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
Date: 2023-09-12
Institutions: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, European Commission
Subjects: administrative formalities, aid to undertakings, commercial transaction, corporation tax, deadline for payment, financing, skilled worker, small and medium-sized enterprises, tax harmonisation, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Strasbourg, 12.9.2023  COM(2023) 535 final  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  
 
 
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 

1  Small business matters 

Small  and  medium-sized  enterprises  (SMEs)  are  central  to  Europe’s  economic  and 
social  fabric.  The  24  million  European  SMEs  represent  99%  of  all  businesses  in  the  EU, 
provide two thirds of jobs in the private sector in the EU1 and are deeply embedded in local 
communities, in particular in rural areas2. They account for more than half of value added in 
the  EU’s  non-financial  business  sector  and  are  Europe’s  breeding  ground  for  innovation3, 
diversity and  equality4. SMEs are essential to  Europe’s green and digital transitions5  and its 
long-term prosperity.  

As  such,  SMEs  have  been  a  constant  in  Commission  policy,  even  more  so  since  the 
launch  of  the  2020  SME  Strategy6.  Under  the  ongoing  multiannual  financial  framework 
(2021-2027)  and  under  the  NextGenerationEU7,  the  Commission  expects  more  than  200 
billion euro to be made available to SMEs under its various funding programmes. In a period 
of successive crises, the sustained recovery and resilience of SMEs have been a key priority. 
The Recovery and Resilience Facility (RRF)8 provides up to 45 billion euro of unprecedented 
support  to  SMEs9,  in  addition  to  a  total  of  65  billion  euro  under  Cohesion  policy  funds10. 
SMEs were also the primary beneficiaries of the European instrument for temporary Support 
to  mitigate  Unemployment  Risks  in  an  Emergency  (SURE),  designed  to  protect  jobs  and 
incomes  affected  by  the  coronavirus  pandemic.  Moreover,  SME  interests  have  been  at  the 
centre of the Commission’s temporary framework for state aid11, allowing Member States to 
provide necessary support to businesses in need while ensuring equal treatment and limiting 
undue distortions to competition that would undermine the Single Market. 

1 SME Performance Review 2023, https://single-market-economy.ec.europa.eu/smes/sme-strategy/sme-
performance-review_en.  
2 Flash Eurobarometer 486, SMEs, start-ups, scale-ups and entrepreneurship, September 2020, 
https://europa.eu/eurobarometer/surveys/detail/2244. 
3 Productivity in SMEs and large firms, OECD, 2021, https://www.oecd-ilibrary.org/sites/54337c24-
en/index.html?itemId=/content/component/54337c24-en. 
4 Flash Eurobarometer 486, SMEs, start-ups, scale-ups and entrepreneurship, September 2020, 
https://europa.eu/eurobarometer/surveys/detail/2244.  
5 Some 89% of SMEs are already taking action to be more resource efficient, Flash Eurobarometer 498, SMEs, 
resource efficiency and green markets, March 2022, https://europa.eu/eurobarometer/surveys/detail/2287.  
6 COM (2020) 103 final. 
7 COM (2021) 250 final. 
8 https://ec.europa.eu/economy_finance/recovery-and-resilience-scoreboard/smart.html. 
9 RRF Scoreboard, pillar tagging methodology, ‘Support to SMEs’ as primary or secondary policy area. 
10 This includes 43 billion euro under the 2021-2027 multiannual financial framework and a total of 22 billion 
euro under Cohesion Policy’s Coronavirus Response Investment Initiatives and REACT-EU.  
11 The COVID-19 State aid Temporary Framework; the Commission Temporary Crisis Framework for State Aid 
measures to support the economy following the aggression against Ukraine by Russia; the amended general 
block exemption rules (Commission Regulation (EU) 2023/1315 ; the proposed revision of the Regulation on de 
minimis aid, https://competition-policy.ec.europa.eu/public-consultations/2022-de-minimis_en. 

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A range of actions has helped European SMEs grasp new market opportunities offered 
by  the  green  and  digital  transitions  and  cross-sectoral  and  cross-border  cooperation. 
From deploying 150 Digital Innovation Hubs across the continent to rolling out a network of 
sustainability advisers for SMEs12; from launching transition pathways for Europe’s industrial 
ecosystems13  to  reforming  the  electricity  market  design14;  from  helping  SMEs  access  data 
under fair conditions15 to mobilising risk capital for start-ups and SMEs in strategic areas such 
as  space16;  and  from  strengthening  internationalisation17  and  trade18,  enhancing  business 
opportunities through the Global Gateway19 to protecting intellectual property assets20: SMEs’ 
needs have been front of mind across the Commission’s work. 

Nevertheless,  SMEs  face  major  uncertainties,  supply  constraints, labour shortages and 
not always fair competition. Volatility and unpredictability in the current economic context 
have made it more difficult for SMEs to do business. Through parts of 2021 and 2022, they 
experienced difficulties in hiring new staff to meet a strong rebound in demand.  In addition, 
they  were  faced  with  higher  energy  costs,  brought  about  by  the  Russian  war  of  aggression 
against Ukraine, while rapidly increasing raw material prices have put even more pressure on 
small businesses. Rising interest rates have also made SMEs’ access to finance more onerous. 

These headwinds are likely to persist. It is vital that the EU and Member States continue to 
support SMEs relentlessly, help them consolidate their recovery and tap their full potential, so 
that all of them - from the corner shop and the family-run hotel to the technology start-up - 
can continue to contribute to Europe’s long-term prosperity.  

With this SME Relief Package, the Commission aims to provide short-term relief, boost 
long-term  SME  competitiveness  and  resilience,  and  foster  a  fair  and  SME-friendly 
business environment. It includes:  

• 
• 
• 

a proposal for a late payment Regulation,  
a proposal for a Directive on tax simplification for SMEs,  
a set of measures to make things easier for SMEs, improve access to finance and skilled 
workforce, and to support SMEs throughout their business lifecycle. 

12 Within the Enterprise Europe Network. 
13 https://single-market-economy.ec.europa.eu/industry/transition-pathways_en. 
14 COM (2023) 148 final. The proposal would allow Member States to apply price controls to SMEs as well as 
consumers during energy crises.  
15 COM (2022) 68 final.  
16 The CASSINI investment facility is injecting nearly 700 million euro into venture capital funds investing in 
space, mobilising at least 1.5 billion euro total risk capital for start-ups and SMEs. 
17 SMEs are also benefiting from EUR 1 billion financing under the Single Market Programme, earmarked to 
support strengthening SMEs’ competitiveness and their internationalisation and channelling support to SMEs via 
SME intermediaries, for instance through the Enterprise Europe Network and Euroclusters, facilitated by the 
European Cluster Collaboration Platform. 
18 All new EU trade agreements include dedicated SME chapters which include provisions to help SMEs grow 
their business with and in foreign markets. A dedicated complaint mechanism (https://trade.ec.europa.eu/access-
to-markets/en/content/single-entry-point-0) allows SMEs to report barriers when accessing foreign markets. 
19 https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/stronger-europe-world/global-
gateway_en. 
20 COM (2020) 760. The Action Plan helps companies, especially SMEs, to make the most of their inventions 
and creations.  

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The Communication is accompanied by the first implementation report on the Single Digital 
Gateway  and  a  first  preliminary  review  of  the  Regulation  on  platform-to-business  relations 
(‘P2B Regulation’)21.  

2  Challenges: SMEs and their sustained recovery 

SMEs have not yet returned to their pre-pandemic performance levels. When adjusted for 
inflation,  SME  value  added  for  2023  is  forecast  to  remain  3.6%  (against  1.8%  for  large 
enterprises) below its 2019 level, while SME employment has barely recovered to pre-crisis 
levels22. In real terms in 2022, SMEs in 12 out of the 14 industrial ecosystems23 experienced a 
decrease  in  value  added  and  for  2023,  a  decline  in  value  added  is  forecast  for  SMEs  in  all 
ecosystems.  

Figure 1: Key challenges for SMEs; source: Flash Eurobarometer 486 

Regulatory obstacles or administrative burden and payment delays 
come out on top when SMEs report the biggest problems they face

Regulatory obstacles or administrative burden

55%

Payment delays

Access to finance

Skills, including managerial skills

35%

21%

17%

Administrative burden or regulatory obstacles are among the biggest problems for 55% 
of  SMEs24.  A  predictable  regulatory  environment,  good  governance  and  an  efficient 
institutional  framework  contribute  to  enhancing  competitiveness,  achieving  fairness  and 
providing relief. 

Late payments endured by SMEs hamper competitiveness, increase uncertainty, and in 
the  case  of  public  procurement  discourage  participation.  In  any  affected  company,  they 
increase  working  capital  needs  and  financing  costs,  drive  up  costs  due  to  the  time  spent  in 
pursuing debtors, and thereby reduce the capacity to invest.  

