Support for small and medium-sized enterprises (SMEs)
SMEs are the backbone of Europe's industry and economy. The EU is actively working to reinforce their resilience and competitiveness.
SMEs in Europe
The 34 million European SMEs represent 99.8% of all businesses and provide about two-thirds of employment in the EU.
SMEs are central to Europe's economic and social fabric and support long-term prosperity and competitiveness.
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.
It is working on making the SMEs more competitive and resilient by addressing the main operational challenges they face:
- the administrative burden and regulatory obstacles
- payment delays
- problems with access to finance
- the shortfall in skilled staff and experienced managers
Since February 2025, in response to a call for simplification from the European Council, the EU has also been discussing and adopting a series of simplification proposals, also known to as 'omnibuses', to allow EU businesses, and especially SMEs, to flourish and foster a more innovative investment environment.
Reduce the administrative burden
In a Flash Eurobarometer in July 2025, 64% of SMEs reported administrative burden or regulatory obstacles as a persistent challenge. The EU is actively working to tackle this issue.
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 EU has adopted several simplification proposals presented by the Commission 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 SMEs by 2030.
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.
The new rules:
- encourage the use of the 'once-only principle' 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
The measures will make cross-border business faster, easier and more transparent.
Tax simplification
The Commission proposed to establish a head office tax system for SMEs to allow them those operating across borders to deal with only one tax administration, instead of having to comply with multiple tax systems.
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.
Access to finance
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 protect European businesses, particularly SMEs, the 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.
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
Access to skilled staff
The EU is supporting the development and strengthening of appropriate skills, in cooperation with member states and stakeholders, through various programmes, including the European skills agenda,the EU pact for skills and the future net-zero skills academies.
EU talent pool
To help SMEs attract talent from abroad, the EU will establish by 2027 the EU talent pool, an online platform that will match job vacancies of EU-based employers with the profiles of non-EU jobseekers residing outside of the EU.
The EU's objective is to make the EU labour market more competitive and tackle labour market shortages.
Participation in the EU talent pool will be voluntary for member states.
Harmonised corporate rules
In March and October 2025, the European Council called on the Commission to propose without delay an optional 28th company law regime allowing innovative companies to scale up with the aim of making business easier and faster in Europe.
In March 2026, the Commission tabled a proposal for a regulation on the 28th regime corporate legal framework which introduces a harmonised digital legal form, 'EU Inc.', which founders and companies may opt to use to start and grow a business in Europe, instead of navigating multiple national regimes.
Key elements include:
- digital incorporation within 48 hours in all member states
- faster and digital insolvency procedures
- harmonised taxation of employee stock options
As co-legislators, the Council and the Parliament are currently reviewing the proposal.
See also
Simplification of EU rules
Capital markets union explained
Competitiveness compass
Last review: 4 August 2026