Member states will be allowed to completely abolish financial reporting obligations for micro-enterprises as part of the European Economic Recovery Plan, which was originally unveiled in November 2008.
Internal Market and Services Commissioner Charlie McCreevy said the move will ease the burden on small businesses at a time of economic uncertainty, but it will be up to member states to decide whether to implement the proposal.
He called on the European Parliament to give its full and rapid backing to the Commission's plan.
"We intend to do whatever we can to encourage maximum take up of this exemption by our member states. Micro-entities could save as much as €1,200 each year, if member states follow our lead on this one. In the current climate, that is no mean saving," McCreevy said.
He pledged to follow the latest move with further simplification in the field of financial reporting by the end of 2009.
The Commission will now launch a stakeholder consultation in an effort to identify further areas which are ripe for simplification. Micro-entities are primarily engaged in business at local or regional level, with little or no cross-border activity.
The EU executive said these companies have limited resources but have been expected to comply with the same demanding regulations faced by larger companies.
To qualify, companies must meet two of three requirements set out by the Commission:
- A balance sheet total of not more than €500,000;
- A net turnover of not more than €1,000,000, and;
- Not more than ten employees.
Commission spokespersons stressed that the move to cut red tape comes in response to long-standing calls to reduce the administrative burden on SMEs.