Access  to  finance  requires  more  effort  from  small  businesses  than  from  large  companies. 
Increased uncertainty and higher costs in funding reduce SMEs’ capacity to invest. At the end 

21 Regulation (EU) 2019/1150 (‘the P2B Regulation’) sets out rules for creating a fair, transparent and 
predictable business environment in particular for smaller businesses and traders on online platforms.  
22 SME Performance Review 2023, https://single-market-economy.ec.europa.eu/smes/sme-strategy/sme-
performance-review_en. 
23 https://single-market-economy.ec.europa.eu/industry/transition-pathways_en.  
24 Flash Eurobarometer 486, SMEs, start-ups, scale-ups and entrepreneurship, September 2020, 
https://europa.eu/eurobarometer/surveys/detail/2244. 

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of  2022,  SMEs  were  expecting  an  imminent  deterioration  in  the  availability  of  all  types  of 
finance25. 

The  availability  of  skilled  staff  or  experienced  managers  recently  rose  to  be  the  most 
important problem for 27% of SMEs in the EU26, and 70% of SMEs report an increase in 
labour  costs27.  The  results  of  the  Eurobarometer  on  skills28  presented  in  parallel  to  this 
Communication  show  that  skills  shortages  hold  back  business  activities  for  63%  of  SMEs, 
and also inhibit their efforts on digitalisation (for 45% of SMEs) and greening (39%). 

These  challenges  will  be  the  focus  of  the  actions  presented  in  this  SME  Relief  Package,  as 
described below. 

3  Relief for SMEs: Helping SMEs do business in challenging times 

3.1  Making things easier for SMEs 

3.1.1  Simplifying taxes  

Businesses,  notably  those  with  cross-border  activities,  face  complexity  and  high 
compliance  costs  as  a  result  of  having  to  comply  with  different  corporate  tax  systems 
when  doing  business  in  more  than  one  Member  State.  Therefore,  as  part  of  this  SME 
Relief  Package,  the  Commission  is  proposing  a  major  simplification  in  the  area  of  direct 
taxation  for  SMEs  that  have  created  a  taxable  presence  in  another  Member  State  through  a 
permanent  establishment.  These  SMEs  would  be  allowed  to  compute  the  tax  base  of  their 
permanent  establishments  in  other  Member  States  in  accordance  with  the  rules  of  their 
Member  State  where  they  maintain  their  head  office  and  with  which  they  are  most  familiar 
with.  The  envisaged  rules  will  particularly  benefit  SMEs  at  an  early  stage  of  international 
expansion. The impact assessment accompanying the proposal estimates that it could reduce 
SMEs’  tax  compliance  costs  by  32%  leading  to  overall  savings  of  up  to  3.4  billion  euro  a 
year.  

In addition, to alleviate the burden small businesses with cross-border activities face in 
dealing  with  VAT  across  the  EU,  new  VAT  rules  will  apply  as  of  1  January  202529. 
Eligible  small  businesses  will  have  the  option to  exempt  from  VAT  their  supplies  of  goods 
and services made in any of the other EU Member States in addition to their Member State of 
establishment.  

The Commission: 

•  Action  1:  proposes a tax simplification directive establishing  a Head Office Tax system 

for SMEs.  

25 Survey on the Access to Finance of Enterprises, SAFE, December 2022, https://single-market-
economy.ec.europa.eu/access-finance/data-and-surveys-safe_en. 
26 Ibid. 
27 Ibid.  
28 Flash Eurobarometer 529 on European Year of Skills: Skills shortages, recruitment and retention strategies in 
small and medium-sized enterprises (published in September 2023). 
29 Council Directive (EU) 2020/285. 

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3.1.2  Better Regulation for SMEs 

The  Commission  is  committed  to  ensuring  a  business-friendly  regulatory  environment 
that  helps  SMEs  to  be  productive,  competitive  and  resilient.  In  2021,  the  Commission  has 
further strengthened the SME test, a tool that analyses the impact of proposals on SMEs, to 
further improve its analysis and to better report on those impacts30. The SME test must now 
be  performed  and  reported  more  systematically  in  all  impact  assessment  reports,  where 
proportionate  to  the  relevance  of  an  initiative  for  SMEs.  Further  improvement  in  the 
application  of  the  SME  test  is  however  both  feasible  and  necessary:  the  Commission  will 
therefore follow up on the recommendations that the Fit-for-Future Platform31 will issue later 
in  2023  on  the  application  of  SME  test  to  ensure  even  more  granular  and  consistent 
assessments of the impacts of its legal proposals on SMEs32.  

80% of all EU legislative initiatives are considered to be relevant for SMEs, based on the 
SME  filter33,  a  tool  used  in  the  early  stages  of  policymaking,  serving  as  a  key  part  of  the 
SME test. Since January 2022, this tool has put the spotlight on the interests of SMEs, in close 
cooperation with the SME Envoys34. This was further reinforced since March 2023 with the 
new competitiveness check, which reports in an integrated manner in all impact assessments 
on  the  competitiveness  impacts  on  business,  including  on  SME  competitiveness.  The 
Regulatory  Scrutiny  Board,  the  Commission’s  independent  oversight  body  for  the  quality 
control of draft impact assessments and evaluations, has been reinforced by two members and 
its mandate has been strengthened to increase its focus on competitiveness. The Board is now 
required, in addition to the application of the ‘one-in, one-out’ principle and the integration of 
the  foresight  dimension  in  the  Commission’s  impact  assessments  and  evaluations,  to  pay 
particular  attention to  impacts  on competitiveness. In doing  so, it  shall  assess  the quality  of 
cost estimates and whether reports sufficiently explore the potential to simplify legislation and 
to  reduce  unnecessary  burden  for  business  and  citizens.  In  its  next  annual  meeting  with 
oversight bodies, the Board will deepen discussion of impacts on competitiveness and SME 
impacts, exchanging best practices with other EU scrutinisers35.   

The Commission will appoint a dedicated EU SME Envoy who shall report directly to the 
President, while also  reporting to  the Commissioner for  Internal  Market  on all SME-related 
activities  conducted  in  conjunction  with  the  services  of  the  Directorate-General  for  Internal 
Market, Industry, Entrepreneurship and SMEs (DG GROW), which shall support the Envoy’s 
work. In addition to wider advocacy and coordination work within the Commission, with the 
Network of SME Envoys and externally, and building on the foregoing developments, the EU 
SME Envoy will henceforth be able to participate in the Regulatory Scrutiny Board hearings 
with Directorates-General on initiatives that have a high impact on SMEs. In that context, and 

30 COM (2021) 219 final and https://commission.europa.eu/law/law-making-process/planning-and-proposing-
law/better-regulation/better-regulation-guidelines-and-toolbox_en. 
31 The Fit for Future Platform is a high-level expert group that helps the Commission in its efforts to simplify EU 
laws and to reduce related unnecessary costs, https://commission.europa.eu/law/law-making-process/evaluating-
and-improving-existing-laws/refit-making-eu-law-simpler-less-costly-and-future-proof/fit-future-platform-
f4f_en. 
32  This  also  follows  the  proposals  of  the  Conference  on  the  Future  of  Europe  in  2022  to  boost  the 
competitiveness of SMEs and reinforce the SME test (proposals 12, 17 and 35). 
33 https://ec.europa.eu/docsroom/documents/53934. 
34  A  group  of  Member  States’  high-level  experts  who  advise  the  Commission  on  all  aspects  of  SME  policy, 
https://single-market-economy.ec.europa.eu/smes/sme-strategy/sme-envoys-network_en. 
35 These include also members of  RegWatchEurope, comprising oversight bodies of The Netherlands, Finland, 
Sweden, Germany, Denmark, Norway, Czech Republic, United Kingdom.  

5 

 
 
without prejudice to the Board’s functioning and independence, the EU SME  Envoy will be 
able  to  raise  issues  and  alert  the  Board  on  significant  adverse  impacts  on  SMEs,  potential 
additional  measures  to  mitigate  them,  the  reliability  of  cost/benefit  and  competitiveness 
analyses and the consultations activities. Moreover, the EU SME Envoy, based on the SME 
filter, will provide to the Commission the list of initiatives that are most impactful for SMEs, 
on which the Commission will carry out the full SME test. 

While the system is meeting its goals overall36, the Commission strives to further reduce 
burdens  from  EU  legislation.  Under  the  regulatory  fitness  and  performance  programme 
(REFIT), every evaluation and revision of legislation entails systematic screening for burden 
reduction potential. The Fit for Future Platform contributes to this process. For all significant 
proposals,  comprehensive  impact  assessments  ensure  that  benefits  outweigh  costs.  Since 
January  2022,  with  its  ‘one  in,  one  out’  approach,  the  Commission  has  introduced  a  ‘cost 
brake’,  aiming  to  ensure  that  administrative  costs  in  a  given  policy  area  are  offset  and  that 
adjustment  costs  are  compensated  for  to  the  greatest  possible  extent.  The  first  year  of  full 
implementation of the approach resulted in a substantial reduction in administrative costs with 
proposals  that  will  provide  net  savings  of  7.3  billion  euro37.  The  Commission  is  fully 
committed to delivering on the potential of this tool over the coming years.  

