Spain Faces EU Sanctions Over SME Definition and Tax Compliance
Spain may face sanctions for failing to comply with EU directives on SMEs.
Key Points
- • Spain risks EU sanctions for not updating SME classification and taxation.
- • Proposed law could benefit 100,000 SMEs by raising financial thresholds.
- • Current SME thresholds include €4 million in assets and €8 million in revenue; proposals aim to double these limits.
- • Failure to comply may lead to €8 million in extra administrative costs for small businesses.
Spain is at risk of facing sanctions from the European Commission for its failure to update the legal definition and taxation of small and medium-sized enterprises (SMEs). The Commission has warned that Spain must approve new regulations or face consequences, with a compliance deadline set for December 2024.
Currently, SMEs in Spain are defined by thresholds that include €4 million in assets, €8 million in revenue, and a workforce of up to 50 employees. Proposed changes aim to double these limits, allowing approximately 100,000 businesses to maintain their status as small or medium and avoid higher regulatory burdens. These adjustments come as the EU points to a significant increase in inflation in the Eurozone—24.3% since 2013—highlighting the need to reassess outdated thresholds.
Moreover, Spain has been flagged for not implementing a directive that would exempt small businesses from VAT when dealing with clients in other EU countries, which has a transposition deadline of January 2025. The Ministry of Finance has attributed the lack of progress to 'parliamentary arithmetic,' resulting in unresolved issues in Congress.
If the current situation persists, small businesses could incur about €8 million in additional administrative costs, complicating their operations and fiscal management altogether.