Pursuant to the Accounting Directive, the Act of 18 December 2015 (hereinafter the "Act") amended the size criteria provided for by Articles 15, 15/1 and 16 of the Company Code. The new criteria are applicable to financial years beginning as from 1 January 2016. A royal decree was also adopted on 18 December amending, amongst other provisions, the Royal Decree of 30 January 2001 implementing the Company Code (hereinafter the "RD"). The Accounting Standards Board is currently preparing a draft opinion on the subject which will be submitted for public consultation.
- Small Businesses
Pursuant to new Article 15 §1 of the Company Code, small businesses are defined as entities with legal personality that, for their last closed financial year, met no more than one of the following criteria:
- average annual number of employees: 50
- annual turnover, excluding VAT: 9,000,000 euros
- balance sheet total: 4,500,000 euros
New thresholds for annual turnover and balance sheet total
The Act adjusted these thresholds to the consumer price index. The thresholds were raised from EUR 7,300,000 to EUR 9,000,000 (excluding VAT) for annual turnover and from EUR 3,650,000 to EUR 4,500,000 for the balance sheet total. In this way, a greater number of companies will qualify as small businesses.
Number of employees
The number of employees is no longer a decisive criteria when determining whether a company qualifies as a small business. Formerly, even if a company had annual turnover and a balance sheet total below the thresholds provided for by the Company Code, if it employed annually more than 100 people on average, it could not be considered a small business. Henceforth, exceeding the threshold of 100 employees will no longer automatically result in disqualifying a company from small business status.
New method to calculate the number of employees
The average annual number of employees is now determined with reference to the average number of employees, on a full-time equivalent basis, registered with the DIMONA system at the end of each month of the financial year and not, as was previously the case, the number recorded in the personnel register. The number of employees will be determined with reference to the number of employees recorded in the personnel register or an equivalent document at the end of each month of the financial year only in cases when the registration of employees in the DIMONA database is not required.
As was previously the case, the number of employees, on a full-time equivalent basis, corresponds to the workload expressed in full-time equivalents. For part-time employees, the workload will be determined based on the contractual working time, compared to the normal working time for a comparable full-time employee (the reference employee).
New so-called consistency principle
Henceforth, a company will only lose its small business status if it exceeds more than one of the abovementioned thresholds for two consecutive financial years. In this case, the consequences will apply as from the financial year following that in which, for the second time, more than one of the criteria were (or are no longer) exceeded. Thus, crossing a threshold only once will not cause a company to lose its status as a small business. Likewise, a company that ceases to exceed more than one of these criteria will not automatically be considered a small business the first time this occurs.
The legislature's objective in introducing this principle was to prevent small businesses that experienced an exceptionally profitable year from being recharacterised and losing their small business status.
Financial year of more or less than twelve months
In general, a company's financial year is twelve months. It is however accepted that a financial year may be shortened or extended. Indeed, upon the establishment of a company, provision is often made for a financial year of more or less than 12 months so that the financial year corresponds, for example, to the calendar year and thus starts to run on 1 January and closes on 31 December of each year.
Since the entry into force of the Act of 18 December 2015, the Company Code provides that a company's financial year may only be extended or shortened under exceptional circumstances. It is also expressly stated that the length of the financial year may not exceed 24 months less one calendar day.
If the financial year is exceptionally more or less than 12 months, the company's turnover is multiplied by a fraction whose denominator is twelve and whose numerator is the number of months included in the financial year, with a commenced month being considered a full month.
No calculation of thresholds on a consolidated basis, except for parent companies
For annual financial statements relating to financial years that started before 31 December 2015, the size criteria are applied on a consolidated basis for affiliated (group) companies. However, for annual financial statements relating to financial years as from 1 January 2016, the size criteria are no longer applied on a consolidated basis, even if the company is an affiliate (group company), provided however it is not a parent company.
On the other hand, parent companies and companies formed for the sole purpose of avoiding the disclosure of certain information are obliged to assess if they meet the size criteria on a consolidated basis and, to this end, must thus take into account figures relating to all affiliates. Companies that make up a consortium are treated as a parent company.