To  enable  a  more  innovation-friendly  and  future-proof  regulatory  framework38,  the 
Commission  promotes  the  use  of  regulatory  sandboxes39  in  a  number  of  innovative 
areas,  such  as  artificial  intelligence40  and  virtual  worlds41.  Such  instruments  should  be 
applied  more  broadly,  allowing  businesses  in  the  EU,  in  particular  SMEs  and  start-ups,  to 
experiment with new technologies, practices, services, applications and business models in a 
controlled real-world environment, particularly in cases where legal uncertainty or regulatory 
gaps and barriers are hampering their development.  

In  order  to  better  take  into  account  SME  interests  when  preparing  new  legislative 
proposals,  the  Commission  will  systematically  consider  certain  types  of  SME-friendly 
provisions. These include, where appropriate and justified:  

(1) the  possibility  of  allowing  longer  transition  periods  for  SMEs,  in  order  to  ensure 

predictability and facilitate compliance by SMEs;  

(2) requirements  for  specific  guidance  for  SMEs  to  be  provided  by  the  Commission 
and/or Member States regarding the implementation  of the proposed  legislation (e.g. 
summary of the legislation, online training material) when necessary;  

(3) a  requirement  for  the  Commission  to  pay  particular  attention  to  the  impact  of 
delegated  and implementing acts  on SMEs,  which often define the level  of costs for 
SMEs,  and  to  encourage  stakeholder  feedback  via  feedback  via  ‘Have  your  say: 
Simplify!’ portal42; or  

(4) a review clause or sunset clause in secondary legislation, with timing consistent with 
the  ex-post  evaluation  process,  to  minimise  reporting  and  other  compliance 

36 The OECD Regulatory Policy Outlook 2021 ranks the European Commission’s better regulation system as the 
most advanced on stakeholders’ consultations and evaluations and in third place on impact assessments 
37 Annual Burden Survey 2022 – The European Union’s efforts to simplify legislation, September 2023. 
38 2020/C 447/01. 
39 SWD (2023) 277 final.  
40 COM (2021) 206 final. 
41 COM (2023) 442 final.  
42 https://ec.europa.eu/info/law/better-regulation/have-your-say-simplify_en 

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requirements  and  ensure  a  meaningful  assessment  of  whether  legislation  remains  fit 
for its purpose and that its provisions continue to work well for SMEs. 

The  Commission  will  continue  to  improve  its  better  regulation  processes,  including  the 
visibility of its SME and competitiveness-related better regulation activities, to make sure that 
EU laws and policies work better for SMEs. All actions presented in this communication will 
allow the Commission to step up the quality of its assessment of impacts of legal proposals on 
SMEs and the application of the Think Small First principle43 in all EU policies.  

The Commission does not act in isolation and the commitment of co-legislators, national 
and  regional  authorities,  acting  within  their  competences,  is  also  important.  The 
proposed actions will allow the SME dimension to be included in the inter-institutional law-
making process, as it is a joint responsibility of the co-legislators to ensure that EU law is of 
high quality based on a thorough assessment of impacts. Furthermore, Member States play a 
key  role  in  ensuring  that  national  legislation,  including  measures  transposing  EU  law, 
supports the Think Small First principle and that administrative burden to SMEs is reduced.  

Finally,  EU  executive  agencies,  decentralised  agencies  and  other  bodies44  should  drive  the 
SME-friendly  implementation  of  EU  policies,  notably  through  SME  helpdesks  or  SME 
contact points, relevant SME guidance in all EU languages or SME-friendly online tools45.  

The Commission will:  

•  Action  2:  systematically  consider  specific  SME-friendly  provisions  in  new  legislative 

proposals, where appropriate, justified and in line with Union policy objectives. 

•  Action  3:  appoint  a  dedicated  EU  SME  Envoy  to  provide  guidance  and  advice  to  the 
Commission  on  SME  issues  and  advocate  SME  interests  externally.  The  Envoy  shall 
report  directly  to  the  President,  while  also  reporting  to  the  Commissioner  for  Internal 
Market  on  all  SME-related  activities  conducted  in  conjunction  with  the  services  of  DG 
GROW, which shall support the Envoy’s work. 

•  Action  4:  ensure  that  the  EU  SME  Envoy  will  participate  in  RSB  hearings  with 

Directorates-General on initiatives that have a high impact on SMEs. 

•  Action 5: promote with the European Parliament and the Council the implementation of 
an  ‘on  the  spot’  assessment  of  the  impact  on  SMEs  and  competitiveness  of  proposed 
substantial amendments to Commission’s proposals during the co-legislative process. 
•  Action  6:  engage  with  executive  and  decentralised  agencies  to  identify  and  promote 
good  practices  for  SME  support  with  a  view  to  make  it  easier  for  SMEs  to  use  the 
agencies’ services.  

•  Action  7:  work  with  Member  States  to  promote  experimentation  and  innovation  for 

start-ups through regulatory sandboxes. 

43 The Think Small First principle was defined in the Small Business Act (SBA) https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX:52008DC0394  and 
review  https://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A52011DC0078.  
44 Other bodies relevant for SMEs such as the European Institute of Innovation and Technology. 
45  Good  practices  include  the  digital  risk  assessment  tool  developed  by  the  European  Agency  for  Safety  and 
Health  at  Work,  the  Cybersecurity  Maturity  Assessment  for  SMEs  Tool  of  the  European  Union  Agency  for 
Cybersecurity or the portal dedicated to entrepreneurs of the European Union Intellectual Property Office.  

further  developed 

the  SBA 

in 

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3.1.3  Using digital technologies to reduce burden and improve resilience 

Increased  digitalisation  can  significantly  reduce  the  burden  and  costs  for  SMEs.  The 
Single  Digital  Gateway  (SDG)46  provides  a  one-stop-shop  for  reliable  administrative  and 
regulatory information, online procedures and assistance at all levels of public administration. 
It  helps  SMEs  better  reap  the  opportunities  offered  by  the  Single  Market  and  significantly 
reduces  their  administrative  burden  through  online  procedures  in  key  areas.  The  first  SDG 
implementation report, presented as part of the SME Relief Package, shows that the SDG has 
helped  SMEs  access  high-quality  information  about  rules  and  procedures  applicable  across 
the  Single  Market,  which  is  particularly  beneficial  to  small  businesses  with  limited 
administrative capacities.  

As  outlined  in  the  report,  the  Commission  works  with  Member  States  towards  the 
establishment of online procedures and the launch of the Once-Only Technical System 
(OOTS), which is expected to be fully operational by December 2023. This will enable the 
cross-border  exchange  of  key  documents  among  public  authorities,  avoiding  the  need  for 
SMEs  to  re-submit  documents  in  different  Member  States.  It  will  reduce  the  cost  of  free 
movement  in  the  Single  Market,  administrative  frictions  and  obstacles  while  imposing  no 
additional obligations on businesses.  

A case in point is the hassle experienced by many SMEs with the portable document A1 (to 
determine which social security legislation covers the holder). From the end of this year, the 
OOTS  will  facilitate  recurring  requests  for  the  A1  document,  and  to  receive  the  output 
electronically. In addition, the Commission’s recent Communication on digitalisation in social 
security  coordination  presents  further  measures  to  facilitate  the  interaction  between  mobile 
citizens and businesses operating abroad, in particular SMEs, with national authorities in the 
field  of  social  security,  such  as  the  European Social Security Pass  (ESSPASS)  pilot 
regarding  the  portable  document  A147.  In  the  same  vein,  in  the  context  of  the  reporting 
reduction  and  simplification  initiative  (section  3.1.4  below),  the  creation  of  an  electronic 
format (e-Declaration) for the declaration of posting of workers will significantly reduce 
administrative  burden  and  compliance  costs  for  employers,  allowing  them  to  use  a 
streamlined declaration in a single format in their own language in all participating Member 
States.  

The  recent  proposal  to  further  expand  the  use  of  digital  tools  and  processes  in  EU 
company law is an important step forward in the digitalisation of company law, helping 
SMEs  do  business  in  the  EU48.  It  will  significantly  reduce  administrative  burden  for 
companies by an estimated 437 million euro per year, thanks to an EU Company Certificate 
and application of the once-only principle when companies set up subsidiaries and branches in 
other  Member  States49.  Companies  can  also  benefit  from  their  information  being  visible 
through  the  Business  Registers  Interconnection  System  (BRIS)50  in  the  Single  Market.  In 

46 COM (2018)1724. Accessible through the Your Europe web portal: https://europa.eu/youreurope/.  
47 COM (2023) 501 final.  
48 COM (2023) 177 final. 
49 See the related impact assessment, SWD (2023) 178 final.  
50  BRIS  connects  all  national  registers  and  makes  information  about  20  million  of  companies  and  branches 
publicly available. 

