The European Commission has launched initiatives and proposals to address the challenges and needs of small and medium-sized enterprises (SMEs) in Europe, as well as to simplify tax rules and reduce compliance costs for cross-border businesses within the European Union (EU).
PACKAGE 1:
The European Commission has announced a series of initiatives to address the needs of small and medium-sized enterprises(SMEs) in Europe and strengthen their competitiveness and resilience in the current economic environment. These measures are presented in the context of the "SME Relief Communication" and cover various areas, including tax regulations, access to finance and administrative simplification. The main measures proposed are highlighted below:
Communication on SME relief measures
COM(2023) 535 - Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - SME Relief Package
2. Regulation on late payments in commercial transactions
COM(2023) 533 - Proposal for a regulation of the European Parliament and of the Council on combating late payment in commercial transactions
3. Directive on tax simplification for SMEs
Proposal for a COUNCIL DIRECTIVE establishing a Head Office Tax system for micro, small and medium sized enterprises, and amending Directive 2011/16/EU
4. Implementation report on the Platform-to-business regulation
COM(2023)525 - Report from the Commission on the first preliminary review on the implementation of Regulation (EU) 2019/1150 on promoting fairness and transparency for business users of online intermediation services & SWD(2023)300 - Commission Staff Working Document accompanying the report on the first preliminary review on the implementation of Regulation (EU) 2019/1150 on promoting fairness and transparency for business users of online intermediation services
5. Implementation report on the Single Digital Gateway regulation
COM(2023) 534 - Report from the Commission to the European Parliament and the Council - First Implementation Report on the Single Digital Gateway
Communication on SME Relief Measures (COM(2023) 535):
The main objective of this communication issued by the European Commission is to present a comprehensive set of measures to support small and medium-sized enterprises (SMEs) in Europe. SMEs play a crucial role in the European economy, accounting for 99% of all enterprises in the region and generating a significant share of employment and economic growth.
The context of this communication focuses on the difficulties SMEs have faced in recent years due to a series of crises, including the COVID-19 pandemic, geopolitical conflicts and energy challenges. These events have generated uncertainty, volatility and constraints in supply chains, which have negatively impacted SMEs.
The "SME Relief Package" proposed in this submission covers several aspects, including:
> Regulatory measures to combat late payments in commercial transactions, which improves cash flow for SMEs.
> The introduction of a headquarter tax system for SMEs operating in several EU countries, reducing tax costs and increasing tax certainty.
> Other non-legislative initiatives to improve the regulatory environment and simplify administrative procedures, encourage investments available to SMEs and support workforce training.
Regulation on Late Payments in Commercial Transactions (COM(2023) 533):
This is a regulatory proposal submitted by the European Commission to the European Parliament and the Council of the European Union. Its main focus is to address the problem of late payments in commercial transactions, which negatively affects SMEs.
The key measures included in this proposal are:
> Establishment of a maximum payment limit of 30 days to ensure that companies receive their payments in a timely manner.
> Elimination of ambiguities and loopholes in the current regulation to make it more effective.
> Guarantee of automatic payment of interest and compensation fees in case of late payments.
> Introduction of enforcement and remediation measures to protect companies against delinquent payers.
3. Tax Simplification Directive for SMEs (HOT)- Proposal for a COUNCIL DIRECTIVE (micro-enterprises, SMEs) and amendment of Directive 2011/16/EU.
This proposal for a directive submitted to the Council of the European Union seeks to establish a system of headquarter taxes for micro, small and medium-sized enterprises (SMEs) operating in multiple EU countries.
Key measures of this proposal include:
> Allowing SMEs to interact with a single tax administration (that of the headquarters) instead of complying with multiple tax systems when operating in several EU member states.
> Reduction of tax compliance costs and greater tax certainty.
> Minimization of the risk of double taxation and tax disputes.
> Facilitation of investment and cross-border expansion of SMEs in the EU.
It is important to highlight:
> BEFIT is a proposal aimed at large corporate groups operating throughout the European Union and focuses on income taxation.
> HOT (Head Office Tax System) is a proposal that simplifies the tax rules for SMEs in the early stages of their expansion.
