Is my company an SME?
Whether your company is an SME or large or small is determined by the European SME definition. SME stands for small or medium-sized enterprise. The distinction between a small, medium and large enterprise can be found in the European SME definition. In many places in tax and corporate law there are advantages or exceptions for small or very small (micro) enterprises. In tax legislation, one does not actually speak of an SME. The distinction small/not small/micro is separate from the distinction small/medium/large.
There is therefore a difference between the 'European definition' and the 'tax definition' of a small company.
An important advantage for a small company in tax legislation is that it can enjoy a lower rate (20%) for the first 100,000 euros of taxable income.
But what is a small business there from a tax point of view? This depends on several criteria. In this wiki we list everything that plays a role in determining 'small' or 'not small' and we also briefly discuss the distinction SME/non SME.
The fiscal distinction between small and not small
Legal personality
Small companies have legal personality. This means that the partnership will not be labeled 'small company'.
Three criteria
In addition to legal personality, there are three criteria that determine whether the company is small. If one does not exceed the limits of more than one of those criteria, one is small. With other conditions: for two of the three criteria one must remain below the limits, otherwise one is regarded as great. The criteria revolve around staffing levels, turnover and balance sheet total. The limits are: 50 employees, annual turnover without VAT 9 million euros and 4.5 million euros on the balance sheet. You will find these criteria in Article 1:24 of the Companies and Associations Code (Article 1:24 CC). An evaluation is made per financial year on the basis of these criteria. In the case of an extended financial year, the number of employees and turnover are calculated pro rata on the basis of started months.
Example
Suppose your company has 12 employees and a turnover of 20 million euros and 4 million euros on the balance sheet. Then your company is small, because no more than 50 employees and no more than 4.5 million euros on the balance sheet. Only the turnover limit has been exceeded, so the limits have been exceeded for no more than one (not 2 or not 3) criteria.
From small to large and back
When you, as a small company, exceed two or three limits for two consecutive financial years, you become big. Conversely, if you do not exceed two limits for two consecutive financial years, your large company will become small. An example: as a small company you exceed one limit in 2020, three limits in 2021, two limits in 2022, only one limit in 2023. Then the company will be small in 2020, small in 2021, small in 2022 and large in 2023, because two years in a row the company crossed the borders. If you only cross one limit in 2023 and 2024, you will be small again from 2025.
And the starters? Depending on the financial plan, your company will start as a small or large enterprise.
Micro-company
The legislation also refers to a micro-company. A micro-company is a type of small company. The advantage for a micro-company is that it has to pay less for the filing of the annual accounts with the balance sheet.
Affiliated companies
At affiliated companies, the criteria regarding turnover and balance sheet total are examined on a consolidated basis. For the number of employees takes the average.
The European distinction between small, medium and large (SME or not)
According to the European SME definition, an SME is an independent company with fewer than 250 employees and with an annual turnover of maximum 50 million euros or a balance sheet total of maximum 43 million euros and is independent (i.e. no more than 25% of the company may owned by a company that is not itself an SME).
A small company means fewer than 50 employees and with an annual turnover of maximum 10 million euros or a balance sheet total of maximum 10 million euros.
Here too, the status of an SME is lost only after exceeding the criteria for two consecutive years. And here too, the data of associated companies is included.
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