8 

 
 
addition, SMEs affected by breaches of EU law can rely on SOLVIT51 to resolve disputes and 
obtain out-of-court redress.  

Further  digitalisation  of  SMEs  is  essential  for  their  competitiveness,  resilience  and 
ability  to  innovate.  The  Digital  Decade  Policy  Programme52  aims  for  more  than  90%  of 
SMEs to reach at least a basic level of digital intensity by 2030.  The key vehicle to support 
this  objective  are  the  European  Digital  Innovation  Hubs,  co-financed  by  the  Digital  Europe 
Programme.  They  support  companies,  in  particular  SMEs,  in  their  digitalisation  journey. 
Through  the  assessment  of  SMEs’  digital  maturity  (Digital  Maturity  Assessment),  EDIHs 
provide  targeted  assistance,  which  spans  from  technical  expertise  and  testing  (“test  before 
invest”)  to  innovation  services,  such  as  financial  advice,  training,  and  skills  development. 
Currently, 151 EDIHs can be found in 30 different European countries. By the end of 2025, 
EDIHs  should  help  around  100.000  businesses  and  public  sector  entities  in  Europe.  The 
sectoral  Testing  and  Experimentations  Facilities  (TEFs)  support  AI  developers  to  bring 
trustworthy AI to the market more efficiently, facilitating its uptake among small businesses 
in Europe53.  

The Commission will: 

•  Action 8: launch by the end of 2023 the once-only technical system in co-operation with 
Member States and further expand the scope of the Single Digital Gateway to cover new 
procedures, taking into account SME needs. 

3.1.4  Simplifying procedures and reporting requirements  

In  the  context  of  improving  the  long-term  competitiveness  of  its  businesses54,  the 
Commission is pushing for the rationalisation of reporting requirements resulting from 
EU legislation, with the aim to reduce such burden by 25% without undermining the related 
policy objectives. This ambition pertains to reducing the regulatory burden for businesses of 
all  sizes  but  is  particularly  relevant  for  SMEs.  Reporting  requirements  are  important  to 
properly monitor and enforce legislation, for many companies, especially SMEs, yet they can 
be burdensome, induce costs and affect their capacity to grow. Their accumulation over time 
can result in redundant, duplicating, or obsolete obligations, inefficient frequency and timing, 
or  inadequate  methods  of  collection55.  In  such  cases,  streamlining  reporting  obligations  or 
addressing the needs of specific groups of businesses, such as SMEs, can be an opportunity to 
lighten the burden on businesses. 

The  first  significant  pieces  of  legislation  that  streamline  reporting  obligations  have 
already been proposed by the Commission since March 202356 and further measures will 

in  March  2023, 

the  Commission  proposed  a 

51  https://ec.europa.eu/solvit/what-is-solvit/index_en.htm; 
benchmark for SOLVIT to solve a minimum of 90% of the cases within 12 months in each Member State. 
52 Decision (EU) 2022/2481 establishing the Digital Decade Policy Programme 2030. 
53 https://digital-strategy.ec.europa.eu/en/activities/testing-and-experimentation-facilities. 
54 COM(2023) 168 final 
55 If well designed, the costs of reporting requirements are largely offset by the benefits they bring for example 
by  monitoring  air  pollution  or  supervising  the  financial  sector  and  maintaining  financial  stability.  Such 
requirements  are  not  only  included  in  primary  legislation,  but  also  in  implementing  or  delegated  acts  or  even 
operational arrangements. 
56  Review  of  the  EU’s  bank  crisis  management  and  deposit  insurance  framework;  Implementing  Technical 
Standards on reporting and disclosures by insurance and reinsurance undertakings; Proposal for a Regulation of 

9 

 
 
 
be  presented  alongside  the  Commission  work  programme.  Notably,  a  voluntary,  simple 
and  standardised  methodology  to  report  on  ESG  (environmental,  social,  governance)  issues 
will reduce burden and facilitate SME’s access to sustainable finance (see Section 3.2.4 below 
for  more  details).  Furthermore,  the  Commission’s  proposal  to  postpone  the  deadline  for  the 
adoption of the sectoral European Sustainability Reporting Standards57 will benefit companies 
in  the  scope  of  the  Corporate  Sustainability  Reporting  Directive  (CSRD),  including  listed 
SMEs.  This  allows  them  to  focus  on  the  implementation  of  the  first  set  of  standards.  The 
adjustments  of  the  thresholds  defining  an  SME  under  the  Accounting  Directive  will  reduce 
the  number  of  companies  that  currently  fall  within  the  scope  of  application  of  the 
sustainability  reporting  requirements  under  the  Corporate  Sustainability  Reporting  Directive 
(CSRD) and under the Taxonomy Regulation58. 

Furthermore,  within  the  framework  for  monitoring  and  reporting  on  greenhouse  gas 
emissions,  a  reduced  frequency,  with  which  operators  of  the  power  sector,  energy-intensive 
industries and aviation have to report on improvements to their methodologies, will ease the 
burden on companies without affecting the monitoring’s effectiveness. In addition, simplified 
reporting  obligations  from  EU  legislation  on  alternative  dispute  resolution  for  consumer 
disputes will consolidate and reduce the frequency of reporting requirements without affecting 
the transparency or quality of data.  

In the coming weeks, the Commission will present more comprehensively the measures 
adopted  and  to  be  adopted  to  rationalise  reporting  obligations  for  all  businesses.  The 
Commission intends to make it a prominent feature of its 2024 work programme, which will 
be  accompanied  by  a  package  of  proposals  and  planned  evaluations.  This  work  will  be 
systematised by the end of 2023, for the coming cycles, by:  

- 

- 

establishing across the Commission services standardised means of mapping reporting 
requirements  in  existing  legislation  or  administrative  arrangements  and  in  new 
proposals;  
identifying  priority  areas  in  cooperation  with  a  representative  set  of  companies, 
sectoral  associations  and  national  authorities  (which  often  serve  as  the  interface  for 
such reporting); 

-  preparation of targeted rationalisation plans by each Commission service for 2024 and 

thereafter. 

The  input  from  SMEs  and  other  stakeholders  has  an  important  role  in  ensuring  the 
success of this overall exercise of burden reduction. The ‘Have your say Simplify!’ portal 

the  EP  and  Council  amending  Regulation  (EC)  No  223/2009  on  European  statistics;  Economic  Governance 
Review-simplification of reporting; Proposal for a Regulation of the European Parliament and of the Council on 
detergents  and  surfactants;  Union  Customs  Code;  General  pharmaceutical  legal  framework;  several  initiatives 
either in preparation or proposed in transport area, such as the  Directive on combined transport, a  harmonised 
legal framework for railway capacity and traffic management and the abolition of the rail freight corridors as part 
of the greening freight package, the revisions of the Weights and Dimensions (see greening freight package) as 
well as of the Port State Control Directives, etc. 
57 The first set of European Sustainability Reporting Standards (COM (2023) 5303 final) significantly  reduced 
the  reporting  burden  compared  to  the  technical  advice  received  from  EFRAG.  The  Commission  extended  the 
principle of reporting only material information, introduced a number of phase-ins, and made certain disclosure 
requirements voluntary.  
58 Article 8 of Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the 
establishment of a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088 (OJ 
L 198, 22.6.2020, p. 13). 

10 

 
 
allows  to  collect  their  input  on  reporting  obligations.  The  Fit  for  Future  Platform  has  also 
been  invited  to  pay  particular  attention  to  reporting  obligations  and  dedicate  one  or  more 
opinions to this issue in its Annual Work Programme 2024. 

The Commission will: 

•  Action  9:  present,  in  October  2023,  the  next  set  of  proposals  to  rationalise  reporting 
requirements alongside the work programme, including the measures mentioned above, as 
part of a systematic and recurring cycle to meet the 25% reporting reduction target. 

3.2 

Improving liquidity and access to finance 

3.2.1  Tackling late payments 

Late  payment  of  invoices  affects  companies  from  all  sectors  across  all  EU  Member 
States.  It  has  a  particularly  negative  impact  on  SMEs,  as  they  rely  on  regular  and 
predictable streams of cash59, and have more limited access to liquidity than large businesses. 
SMEs  that  are  paid  late  have  to  cover  the  resulting  shortfall  in  liquidity  through  short-term 
loans,  driving  up  their  financing  costs.  Reducing  late  payments  is  a  key  element  to  provide 
SMEs  with  the  much-needed  liquidity  to  invest  in  innovation  or  to  pass  cost  reductions  to 
consumers60. 

