Commission Delegated Regulation (EU) 2023/2775, published in December 2023, updated the quantitative thresholds for the definition of small and medium-sized enterprises in the EU, effective for financial years beginning from 1 January 2024 in most member states. This review — the first in more than twenty years — adjusts the thresholds for cumulative inflation and structural changes in the European economy. The previous SME definition had been set by Directive 2013/34/EU, transposed into Spanish law through the Audit of Accounts Act (Law 22/2015) and the reform of the Commercial Code.
New SME Thresholds
The new quantitative thresholds, applied on an either/or basis for the balance sheet and turnover criteria, are:
- Micro-enterprise: fewer than 10 employees and annual balance sheet or net turnover not exceeding €900,000 (the previous net turnover threshold in the harmonised EU definition was €700,000, with a balance sheet limit of €350,000).
- Small enterprise: fewer than 50 employees and balance sheet or net turnover not exceeding €7.5 million (previously €10 million net turnover and €5 million balance sheet under the harmonised EU definition).
- Medium-sized enterprise: fewer than 250 employees and balance sheet not exceeding €25 million or net turnover not exceeding €50 million (previously €20 million and €40 million respectively).
The employee headcount criterion does not change: it remains the primary qualifying element and can only be set aside when a company clearly falls within or outside the financial limits. To gain or lose SME status, a company must meet or breach the criteria for two consecutive financial years — a rule that provides stability and prevents oscillations caused by exceptional results in a single year.
Impact in Spain: Obligations and Benefits Linked to Company Size
In Spain, SME classification activates a range of regulatory regimes with direct economic consequences. The main areas affected are:
Corporate Income Tax. Law 27/2014 on Corporate Tax sets a reduced rate of 23% for entities whose net turnover in the previous tax period was below one million euros — the reduced-dimension entity regime — along with additional benefits for SMEs. Companies crossing the new thresholds upwards may lose these benefits; those that fall back below the thresholds may again qualify for preferential treatment depending on their structure.
Public financing. Access to CDTI funding lines, ENISA participating loans (reserved for innovative SMEs under the EU Block Exemption Regulation 651/2014), ICO Empresas facilities and ERDF and ESF structural funds is conditioned, in many programmes, on SME status. The threshold update may reopen access to these instruments for companies that had previously exceeded the old limits.
Mandatory audit. Article 263 of Royal Legislative Decree 1/2010 (the consolidated text of the Spanish Companies Act, LSC) requires companies to submit their annual accounts to audit if they exceed two of the following three thresholds in two consecutive financial years: total assets above €2.85 million, annual net turnover above €5.7 million, or an average workforce above 50 employees. These LSC thresholds are distinct from the European ones but are normatively linked to the evolution of the SME definition and must be assessed alongside the Delegated Regulation update.
Non-financial reporting. Law 11/2018, which transposed the Non-Financial Information Directive (2014/95/EU), and the forthcoming transposition of the CSRD (Directive 2022/2464/EU) progressively extend the universe of companies required to publish sustainability information. The CSRD thresholds are partly aligned with the SME definition: for 2025–2026, the obligation covers large companies; from 2027 it is expected to extend to listed SMEs.
Audit and Annual Accounts Obligations
The threshold update may affect the obligation to audit annual accounts. Companies that exceed two of the three limits in Article 263 of the LSC for two consecutive financial years are required to submit their accounts to statutory audit. Those that fall back below the thresholds — taking into account the new European definition as incorporated into national law — may be released from that obligation, with the corresponding cost savings and administrative simplification.
It is worth noting that companies not subject to mandatory audit can still commission a voluntary audit, either at the company’s own initiative or at the request of minority shareholders representing at least 5% of the share capital through the mechanism of Article 265.2 of the LSC.
Steps to Take Now
Companies whose size is close to the thresholds — whether they stand to gain or lose SME status — should carry out a classification review at the start of financial year 2024. That review should cover:
- Verify headcount, net turnover and total assets for the two most recently closed financial years.
- Determine whether the category changes under the new thresholds of Delegated Regulation (EU) 2023/2775.
- Review audit obligations under Article 263 of the LSC and applicable non-financial reporting rules.
- Identify tax benefits, public financing lines and simplified regimes that become available or are lost as a result of the reclassification.
- Notify any ongoing aid or financing programmes of the change in category, where required.
At BMC we advise on the implications of regulatory changes for accounting, commercial law and tax planning, including a review of your company’s positioning relative to the new SME thresholds. See our corporate secretarial services.
