On 6 May 2003 the Commission adopted a new Recommendation 2003/361/EC regarding the SME definition which replaced Recommendation 96/280/EC as from 1 January 2005. The revision takes account of the economic developments since 1996 and the lessons drawn from the application of the definition. It increases legal certainty, while reducing possibilities of its abuse, particularly with regard to state aid, Structural Funds and the Research and Development Framework Programme.

This Recommendation concerns all Community policies applied within the European Economic Area in favour of SMEs and is addressed to the Member States, the European Investment Bank and the European Investment Fund.

The definition will be adopted in a number of Community acts and programmes and integrated in the field of state aids where SMEs can benefit from exemption provisions including aid for R&D and vocational training (see state aid rules).

• SME User Guide explaining the new SME definition

• Report from the Commission on the implementation of the definition

• SME definition: Commission Recommendation of 06 May 2003 
  OJ L 124 of 20.5.2003, p. 36 

• Press release and Presentation

• First public consultation

• Second public consultation

Background:

Micro, small and medium-sized enterprises are socially and economically important, since they represent 99 % of all enterprises in the EU and provide around 65 million jobs and contribute to entrepreneurship and innovation. However, they face particular difficulties which the EU and national legislation try to redress by granting various advantages to SMEs. A legally secure and user-friendly definition is necessary in order to avoid distortions in the Single Market.

The revision ensures that enterprises which are part of a larger grouping and could therefore benefit from a stronger economic backing than genuine SMEs, do not benefit from SME support schemes.

The increase of the financial ceilings is designed to take into account subsequent price and productivity increases since 1996, however the headcount ceilings remain fixed.

The modifications were to a large extent based on two rounds of intensive public consultation in 2001-2002. As a result, for instance

• the typology of enterprises (difference between the three categories : autonomous enterprises, partner enterprises and linked enterprises) was clarified and aligned with the Directive on consolidated accounts, while introducing a calculation method for the thresholds, which gives a realistic picture of their economic strength,

• apprentices or students in professional training are no longer included in the calculation for headcount. This has been done to promote vocational training,

• a model for a self-declaration OJ C 118 of 20.5.2003, p. 5  and corrigendum OJ C 156 of 4.7.2003, p. 14
  which should be completed by the enterprises themselves will avoid the uncertainties in the interpretation of the definition and will reduce the administrative burden;

• the exemptions for research institutes and venture capital funds were expanded to encourage the equity financing of SMEs and promote research.

See also SCADPlus.
 

Last update:  03/04/2009