As  part  of  this  SME  Relief  Package,  the  Commission  proposes  a  revision  of  the  late 
payment rules, replacing the existing Late Payment Directive with a regulation with binding 
maximum payment terms of 30 days for all commercial transactions. It will make the payment 
of  compensatory  fees  and  interest  automatic  in  case  of  late  payment  and  flank  these  new 
measures with a robust enforcement framework. It will also make it easier for companies to 
assert  their  rights  by reducing  the burden of, and facilitating access  to,  effective  redress  via 
mediation. 

Bearing  in  mind  that  one  day  late  equals  158  million  euro  of  additional  finance  costs  for 
European companies, these new rules aim to reduce late payments by 35%. Furthermore, the 
amount  of  time  companies  spend  on  chasing  their  debtors  will  be  significantly  reduced, 
saving European businesses 340 million person-hours, equal to 8.7 billion euro. Beyond the 
direct  monetary  benefits,  this  should  redistribute  liquidity  more  fairly  in  the  economy  and 
decrease the dependency of SMEs on external financing.  

The instrument  chosen for the review is  a regulation, to  repeal  and  replace the  current  Late 
Payment Directive. A regulation has numerous advantages, in particular, as regards the need 
to  tackle  the  cross-border  aspect  of  late  payments.  It  allows  introducing  the  same  solutions 
throughout the EU in relation to the key aspects, such as the maximum term for payments and 
verification  procedures,  the  rate  of  interest  for  late  payments  and  the  amount  of  flat  fee 
compensation.  At  the  same  time,  Member  States  will  be  allowed  to  adopt  more  stringent 
provisions on certain aspects. 

59  For  more  details  see  the  impact  assessment  report  on  late  payments,  published  in  parallel  to  this 
communication.  
60 With these aims in mind, the Commission recently launched several infringement procedures in the area of late 
payments, https://ec.europa.eu/commission/presscorner/detail/en/inf_23_1808. 

11 

 
 
The Commission: 

•  Action 10: proposes a new Late Payment Regulation, substantially reinforcing EU rules to 

combat late payments in commercial transactions.  

3.2.2  Capitalising on the full potential offered by EU programmes to SMEs 

With support for SMEs expected to reach more than 200 billion euro until 2027 under 
EU  funding  programmes  61,  SMEs  have  access  to  a  wide  range  of  financial  support. 
Notably, several measures have been put in place to remedy the growing difficulties of SMEs 
in  accessing finance62,  starting with  the SME window of the  InvestEU programme63, which 
provides  better  access  to  finance  for  SMEs  with  more  favourable  financing  conditions.  The 
SME  window  also  helps  SMEs  adapt  to  sustainable  business  practices  and  funds  start-ups 
developing new sustainability technologies.  

The  role  of  the  SME  window  of  InvestEU  in  providing  debt  and  equity  support  to 
European  SMEs  in  the  next  years  will  be  substantial.  Banks,  guarantee  institutions  and 
other  financial  intermediaries  have  shown  remarkable  demand  by  applying  to  the  European 
Investment  Fund  (EIF),  requesting  three  times  the  overall  2021-2027  capacity  allocated  to 
guarantees. The market demand for equity investments is already at the full capacity for 2021-
2027 for many thematic areas including cleantech, life sciences, and digital transformation, as 
well  as  social  entrepreneurship.  This  oversubscription  of  the  SME  window  of  InvestEU  is 
expected  to  prevent  the  EIF  from  entering  into  new  guarantee-agreements  with  financial 
intermediaries as of 2025, as the resources allocated to guarantees will have been fully used 
by then.  

The  Commission  has  proposed  as  part  of  the  Strategic  Technologies  for  Europe 
Platform (STEP)64 to increase the EU guarantee available by 7.5 billion euro through a 
dedicated  STEP  window  of  InvestEU.  Once  STEP  is  approved  by  the  co-legislators,  the 
Commission  will  strive  for  quick  implementation  of  additional  resources  allocated  to 
InvestEU, for the benefit of SMEs. 

61  This  would  include  funding  available  for  SMEs  through  the  following  instruments  (Commission  services 
estimates): InvestEU (EUR 6.9 billion from the dedicated SME window and an additional EUR 0.82 billion via 
the  Social  Investment  and  Skills  policy  window,  Recovery  and  Resilience  Facility  (RRF)  (EUR  45.2  billion), 
EIC  (EUR  10  billion),  Cassini  (EUR  0.7  billion),  Single  Market  Programme  SME  Pillar  (EUR  1  billion), 
Intellectual  property  SME  fund  (EUR  0.08  billion),  Digital  Europe  Programme  (EUR  0.7  billion),  European 
Defence Fund (over EUR 0.2 billion), European Space programme (EUR 1 billion), Secure Connectivity - IRIS2 
(EUR 0.72 billion), Horizon Europe (EUR 15 billion), Just Transition Fund (EUR  4.8 billion), Creative Europe 
(EUR 2.3 billion), European Regional Development Fund (EUR 38.71 billion), Cohesion Policy’s Coronavirus 
Response  Investment  Initiatives  and  REACT-EU  (EUR  22  billion),  European  Agricultural  Fund  for  Rural 
Development  (EUR  30  billion),  Cohesion  Fund  (EUR  0.05  billion),  European  Maritime,  Fisheries  and 
Aquaculture  Fund  (EUR  2.52  billion),  Life  programme  (EUR  0.13  billion),  Connecting  Europe  Facility  (EUR 
0.2 billion), Innovation Fund (EUR 0.17 billion), European Social Fund Plus (EUR 0.82 billion), New European 
Innovation Agenda in the area of access to finance (EUR 45 billion) for deep-tech startups, SMEs and small mid-
caps. 
62 Of the various financial instruments available for SMEs during the previous multiannual financial framework 
(2014-2020 period), the COSME Loan Guarantee Facility alone triggered EUR 68 billion in financing to nearly 
900 000 SMEs, helping to create or maintain more than 4 million jobs. 
63 https://single-market-economy.ec.europa.eu/access-finance/investeu/investeu-fund-sme-window_en. 
64 COM (2023) 335 final. 

12 

 
 
Member States can play a key role by allocating additional resources to InvestEU from , 
the Recovery and Resilience Facility (RRF) or from national budgets, as well as to make 
use  of  the  existing  transfer  possibilities  under  shared  management  funds,  to  boost 
investment in their country.  

In the context of the STEP proposal, the Commission presented several avenues to make the 
use  of  such  resources  easier  for  Member  States  and  to  increase  the  amount  of  InvestEU-
backed financing to SMEs, notably through the clarification of State aid aspects with regards 
to all resource transfers as well as the application of ‘do no significant harm’ aspects65.  

Where  a  Member  State  decides  to  allocate  resources  to  the  InvestEU  Member  State 
compartment  to  implement  an  existing  InvestEU  financial  product  developed  for  the  EU 
compartment by an International Financial Institution as an implementing partner, such as the 
EIB Group or the European Bank for Reconstruction and Development (EBRD), this does not 
in itself entail State aid, as further explained by the Commission in the STEP proposal66. Such 
possible resource transfers (from shared management, RRF or national budgets) are therefore 
a quick, easy and optional mechanism available for Member States to channel much-needed 
finance  to  SMEs  without  reporting  burdens  beyond  those  required  by  InvestEU.  To  date,  a 
number of Member States have made use of this transfer possibility. Given the high market 
demand,  Member  States  that  have  not  yet  made  a  contribution  are  encouraged  to  do  so 
through the InvestEU Member State compartment, in order to support the implementation of 
financial products for SMEs in their Member State. The Commission will follow the progress 
of implementation under the SME window together with the network of SME Envoys. 

Furthermore, Member States and regions can establish financial instruments co-funded 
by EU shared management programmes to channel EU resources into various financial 
products, including loans, guarantees, equity, and other risk-bearing mechanisms. Such 
support  can  directly  help  SMEs.  To  facilitate  this  process,  the  Commission’s  fi-compass67 
platform  provides  resources,  including  general  information,  guidance,  practical  tools,  and 
learning opportunities, guiding managing authorities on utilising financial instruments under 
each of the EU shared management Funds. 

The Commission will: 

•  Action  11:  encourage  Member  States,  through  the  relevant  InvestEU  governance 
structure,  to  allocate  additional  resources  to  InvestEU  national  compartments  and 
facilitate  RRF  contributions  to  InvestEU  by  providing  additional  guidance  on  the 
application of the ‘do no significant harm’ principle by October 2023.  

