Internal Market, Industry, Entrepreneurship and SMEs

SME taxation in Europe – An empirical study of applied corporate income taxation for SMEs compared to large enterprises

SME taxation in Europe – An empirical study of applied corporate income taxation for SMEs compared to large enterprises
Published on: 28/07/2015
This report analyses tax incentives for SMEs in 20 EU countries and five non-EU countries between 2009-2013. Its findings and recommendations are based on a review of tax codes, modelling of tax burdens using two different models, a descriptive analysis of company financial ratios, and the perceptions of tax advisers and companies in each country.

The key objectives of the 2015 study were:

  • to identify key competitive advantages and disadvantages resulting from corporate income tax (CIT) for SMEs and LSEs;
  • to identify good SME CIT practices;
  • to suggest solutions to overcome possible distortions and disadvantages for SMEs with regard to CIT.

The main findings of the study were:

  • CIT burdens across Europe are significantly different from one country to another;
  • only five EU countries treat SMEs more beneficially than large enterprises in terms of the actual burden of taxes paid;
  • SME tax incentives are not as frequently implemented as R&D tax incentives;
  • R&D tax incentives are more advantageous for SMEs, but large enterprises can circumvent high tax burdens with the help of optimized location and financing strategies. In many EU countries, the latter more than offset the advantages incurred by small and micro enterprises due to SME tax incentives;
  • most SME tax incentives only benefit micro and small enterprises;
  • SMEs perceive the high compliance burden related to taxes to be particularly problematic.