28-01-2010 - 12:14
Committees
Committees
Micro-companies could be exempted from having to draw up annual accounts under an amendment to EU accounting rules approved by the Legal Affairs Committee on Thursday. However, these exemptions would have to be granted by EU Member States, and the companies would still have to keep records of their business transactions and financial situation. Parliament is to vote on the amendment in February.
About 7.2 million EU companies are subject to reporting rules under the EU accounting directives. Some 5.4 million (around 75%) of these are "micro-entities". They are primarily engaged in business at local or regional level, with little or no cross-border activity.
The proposal voted on Thursday in the Legal Affairs Committee would enable Member States to simplify the business environment for micro-companies by lifting the reporting requirements that apply to them, so as to enhance their competitiveness and release their growth potential.
The exemption from having to draw up annual accounts would apply to companies that meet two of the following criteria: balance sheet total under €500,000, net turnover under €1,000,000 and/or average of 10 employees during the financial year.
"The reach of micro-entities’ business is generally confined to the regional and local market. To that extent they have no cross-border impact on the single European market, and the logical conclusion, therefore, is that they need not be bound by EU-wide internal market regulations", said rapporteur, Klaus-Heiner Lehne (EPP, DE).
Given that the numbers of businesses eligible for exemption will vary greatly from one Member State to another and that their activities have no bearing on cross-border trade or the functioning of the single market, Member States should take account of the differing impact of the threshold values when implementing the directive at national level, added the committee.
Records of business transactions and financial situation
To address concerns that an exemption from accounting duties could hamper internal organisation and reduce transparency and access to information, the Legal Affairs Committee made it clear that that micro-entities must still be subject to the obligation to keep records that show the company’s business transactions and financial situation “as a minimum standard”.
The Legal Affairs Committee proposal follows up Parliament's request, at the end of 2008, that the Commission table a legislative proposal to enable Member States to exempt very small undertakings (micro-entities) from the scope of the accounting directives. This proposal follows that request. This proposal is also part of the EU's "Simplification Rolling Programme", a key priority under its "Better Regulation" agenda.
How much could be saved?
A study mentioned in the Commission's impact assessment concluded that that the average per company cost of complying with the requirements of the accounting directives is €1,558. Out of this amount, the administrative burden (i.e. collecting and processing information only to satisfy legal obligations without a real business need) is €1,169.
If all Member States were to exempt micro companies and did not impose additional requirements, the proposal could save an estimated at €6.3 billion.
In the chair: Klaus-Heiner Lehne (EPP, DE)
Committee vote: 28/01/2010
Plenary vote: February II session
REF.: 20100125IPR67979