Export  credit  agencies  (ECAs)  play  a  fundamental  role  in  supporting  companies  in 
international  trade.  A  more  coordinated  approach  between  EU  Member  States’  export 
credits  and  EU-level  financing  tools  is  starting  to  take  place  and  should  be  further 
strengthened. As a result of the Russian war of aggression against Ukraine, the majority of EU 
ECAs  suspended  their  risk  coverage  for  Ukraine,  thereby  having  a  negative  impact  on  the 

65  Through  an  amendment  of  the  technical  guidance  on  the  application  of  ‘do  no  significant  harm’  under 
Regulation (EU) 2021/241. This will also facilitate the allocation of resources to InvestEU from the RRF. 
66  This  is  without  prejudice  to  the  obligation  of  EU  financial  instruments  and  budgetary  guarantees  to  be 
consistent with State aid rules pursuant to Article 209(2)(c) of the Financial Regulation. 
67 https://www.fi-compass.eu. 

13 

 
  
 
ability of EU companies to export to Ukraine. A pilot facility of roughly 300 million euro in 
the course of 2024 under the SME window of InvestEU will allow Export Credit Agencies to 
resume  their  business  with  regard  to  Ukraine.  The  pilot  facility  is  expected  to  improve  the 
competitiveness  of  European  SMEs  by  establishing  stronger  ties  with  Ukraine,  allowing  to 
support several hundred million euro in new exports. 

The Commission will: 

•  Action 12: work with the EIF towards setting up in the course of 2024 a pilot facility to 

allow Export Credit Agencies to support SMEs in trading with Ukraine.  

As  part  of  the  wider  Capital  Markets  Union  (CMU)  initiative68,  the  creation  of  SME 
growth markets, pan-European venture capital funds and crowdfunding have improved 
access to finance for SMEs. The recent political agreement on the European Single Access 
Point will make companies, large and small, more visible to investors, while the revised rules 
for the European long term investment funds regulation and alternative investment funds will 
enlarge  the  pool  of  funding  available  to  SMEs.  The  Listing  Act  proposals69  aim  to  foster 
access  to  finance  on  public  markets  for  companies,  including  SMEs,  by  cutting  red  tape, 
streamlining rules and allowing owners to retain decision-making powers after the listing of 
their companies. A high level of ambition for the Listing Act proposals is key to ensure that 
high-growth companies continue to develop and create jobs in the EU. In order to give SMEs 
better  access  to  market-based  sources  of  funding  and  equity  capital,  a  swift  adoption  of  the 
legislative proposals under the 2020 CMU Action Plan and further discussions on the future 
development of the CMU, notably in the Eurogroup, will be important.  

Another avenue to support SMEs is the European Innovation Council (EIC) which is the 
leading  EU  instrument  for  providing  blended  finance  (grants  and  equity  or  quasi-
equity) to fast growing start-ups and SMEs that are pursuing breakthrough innovations. 
The  EIC  Fund  provides  equity  funding  ranging  from  0.5  million  to  15  million  euro  equity 
funding to such companies, leveraging a budget of 10 billion euro to crowd in 30 to 50 billion 
euro from private investors. For companies that require follow-on financing rounds or larger 
investment amounts, the Commission’s STEP proposal foresees an additional budget of 2.63 
billion  euro  to  enable  the  EIC  Fund  to  provide  unprecedented  equity  investments  ranging 
between  15  and  50  million  euro  in  technologies  of  strategic  importance  for  Europe.  By 
generating  additional  private  investments,  this  can  lead  to  13  billion  euro  of  fresh  equity 
support to non-bankable SMEs and small mid-caps. 

The  Commission  will  also  help  SMEs  with  energy  efficiency  measures  (ranging  from 
energy  audits  to  technologies  and  trainings),  by  making  available  10  million  euro  from  the 
Single Market Programme through the Enterprise Europe Network by open calls. 

3.2.3  Public procurement 

Easier access to public procurement markets can help SMEs unlock their potential with 
a  positive  impact  on  growth  and  on  economic  recovery.  A  substantial  part  of  public 
investment  is  spent  through  public  procurement,  representing  14  %  of  the  EU  GDP.  Yet, 
SMEs  have  difficulties  finding  access  to  procurement.  The  Commission  has  presented 

68 https://ec.europa.eu/commission/presscorner/detail/en/ip_22_7348. 
69 COM (2022) 760 final. 

14 

 
 
 
initiatives that facilitate the access of companies including SMEs to public procurement, also 
cross-border70. The aim is to increase the SME share of public procurement in line with their 
overall weight in the economy. To improve the participation of SMEs in public procurement, 
it will be important to promote the use of standardised provisions and clauses in procurement 
documents,  especially  for  low-risk  or  low-value  contracts,  making  it  easier  for  SMEs  to 
handle tender documents. Practices that improve SME involvement should be promoted, such 
as  the  use  of  conditions  suitable  for  SMEs  (more  favourable  financial  qualifications  and 
payment terms).  

The Commission will: 

•  Action  13:  promote  the  use  of  standardised  procurement  provisions  and  conditions 

suitable for SMEs to improve the participation of SMEs in public procurement. 

3.2.4  Making it easier for SMEs to access sustainable finance  

SMEs play an important role in helping Europe achieve its climate neutrality goals and 
other  environmental  goals71.  Raising  finance  for  SMEs’  sustainability  transition,  while 
minimising administrative burden  is therefore key. To realise their full potential towards 
the transition to a sustainable economy, SMEs need in particular (1) a simple and standardised 
framework to report on ESG (Environmental – Social – Governance) issues; and (2) financial 
institutions that support them in their efforts to transition to a sustainable business. 

Despite the measures already put in place to address their needs72, SMEs find it difficult 
to  obtain  funding  for  their  green  projects.  SMEs,  with  the  exception  of  listed  SMEs,  are 
formally not subject to the requirements of the EU sustainable finance framework. However, 
the  Commission  is  aware  that  these  SMEs  face  increasing  information  requests  for 
sustainability  information  by  their  financial  and  value  chain  partners,  often  in  a  non-
standardised  format.  In  this  light,  the  Commission  recognises  concerns  from  SMEs  about 
trickledown effects of these new rules on sustainability reporting.  

The  Commission  is  taking  action  to  address  these  concerns.  First,  the  Commission  has 
encouraged73  large  corporate  and  financial  intermediaries  to  apply  the  principle  of 
proportionality  when  engaging  with  SMEs  and  to  exercise  restraint  when  requesting 
information from SME value chain partners. It also puts forward specific guidance, including 
voluntary tools that SMEs can use to access transition finance.  

70 COM (2017) 572 final. In 2020 and 2021 the Commission published two studies on SMEs’ participation in 
public procurement: https://op.europa.eu/en/publication-detail/-/publication/eec8227c-ecc4-11ea-b3c6-
01aa75ed71a1 and 
https://ec.europa.eu/docsroom/documents/46111/attachments/1/translations/en/renditions/native. Two brochures 
have been published in 2023 to foster the participation of startups in public procurement: 
https://ec.europa.eu/docsroom/documents/54254, https://ec.europa.eu/docsroom/documents/54276. 
71 Activity Report 2023 of the OECD Platform on Financing SMEs for Sustainability (page 6), 
https://www.oecd.org/cfe/smes/SME%20activity-report-2023.pdf. 
72 Most recently through the Commission’s Communication “A sustainable finance framework that works on the 
ground” of June 2023, COM (2023) 317 final, that notably pleads for the inclusiveness, usability and 
proportionality of such a framework to enable SMEs to raise finance for their sustainability transition. 
73 Commission’s Recommendation (EU) 2023/1425 on facilitating finance for the transition to a sustainable 
economy. 

15 

 
 
Simplified reporting standards for listed SMEs are under development by the European 
Financial  Reporting  Advisory  Group  (EFRAG).  The  Commission  will  ensure  that  these 
standards  for  listed  SMEs  are  proportionate.  The  standards  will  limit  the  information  that 
listed SMEs in the scope of CSRD are required to report. They will also provide a legal limit 
to  the  information  that  European  Sustainability  Reporting  Standards  can  require  large 
companies to obtain from SMEs in their value chain, and hence limit the trickledown effects. 
This is an important safeguard from the CSRD to limit the indirect impact on SMEs of value 
chain reporting requirements imposed on large business. The Commission will seek to ensure, 
in  the  ongoing  negotiations  on  the  Corporate  Sustainability  Due  Diligence  Directive,  that 
these safeguards are carried over in that context. In addition, EFRAG will develop a voluntary 
standard for non-listed SMEs. SMEs can use this to standardise the sustainability information 
they wish to report, creating better opportunities to obtain green financing and thus facilitating 
the transition to a sustainable economy.  

User-friendly  tools,  information  and  knowledge-sharing,  in  cooperation  with  industry 
stakeholders,  will  help  SMEs  navigate  the  EU’s  sustainable  finance  framework.  In 
particular,  simplified  approaches,  developed  together  with  the  Platform  on  Sustainable 
Finance, should allow non-listed SMEs to benefit from the use of the taxonomy. 

