EU announces support package for small and medium-sized businesses
The European Commission has announced a new support package for small and medium-sized businesses, in addition to changes to EU corporation taxes.
The vast majority of European businesses are SMEs, employing an estimated 100 million people and contributing over half of the continent’s total GDP. However, recent economic pressures including high inflation have left many struggling. This, along with other pressures like complex tax systems and unnecessary paperwork is limiting a lot of business owners.
According to the Commission, the new rules aim to simplify the tax systems for EU businesses, cut red tape, and make the system more competitive in general.
What does the support package include?
The objective of this package is to give small businesses more room for maneuver. The measures are geared towards tackling the issue of late payments by decreasing the maximum payment limit to 30 days and closing legal loopholes.
In Europe, businesses spend an estimated 74 days annually chasing overdue payments, incurring a cost of €275 billion. This, in turn, has a cascading impact on the broader economy, with one in four bankruptcies attributed to late payments.
Under current EU rules, businesses have a maximum of 60 days to settle debts, though this deadline can be extended if mutually agreed upon. Companies are entitled to interest on overdue payments. The proposed changes aim to further tighten regulations on late payments.
Additionally, the new proposals seek to streamline processes for small and medium-sized enterprises (SMEs) operating across borders. These businesses would only need to interact with one tax administration, even if they have establishments in multiple EU countries. This simplification of reporting procedures aims to reduce the risk of double and over-taxation.
The European Commission will also introduce some changes to corporate tax. The new and more straightforward tax rulebook, known as the ‘BEFIT’ rules, targets large cross-border businesses operating within the EU. These rules apply to corporate groups with an annual revenue exceeding €750 million.
