Parliament wants to reduce red tape for small firms
By Ina Dimireva
Very small companies could be exempted from having to draw up annual accounts, following approval by the European Parliament of changes to EU accounting rules. Voting in the 10 March plenary, MEPs said it would be up to each Member State to grant such exemptions, depending on the impact the directive would have in that country. Companies would in any case still have to keep records of their business transactions and financial situation. The EP approved the legislative resolution with 445 votes in favour, 196 against and 21 abstentions.
About 7.2 million EU companies are subject to reporting rules under EU accounting directives. In order to boost the competitiveness and growth potential of micro-companies, the proposal would allow Member States to simplify the business environment for these companies by waiving the usual reporting requirements. “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 the rapporteur Klaus-Heiner Lehne (EPP, DE).
Member States can exempt companies from drawing up annual accounts if they meet two of the following criteria: (1) balance sheet total under €500,000, (2) turnover under €1,000,000 and/or (3) average of 10 employees during the financial year. However, the EP’s report also gives Member States the freedom to choose whether or not to exempt micro-entities “taking account in particular of the situation at national level regarding the number of businesses covered” under threshold values.
The EP insisted that Member States still subject micro-entities to the obligation to keep records that show the company’s business transactions and financial situation, “as a minimum standard”, so that information remains transparent and accessible. Since the Council still blocks the proposal, during the debate, the rapporteur stressed that the blocking minority should “rethink its position”.
The Commission’s impact assessment calculated that the average cost per company of complying with the requirements of the accounting directives is €1,558. Of this amount, the administrative burden (i.e. collecting and processing information purely 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.
Report on the annual accounts of certain types of companies as regards micro-entities