In addition, financial institutions need to support SMEs in their efforts to transition to a 
sustainable business. This requires a better integration of green SME finance in the business 
models of banks. There is a need to define the concept of green loans and to set standards for 
green loans at EU level to enhance their uptake. The inclusion of such loans to SMEs in the 
numerator  of  the  Green  Asset  Ratio  of  banks  should,  for  example,  give  more  visibility  to 
green  SME  lending  and  encourage  financial  institutions  to  provide  sustainable  finance  to 
SMEs. 

Based  on  the  results  of  various  on-going  Commission  studies  on  SMEs  and  taxonomy 
reporting/sustainable finance, the Commission will: 

•  Action 14: ensure that SMEs have a simple and standardised framework to report on ESG 
issues, by limiting the risk of disclosure requirements trickling down on non-listed SMEs 
in the value chain of undertakings in the scope of CSRD, and ensuring the rapid delivery 
of voluntary standards for non-listed SMEs. 

•  Action  15:  encourage  financial  institutions  to  include  green  SME  financing  in  their 

business models by: 

a.  working  towards  a  standard  or  a  definition  of  green  loans  notably  for  SMEs 

based on upcoming advice by the European Banking Authority74; 

b.  assessing an SME-friendly adaptation of the Green Asset Ratio to be considered 

in a future update of the Taxonomy Disclosures Delegated Act.  

3.3  Enabling access to skilled staff 

The  way  SMEs  and  their  workers  learn,  take  part  in  society,  and  lead  their  everyday 
business  is  changing  with  technological  developments,  global  and  demographic 
challenges. SMEs need access to a skilled workforce to deal with these changes and to ensure 
their resilience while contributing to society, productivity and innovation. 

74 The Commission’s call for advice on green loans and mortgages, issued to the EBA in November 2022.  

16 

 
 
The Commission is building on the European Skills Agenda75 to help Member States ensure 
that 60% of all working-age adults participate in training programmes each year, in line with 
the  target  set  by  the  European  Pillar  of  Social  Right  action  plan76.  The  European  Year  of 
Skills and the unprecedented EU financial resources available for skills development during 
the  MFF  2021-27  programming  period,  in  particular  an  estimated  65  billion  euro  from  the 
Recovery and Resilience Facility and the European Social Fund Plus,  also presents a unique 
opportunity to accelerate actions that can benefit SMEs’ access to a deep and diverse pool of 
skills,  such  as  the  proposals  on  digital  education  and  skills77.  In  that  sense,  the  pilot  on  the 
European  Digital  Skills  Certificate78,  in  cooperation  with  Member  States  and  stakeholders, 
will contribute to enhance transparency and recognition of digital skills, facilitating access by 
SMEs to the talent they need for the digital transition.  

As part of the modernisation of vocational education and training (VET) systems79, the 
EU  is  also  supporting  centres  of  vocational  excellence80  to  develop local  ‘skills 
ecosystems’ from advanced manufacturing to artificial intelligence, to water technology and 
urban  greening.  They  work  closely  with  businesses  including  SMEs,  and  contribute  to 
regional  development,  entrepreneurship,  innovation,  and  smart  specialisation  strategies.  The 
European  Alliance  for  Apprenticeships  supports  the  promotion  of  more  and  better 
apprenticeships  across  the  EU,  as  effective  learning  pathways  to  get  the  skilled  workers 
companies, in particular SMEs, need. 

Within  the EU  Pact  for  Skills81,  18 Large-scale  Skills  Partnerships  (LSPs)  covering  all 
industrial ecosystems work towards the identification of skills needs and the roll-out of 
training in enterprises and their supply chains to up- and reskill 10 million workers by 
2030. SMEs are actively involved in all LSPs directly, as individual members and indirectly 
through sectoral network organisations. The partnering up with other players, such as social 
partners,  and  networks  under  the  LSPs  gives  them  access  to  training  programmes,  content, 
and material that otherwise they would often not have given their limited size and resources.  

The Enterprise Europe Network plays an important role in providing training to SMEs 
to  help  them comply with new requirements, to  seize the opportunities of measures like  the 
Net Zero Industrial Act or Critical Raw Materials Act and deal with the implications of Green 
Deal  and  sustainability  legislation,  such  as  the  Directive  on  corporate  sustainability  due 
diligence. 

Entrepreneurial skills are key to help existing entrepreneurs grow their business and to 
encourage more people to take up entrepreneurship as a career.  To empower women to 
become  entrepreneurs,  the  Commission  has  been  pursuing  awareness-raising  activities 
coupled with training, mentoring, and coaching and improving women entrepreneurs’ access 

75 COM (2020) 274 final.  
76 European Pillar of Social Rights Action Plan, endorsed by heads of state and government in 2020, 
https://ec.europa.eu/social/main.jsp?catId=1607&langId=en.  
77 COM (2023) 205 final and COM (2023) 206 final. 
78 https://education.ec.europa.eu/focus-topics/digital-education/action-plan/action-9?. 
79 Council Recommendation 2020/C 417/01. 
80 https://ec.europa.eu/social/main.jsp?catId=1501. 
81 The Pact also encourages partnerships at regional level to support the up and re-skilling of the workforce, 
including those in SMEs. According to survey results, since its launch in 2020, Pact members’ concerted efforts 
have reached an estimate of almost two million individuals. In addition, members have made an aggregated 
investment of close to EUR 160 million into upskilling and reskilling activities. https://pact-for-
skills.ec.europa.eu/index_en.  

17 

 
 
to  finance  and  business  networks.  For  example,  Erasmus  for  Young  Entrepreneurs82  has 
supported more than 9,000 women entrepreneurs and Women TechEU83 has offered funding 
for companies founded by women with a budget exceeding 10 million euro. However, further 
work  is  necessary  to  unlock  the  full  entrepreneurial  potential  of  women,  young  people  and 
groups at risk of exclusion.  

Finally,  processes  also  need  to  become  easier  for  SMEs  to  attract  talent  from  abroad. 
The Commission will propose later this year a package on maximising the potential of talent 
mobility  that  will  include  a  legislative  proposal  on  establishing  an  EU  Talent  Pool  and  an 
initiative  to  work  with  Member  States  to  facilitate  the  faster  recognition  of  professional 
qualifications of third country nationals,  including through partnerships with third countries, 
to improve recruitment and job matching.  

The Commission will:  

•  Action  16:  present  a  proposal  to  establish  an  EU  Talent  Pool  and  an  initiative  to 
improve  the  recognition  of  qualifications  and  skills  of  third  country  nationals  to  help 
skills gaps in the EU labour market – by Q4 2023. 

•  Action  17:  work  with  groups  whose  untapped  entrepreneurial  potential  remains  high, 
such  as  women,  young  people  and  persons  with  disabilities,  through  awareness, 
mentoring and coaching campaigns. 

3.4  Supporting SMEs throughout their entire business life cycle 

3.4.1  Starting a new business 

Since  the  review  of  the  Small  Business  Act84,  the  Commission  has  been  working  with 
Member  States  to  reduce  the  start-up  time  for  new  enterprises.  The  2016  Start-up  and 
Scale-up Initiative85 included a range of actions to make it more attractive for entrepreneurs to 
set  up  a  business  and  expand  it  in  Europe.  The  Commission  is  also  encouraging  Member 
States  to  foster  the  creation  of  start-ups  by  implementing  the  principles  and  best  practices 
outlined in the declaration on the EU Startup Nations Standard of Excellence86, such as: 

• 

• 

• 

facilitating the creation of new legal entities for start-ups, both online and offline, within 
minimal  time  and  at  minimal  costs,  including  making  it  possible  to  submit  online 
administrative  documents  for  the  creation  of  a  start-up  or  subsidiary  in  other  Member 
States87 
setting  up  a  start-up  fast-lane  (including  a  market  access  helpdesk)  through  an  online 
one-stop shop that provides full information about national administrative requirements 
and funding opportunities, to be linked to the Single Digital Gateway; 
supporting  diversity  and  inclusion,  also  in  line  with  the  action  plan  for  the  social 
economy88.  

82 https://www.erasmus-entrepreneurs.eu/. 
83 https://eismea.ec.europa.eu/programmes/european-innovation-ecosystems/women-techeu_en. 
84 COM (2011) 78 final. 
85 COM (2016) 733 final. 
86 https://startupnationsstandard.eu/files/SNS-declaration.pdf. 
87 In line with Directive (EU) 2019/1151 and the proposal COM (2023) 177 final.  
88 COM (2021) 778 final. 