New Article 15 §6(2) of the Company Code provides for the option of applying a simplified calculation method to determine the size criteria on a consolidated basis.
Application of the size criteria on a consolidated basis does not mean that a parent company is automatically obliged to release consolidated financial statements. For example, a parent company that is itself a subsidiary of another parent company which prepares, has audited and issues consolidated financial statements is exempt from having to draw up consolidated financial statements, subject to fulfilment of the conditions provided for by Article 113 of the Company Code
A new subcategory of small business has been created, namely the micro-company, covered by new Article 15/1 of the Company Code.
A micro-company is a small business with legal personality which, on the closing date of its financial statements, is not a subsidiary or a parent company and meets no more than one of the following criteria:
- average annual number of employees: 10
- annual turnover, excluding VAT : 700,000 euros
- balance sheet total: 350,000 euros
When reference is made in the statutory provisions to small businesses, these references also concern micro-companies, which by definition are a type of small business.
It follows from the definition set out in Article 15/1 of the Company Code that a micro-company can never be a parent company, as no corresponding calculation on a consolidated basis is provided for micro-companies.
According to the deputy prime minister and minister for employment, the economy and consumers, Kris Peeters, no fewer than 321,235 companies may fall into this new category, which represents 83.59% of all annual corporate financial statements filed in Belgium.
Micro-companies may file their annual financial statements in accordance with a specific format determined by the Royal Decree, with a limited number of mentions in the annex.
- Moderate-sized groups
A company and its subsidiaries, or companies that together form a consortium, shall be considered as forming a moderate-sized group when these companies, on a consolidated basis, do not exceed more than one of the following criteria (new Article 16 of the Company Code):
- average annual number of employees: 250
- turnover, excluding VAT: 34,000,000 euros
- balance sheet total: 17,000,000 euros
These figures are calculated on the closing date of the annual financial statements of the consolidating company, based on the last annual financial statements of the companies included in its consolidated group.
The principle of consistency is also applicable to determine if a group if of moderate size or not. The fact that a group exceeds (or does not exceed) more than one of these criteria is only relevant if it occurs for two consecutive financial years. In this case, the consequences shall apply as from the financial year following that in which, for the second time, more than one of these criteria were exceeded or no longer exceeded.
- Impact of the size criteria on corporate life
The legislature's objective is to reduce the administrative burden on medium-sized businesses. According to the deputy prime minister and minister for employment, the economy and consumers Kris Peeters, the upwards revision of the size criteria will result in the reclassification of more than 1,000 companies as small businesses.
There are many advantages associated with small-business status, some of which are briefly mentioned below.
Small businesses may use an abridged format to prepare and issue their annual financial statements (Articles 93 and 99 of the Company Code), while micro-companies may use a micro-format. Small businesses need not draw up a management report, without prejudice however to the requirement to justify application of the going-concern accounting rules in the event of a deferred loss or losses for two consecutive years (Article 94 of the Company Code), and need not appoint an auditor, unless they form part of a corporate group which is subject to the obligation to draw up and issue consolidated financial statements (Article 141 of the Company Code). Further, the additional fees incurred for late filing of annual financial statements with the National Bank of Belgium are lower for small businesses (Article 101 of the Company Code). Finally, the content of the social balance sheet for small businesses is less detailed compared to other companies (Article 191/3 of the Royal Decree).
In addition, it should be noted that a "Big Business" unit was launched on 1 July 2015 within the Federal Public Service for Finance. This authority is primarily, but not exclusively, responsible for companies and legal entities qualifying as "big businesses". Seven centres have been created to verify the tax situation and assessment, handling of tax litigation, and defence before the various courts and tribunals of big businesses, including with respect to income tax, taxes treated as income tax, value added tax and various other taxes, with the exception of the provisions on collection and recovery. The stated objective is to guarantee a level of service that meets the expectations of big businesses while allowing adequate oversight having regard to the size of these undertakings.
With respect to moderate-sized groups, they are exempt from having to draw up consolidated financial statements and a corresponding management report.