SME

What it means

A small and medium-sized enterprise, SME for short, is a category defined in a European Commission recommendation. What counts is headcount and either annual turnover or the balance sheet total. A medium-sized enterprise has fewer than 250 employees, a small one fewer than 50 and a micro enterprise fewer than 10, and each group also has financial ceilings.

Crucially, the company is not assessed on its own. Linked enterprises, such as a parent or subsidiary, are added in full, and partner enterprises in proportion to the holding. A company controlled by a public body is usually not an SME at all.

SME status is a different concept from accounting size categories. A micro entity under the Accounting Act is judged on the size criteria of the company alone, whereas the SME test looks at the whole group. A company can thus be micro in accounting yet not be an SME.

How it works in practice

The status matters most with grants. Many calls are open only to SMEs or give them a higher aid intensity, so the application includes an SME declaration. We prepare it from the financial statements of the company and all its linked and partner enterprises.

For groups with a holding company or common owners we map the ownership structure up to the beneficial owners. A link through the same individual doing business in the same market also counts, which often surprises clients.

SME status also affects state aid rules, for example under block exemptions, and de minimis limits are tracked for the whole single undertaking. For calls under the Recovery Plan and EU funds we therefore verify the status before the project is prepared.

What to watch out for

A company loses SME status only after exceeding the ceilings in two consecutive years, but a single acquisition or a new investor can change the links immediately. An incorrect SME declaration can lead to repaying the grant with interest.

Staff figures are counted in annual work units, not by the number of people on a single day. Casual workers, part-timers and seasonal staff are counted proportionally, and errors in this calculation are among the most common findings in project audits.