18 

 
 
3.4.2  Growing the business 

The  measures  in  this  communication  will  allow  SMEs  to  compete  and  grow.  SMEs  are 
currently defined as companies with under 250 employees, combined with an annual turnover 
up  to  50  million  euro  or  a  balance  sheet  total  up  to  43  million.  These  thresholds  were 
established in 2003. While twenty years later the vast majority of companies remain covered 
by the SME definition, some companies outgrow the definition and become so-called mid-cap 
companies. 

In 2021, the Commission evaluated the SME definition and concluded that it remained 
relevant (with the average turnover of EU SME remaining well below the threshold)89. This 
evaluation was carried out on the basis of 2018 data and could not reflect the impacts of the 
pandemic, war in Ukraine and the energy crisis, which have shaken the EU’s economy since 
then,  and  in  particular  have  driven  a  significant  surge  in  inflation  that  is  only  gradually 
coming  down.  Moreover,  in  light  of  current  and  future  economic  challenges  –  from 
digitalisation to demographic change – it may be appropriate to give greater recognition to the 
productivity  gains  over  the  past  two  decades,  by  taking  them  into  account  in  defining  the 
upper bounds of the SME status.  

The 2021 evaluation also recognised the need to “look into the challenges that companies 
meet once they have ‘outgrown’ the SME-phase”90. For example, there may be threshold 
effects if the benefits of different measures in favour of SMEs are all lost in the event that a 
growing company exceeds one of those parameters. 

A recent Commission study revealed the essential role of mid-caps in the EU economy91: 
small  (250-499  employees)  and  large  mid-caps  (500-1499  employees)  together  account  for 
more  than  13%  of  overall  employment  in  the  European  non-financial  business  sector.  The 
share of mid-cap firms is particularly high in industrial ecosystems that are key to the EU’s 
competitiveness  and  technological  sovereignty:  electronics,  aerospace  and  defence,  energy, 
energy-intensive industries, and health.  

Various  funding  schemes  for  risk  finance  and  scaling-up  approved  by  the  European 
Commission are available to support their dynamic growth process and to address their 
funding  gap.  The  Guidelines  on  State  aid  to  promote  risk  finance  investments  contain  a 
definition for small mid-caps and allow support under certain conditions to these companies. 
The  Commission  also  makes  it  possible  for  Member  States  to  support  mid-cap  companies 
under  the  Temporary  Crisis  and  Transition  Framework92  and  the  revised  General  Block 
Exemption Regulation93.  

Small  mid-caps  usually  grow  faster,  are  more  innovative  and  deal  better  with 
digitalisation  than  SMEs,  yet  still  face  certain  challenges  such  as  the  lack  of  skilled 
employees  or  administrative  burden.  Statistical  data  on  small  mid-caps  is  limited  and  a 
coherent approach to support the growth of small mid-cap companies is missing. 

89 Latest evaluation COM SWD (2021) 280 final. 
90 SWD (2021) 280 final.  
91 Study to map, measure and portray the EU mid-cap landscape, 2022, https://op.europa.eu/en/publication- 
detail/-/publication/ad5fdad5-6a33-11ed-b14f-01aa75ed71a1/language-en/format-PDF/source-277396461. 
92 COM (2023) 1711. 
93 Commission Regulation (EU) 2023/1315.  

19 

 
 
The Commission will: 

•  Action 18: be attentive to the needs of companies that outgrow the thresholds of the SME 
definition, as well as the broader range of small mid-cap companies, and will, by the end 
of 2023:  

a.  analyse  the  impact  of  high  inflation  and  longer-run  increases  in  productivity,  as 
well  as  the  interaction  with  possible  additional  measures  for  mid-caps,  to  raise  - 
when justified - the financial thresholds of the current SME definition; 

b.  develop a harmonised definition for small mid-cap companies; 
c.  thereafter, take actions  necessary to  reflect  a revised SME definition in relevant 

legislative acts, and 

d.  build a dataset based on the small mid-cap definition and assess possible measures 
to  support  these  companies  in  their  growth  (including  potential  application  in 
adapted form of certain measures favouring SMEs).  

3.4.3  Transferring  the  business,  preventing  insolvency  and  giving  entrepreneurs  a  second 

chance 

Successful  business  transfers  benefit  Europe’s  economy  and  its  social  fabric,  avoiding 
job  losses  and  safeguarding  economic  activity.  The  Commission  Recommendation  on 
business  transfers,  addressing  key  legal,  fiscal  and  administrative  aspects  of  business 
transfers,  remains  valid  today.94  The  Commission  has  been  promoting  best  practices  in 
business  transfers  developed  either  under  several  EU-funded  projects95  or  by  other 
stakeholders  undertaking  work  in  the  area.  In  2021  the  Commission  carried  out  a  study  on 
improving the evidence base on business transfers96. In addition, in its proposal for a Council 
Recommendation  on  developing  social  economy  framework  conditions97,  the  Commission 
recommended  Member  States  to  ensure  an  enabling  framework  for  business  transfers  to 
employees  to  form  worker  cooperatives.  Given  the  importance  of  business  transfers,  the 
Commission is prepared to take stock of recent developments in Member States.  

The Early Warning Europe Mentor Academy98 will develop an online learning programme for 
mentors, who will be able to better support companies at risk of insolvency and help business 
owners transfer their business to the next generation.  

Finally,  since  approximately  50%  of  new  businesses  fail  during  their  first  five  years99, 
the Commission’s insolvency policy supports entrepreneurs who have faced bankruptcy 
to  ensure  that  they  can  quickly  get  a  second  chance.  The  Directive  on  restructuring  and 
insolvency aims to prevent bankruptcy and help insolvent businesses to get back on their feet. 
By  mid-2026,  the  Commission  will  report  on  the  application  and  impact  of  the  Directive’s 

94 COM 94/1069/EC. Notably, the Commission proposed targeted tax incentives, such as conditional reduction 
of inheritance and gift taxes in family successions, conditional tax deferrals or reinvestment tax relief, or specific 
tax  incentives  to  encourage  the  transfer  of  the  company  to  employees  –  with  the  objective  of  ensuring  that 
transfer taxes do not endanger the survival of the business. 
95 https://single-market-economy.ec.europa.eu/smes/supporting-entrepreneurship/transfer-businesses_en. 
96 https://op.europa.eu/en/publication-detail/-/publication/fdfae129-69bb-11eb-aeb5-01aa75ed71a1/language-
en/format-PDF/source-190448642. 
97 COM (2023) 316 final. 
98 https://www.earlywarningeurope.eu/mentor-academy. 
99 COM (2012) 795 final. 

20 

 
 
 
provisions.  Additionally,  in  2022,  as  part  of  the  Capital  Markets  Union,  the  Commission 
proposed a Directive on harmonising certain aspects of insolvency law100. Its most innovative 
feature  concerns  the  introduction  of  a  simplified,  swift,  and  cost-effective  winding-up 
procedure for microenterprises. The Commission encourages the co-legislator to make urgent 
progress on this proposal. This is crucial to ensure more efficient insolvency proceedings, and 
therefore an increasing number of cross-border investments, including for SMEs. 

The Commission will: 

•  Action 19: assess framework conditions for business transfers in Member States together 

with the network of SME Envoys – by Q2 2024. 

4  Conclusions 

SMEs  continue to  navigate  a very  uncertain  economic environment.  Declining  but  stubborn 
levels  of  inflation  will  continue  to  strain  added  value  and  employment,  while  geopolitical 
uncertainty will keep many supply chains tight.  

Besides  funding  support,  including  the  massive  effort  from  the  Commission  with  a  total  of 
approximately 200 billion euro until 2027, it is therefore necessary to step up policy support 
for  SMEs,  building  on  the  actions  put  forward  in  this  Communication.  These  actions  all 
revolve  around  the  three  main  operational  challenges  for  SMEs  –  administrative  burden, 
finance  and  skills  –  with  the  aim  to  achieve  very  concrete  goals:  providing  an  enabling 
regulatory framework, reducing reporting requirements, simplifying taxes, fostering liquidity, 
improving  access  to  finance,  providing  SMEs  with  the  right  skills  and  supporting  them 
throughout their life cycle.  

As  recalled  by  the  Commission’s  SME  Strategy101,  effective  relief  and  support  to  SMEs 
depend  on  a  concerted  effort  and  a  strong  partnership  among  all  actors  –  EU  institutions, 
national, regional and local authorities, SMEs, large companies, social partners, civil society 
and investors. In particular, the Commission invites Member States to apply the ‘Think Small 
First’ principle on a national, regional and local level. 

As  far  as  the  Commission  is  concerned,  all  possible  levers  that  can  make  the  life  of  SMEs 
easier and clearer must be activated. Delivering short-term relief, laying the groundwork for 
their long-term competitiveness and resilience, and fostering a fair and SME-friendly business 
environment are at the heart of the Commission’s approach.  

100 COM (2022) 702 final. 
101 COM (2020) 103 final.  

21