> The idea is that SMEs can benefit from the simplified HOT rules when they are growing and expanding. However, if they eventually grow large enough to be ineligible for HOT, they can still opt to use BEFIT, which is more suitable for large companies.
> This offers flexibility to SMEs to adapt their tax approach according to their size and needs throughout their business life cycle.
4. "Platform-to-business Regulation Implementation Report
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS on the first preliminary review on the implementation of Regulation (EU) 2019/1150 on promoting fairness and transparency for business users of online intermediation services
This report presents a preliminary assessment on the state of implementation of Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services (the Platform-to-Business Regulation or 'P2B Regulation').
The P2B Regulation has been in force since July 12, 2020 and establishes a general framework applicable to so-called 'online intermediary services', which act as intermediaries for a wide variety of companies, both large and small, referred to as 'business users', in the internal market.
The objective of the P2B Regulation is to create a fair, transparent and predictable business environment for these commercial users, who rely to varying degrees on these online intermediation services to reach their customers.
The requirements of the Regulation are designed to ensure that business users, particularly small and medium-sized enterprises (SMEs) that may have limited bargaining power compared to online platforms, can conduct business in a predictable manner and are not exposed to unnecessary costs when facing problems with the online platform. This is particularly relevant for companies, especially SMEs, in key ecosystems such as tourism, retail, and cultural and creative industries.
In addition, it can also be a tool to ensure that fairness and transparency help smaller platforms to grow and innovate in a common legal framework shared with larger platforms, on a level playing field. The implementation of the requirements of the P2B Regulation is in the hands of the Member States to ensure that online intermediation services comply with these requirements.
This report provides a preliminary review of the implementation of the P2B Regulation and highlights its importance in fostering fairness and transparency in the relationships between online platforms and commercial users, especially SMEs.
5. Implementation Report on the Digital Single Gateway Regulation
COM(2023) 534 - Report from the Commission to the European Parliament and the Council - First Implementation Report on the Single Digital Gateway
The SDG (Single Digital Service) is an important eGovernment instrument aimed at ensuring a more efficient and competitive single market. It radically improves the European business environment and plays a key role in supporting small and medium-sized enterprises (SMEs). The SDG is in full deployment and increasingly supports businesses and citizens across Europe.
Member States are encouraged to include the SDGs in their national roadmaps, to be adopted by October 9, 2023, to achieve the Digital Decade 2030 targets and promote the EU's digital transformation.
The Commission is using this report as an opportunity to connect with SME representatives, networks and stakeholders and gather their feedback in order to constantly improve this instrument.
PACKAGE 2:
The European Commission has adopted a package of initiatives to reduce tax compliance costs for large cross-border companies in the European Union. The package consists of two key measures:
These proposals are to be adopted by the Board and will become effective July 1, 2028 for BEFIT and January 1, 2026 for the transfer pricing proposal.
1. "Business in Europe: Framework for Income Taxation" (BEFIT)// Proposal for a COUNCIL DIRECTIVE on Business in Europe: Framework for Income Taxation (BEFIT)
> BEFIT introduces a new unique set of rules for determining the taxable income of groups of companies.
> This reduces tax compliance costs for large companies operating in several member states and makes it easier for national tax authorities to determine the taxes due.
> Simpler rules could reduce tax compliance costs for businesses in the EU by up to 65%.
> BEFIT requires companies that are members of the same group to calculate their taxable income according to a common set of rules.
> The tax bases of all group members are aggregated into a single tax base.
> Each member of the BEFIT group will have a percentage of the aggregate taxable income calculated based on the average taxable income of the previous three fiscal years.
2. Harmonization of transfer pricing rules// Proposal for a COUNCIL DIRECTIVE on transfer pricing
> This measure seeks to harmonize transfer pricing rules in the EU and ensure a common approach.
> It will increase tax certainty, reduce the risk of litigation and double taxation, and limit opportunities for companies to use transfer pricing for aggressive tax planning purposes.
Both measures are based on the OECD/G20 international tax agreement on a global minimum level of taxation and the Pillar Two Directive, adopted at the end of 2022. The new rules will be mandatory for groups with combined annual revenues of at least €750 million and where the parent entity owns at least 75% of the ownership rights or profit entitlement rights. For smaller groups, the rules are optional if they prepare consolidated financial statements, which may be of interest to SMEs.
