Support to small and medium-sized enterprises (SMEs)
Small and medium-sized enterprises are the backbone of Europe’s industry and economy. The EU is putting in place policies to support SMEs, given their an essential role in the transition to a sustainable and digital economy.
SMEs in Europe
The 32 million European SMEs represent 99% of all businesses in the EU.
SMEs are central to Europe’s economic and social fabric, drive Europe's green and digital transitions and support long-term prosperity.
To be considered an SME, certain criteria must be met:
| Company category | Staff headcount | Turnover | or | Balance sheet total |
| Medium-sized | < 250 |
≤ €50 m |
≤ €43 m |
|
| Small | < 50 |
≤ €10 m |
≤ €10 m |
|
| Micro | < 10 |
≤ €2 m |
≤ €2 m |
The EU's strategy to support SMEs
The EU wants to support and empower SMEs of all sizes and in all sectors. Achieving a climate-neutral, resource-efficient, and agile digital economy requires the full mobilisation of SMEs.
Particular attention should be paid to the specific needs of SMEs as many of them have been hard hit by the impact of Russia’s aggression against Ukraine and high inflation and energy prices.
In September 2023, the Commission proposed a set of measures aimed at addressing the main operational challenges faced by SMEs:
- the administrative burden and regulatory obstacles
- payment delays
- problems with access to finance
- the shortfall in skilled staff and experienced managers
These measures aim to provide short-term relief and to strengthen SMEs’ long-term competitiveness and resilience.
Reduce the administrative burden
Tax simplification
The proposal for a tax simplification directive establishes a head office tax system for SMEs.
This would allow SMEs operating across borders to deal with only one tax administration, instead of having to comply with multiple tax systems.
This system would:
- increase tax certainty and fairness
- reduce compliance costs and market distortions
- minimise the risk of double taxation, over-taxation and tax disputes
- promote cross-border expansion
This proposal is currently being examined by the Council. It must be agreed unanimously by all member states, after consultation of the Parliament.
Furthermore, from 1 January 2025, new VAT rules mean that eligible small businesses’ goods and services originating in another member state, in addition to the member state of establishment, can be exempt from VAT.
Increasing digital transformation
The EU is actively working to increase the digitalisation of SMEs. Digitalisation makes the administrative processes for SMEs more affordable, faster and less burdensome.
In December 2024, the EU adopted new rules to further expand and upgrade the use of digital tools and processes in company law, thereby helping SMEs do business in the EU.
Digital solutions will cut the amount of red tape by allowing SMEs to complete administrative procedures across the single market without the need to re-submit documents.
The new rules:
- encourage the use of the ‘once-only principle’ (part of the Single Digital Gateway) when setting up subsidiaries and branches in another member state
- introduce a multilingual EU company certificate
- remove formalities such as the need for an apostille on company documents through a digital EU power of attorney to be used in cross-border procedures
They will therefore facilitate the life of entrepreneurs, reduce administrative burdens and make cross-border business faster, easier and more transparent.
Streamlining the reporting requirement
Ensuring compliance with legislation is crucial for effective monitoring and enforcement. However, the associated reporting requirements can be burdensome, incur costs and impede the growth of businesses, particularly SMEs.
Simplifying reporting obligations may present an opportunity to alleviate the strain on SMEs.
Since February 2025, the Commission has submitted several omnibus packages to the Council and the Parliament for adoption in order to reduce administrative costs and reporting requirements for EU businesses.
Concrete targets include reducing both costs and reporting obligations by at least 35% for small and medium-sized enterprises (SMEs) by 2030.
Access to finance
The SME relief package includes a proposal for a regulation on late payments in commercial transactions as well as non-legislative measures to boost investment, such as by working with member states to establish financial instruments co-funded by EU shared management programmes.
Combating late payments
The late payment of invoices is particularly damaging to SMEs as they rely on regular and predictable streams of cash and have more limited access to liquidity than large businesses.
To compensate for this, SMEs often need to take out short-term loans, thus driving up their financing costs.
To protect European businesses, particularly SMEs, the European Commission has proposed that the late payment directive should be revised. Reducing late payments is expected to:
- enable SMEs to invest in innovation
- pass cost reductions on to consumers
- increase certainty for businesses
As co-legislators, the Council and the Parliament are currently reviewing the proposal.
Improving SMEs' access to finance
Overall support for SMEs is expected to amount to more than €200 billion by 2027 through EU funding programmes.
SMEs will also be able to access funding through the newly agreed strategic technologies for Europe platform (STEP). Created as part of the revision of the EU long-term budget for 2021-2027, STEP aims to scale up support and investment opportunities for critical technologies relevant to the green and digital transitions.
In this context, EU countries are also encouraged to allocate additional resources to InvestEU through specific instruments to channel finance to SMEs in their respective countries.
Listings on European stock exchanges
The EU also wants to make it easier for companies of all sizes, including SMEs, to be listed on European stock exchanges.
As part of the capital markets union, the creation of ‘SME growth markets’, a trading venue dedicated to small issuers, has made access to public markets cheaper and easier for SMEs.
To further improve access, in October 2024 the Council adopted the listing act which aims to:
- cut red tape and costs to help EU companies access more sources of financing
- encourage company owners to list the shares in their company for the first time using a multiple-vote share structure
Capital markets union explained
Access to skilled staff
Skills shortages hold back business activities for 63% of SMEs and hamper their efforts to achieve digitalisation (45%) and the green transition (39%).
The EU is supporting the development and strengthening of appropriate skills, in cooperation with member states and stakeholders, by means of various programmes, including:
- the European skills agenda
- the EU pact for skills
- the future net-zero skills academies
EU talent pool
To help SMEs attract talent from abroad, the EU will establish a platform for non-EU jobseekers, the EU talent pool.
The online platform will match job vacancies of employers established in the EU with the profiles of non-EU jobseekers residing outside of the EU.
The objective of the EU is to:
- make the EU labour market more competitive
- tackle labour market shortages
Participation in the EU talent pool will be voluntary for member states.
Last review: 30 March 2026