In more detail
On 12 September 2023, the European Commission ("Commission") published a Communication containing a number of initiatives aimed at addressing the needs faced by European small and medium-sized enterprises (SMEs). The new measures adopted aim to improve the support SMEs receive in the short term, to strengthen the competitiveness of SMEs in the long term, and to increase the equity that takes place in their business environment.
Among all the measures adopted by the Commission, the publication of the new proposal for a Regulation on combating late payment in commercial transactions ("Proposal for a Regulation") and the new proposal for a Directive establishing a Head Office Tax system for micro, small and medium sized enterprises ("Proposal for a Directive") stand out.
Proposal for a Regulation on combating late payment in commercial transactions
The proposed Regulation, once adopted, will replace the 2011 Directive on combating late payment in commercial transactions, which is still in force today. This proposal focuses on late payments, a practice that severely harms SMEs by preventing proper competition between companies and affecting the resilience of their supply chains. In this regard, SMEs may see their productivity reduced while the number of insolvencies increases. The proposed Regulation aims to ensure the functioning of the internal market so that SMEs can trade in this market without materializing a higher risk compared to what can be expected in domestic transactions.
Among the measures adopted in the proposal, a deadline of thirty days is set as the maximum limit for making payments, avoiding the legal ambiguities that existed until now. It also stipulates that interest for late payments must be calculated on a daily basis and added to the amount due. In this sense, both the payment of accrued interest and the payment of compensation fees to which the creditor will be entitled in the event of late payment will be automatic. Finally, the text of the proposal includes developments with regard to enforcement and redress measures aimed at protecting businesses from possible cases of late payment.
Proposal for a Directive establishing a Head Office Tax system for SMEs
The new Proposal for a Directive will allow SMEs to be taxed according to the rules of the Member State in which they have their registered office. It is also foreseen that the new rules arising in the framework of simplification for SMEs will be of optional application. The proposal also seeks to establish a one-stop shop through which SMEs carrying out Community activities can carry out all types of formalities with the tax authority of the Member State in which they have their registered office.
The proposed Directive is a pillar on which to improve tax certainty and reduce market compliance costs affecting entrepreneurs' decisions. It will also minimize the risk of double taxation or over-taxation. In this way, it is envisaged that investment within the European Union will be encouraged alongside freedom of establishment and free movement of capital. Furthermore, this proposal also aims to prevent abusive tax practices, which is why tax abuse rules have been designed to address the risks of tax avoidance related to the transfer of the tax residence of SMEs. In this context, strict conditions are also laid down as regards eligibility for and termination of the tax simplification scheme. Finally, the Proposal for a Directive provides for a derogation whereby SMEs deriving income from shipping activities covered by a tonnage tax scheme are excluded from the simplification rules for SMEs as regards income attributed to a permanent establishment.
Other non-legislative measures proposed for SMEs
- Improve the current regulatory framework: the appointment of an EU SME representative to guide and advise the Commission on issues involving SMEs and to defend the interests of SMEs is foreseen. SME experimentation and innovation will also be promoted.
- Simplify administrative procedures and reporting requirements: the simplification and digitalization of those procedures involving the processing of declarations and certificates is foreseen. In addition, a reduction of reporting obligations will be sought together with the development of new streamlining plans.
- Promote available investments: the implementation of various financing programs and the facilitation of the information procedure on sustainability issues are foreseen.
- Enable the development of a skilled workforce: continued support is foreseen for different training actions and initiatives to match the skills of SMEs in the labor market.
- Supports growth: the revision of the SME definition thresholds and the updating of certain obligations for small mid-cap companies are foreseen.
For more information, please consult the full Commission Communication by clicking on this link. If you need individual advice for your company, please contact our team of experts.
Click here to access the Spanish version.
