When is your company large or small? Further clarification of customised size criteria

Earlier this year, we informed you about the changes in the size criteria for companies that came about as a result of the transposition of a European directive into the Code of Companies and Associations. For the first time since the introduction of this Code, the size criteria were indexed to take into account the high inflation of recent years. Initially, no transitional provisions were provided for in the legislation, but thanks to the law of 15 May 2024, these were finally introduced.

Recently, the Accounting Standards Commission also issued a new advice (CBN advice 2024/07) on the application of these new size criteria. We explain the most important points of these changes and the consequences for you.

What are the new size criteria?

First, we will list new thresholds that apply to financial years starting after December 31, 2023.

Micro-companies

“Micro-companies” means small companies with legal personality that are not subsidiaries or parent companies and that do not exceed more than one of the following criteria on the balance sheet date of the last closed financial year:

Small companies

Small companies are companies with legal personality that, on the balance sheet date of the last closed financial year, do not exceed more than one of the following criteria:

If the company does exceed more than 1 of the latter criteria, it is considered a large company.

Groups of limited size

A company together with its subsidiaries, or companies forming a consortium, are deemed to constitute a group of limited size if these companies together, on a consolidated basis, do not exceed more than one of the following criteria:

When are they applicable?

The new criteria are applicable to financial years beginning after 31 December 2023.

Exceeding more than one of these thresholds only has consequences if it happens two financial years in a row (the principle of consistency). If a small company exceeds the thresholds in years X and X+1, it only becomes large in year X+2. However, the legislator has provided for a one-off exception. For the first financial year ending after 31 December 2023, the principle of consistency does not apply and only the turnover, the balance sheet total and the number of employees of the financial year concerned are taken into account on a one-off basis. The first financial year starting after 31 December 2023 is then the financial year to which the consequences apply. Some examples for clarification:

For financial years which follow the calendar year, 2024 is therefore the first financial year covered by the new legislation and the new criteria will therefore only be applied to the figures of the financial year ending on 31 December 2024. Whether the company was large or small in previous financial years does not play a role in determining the 2024 financial year. As of financial year 2025, the 2nd financial year after the new criteria apply, the previous 2 financial years (financial years 2023 and 2024) will be looked at again to determine the size of the company in 2025.

If your company has a split financial year, the situation is slightly more complex. Suppose that the financial year ends on 31 March 2024, then the first financial year to which the new criteria apply is the financial year starting after 31 December 2023, i.e. the financial year that runs from 1 April 2024 to 31 March 2025. However, the new size criteria will be tested against the figures of the financial year that has a cut-off date after 31 December 2023. In this example, that is 31 March 2024. Does the company exceed more than one of the new criteria on 31 March 2024? Then it is immediately assessed as large for the financial year ending on 31 March 2025. Here, too, as of the 2nd financial year after the new criteria came into effect, in this case the financial year ending on 31 March 2026, the previous 2 financial years are taken into account to determine the size.

Within a few months, the first financial years (with closing date 31 December 2024) that fall under the new scheme will close. Please note that your company may therefore be considered large immediately on the basis of that financial year alone. In the past, there was a delay of 2 years due to the consistency principle, which only had an effect in the 3rd financial year. Moreover, it is possible that the company only determines that it is suddenly large once the financial year has already ended. Does it look like your company is close to the threshold values? Then take the consequences into account now.

Why does it matter whether my company is large or small?

Large, small or micro companies are treated differently in various areas, including:

More extensive financial reporting for large companies, such as drawing up annual accounts in the full format instead of the abbreviated or micro format, as well as drawing up an annual report. For groups that cannot be considered a group of limited size, consolidated annual accounts must also be drawn up and published.

The mandatory appointment in large companies of an auditor who carries out the statutory audit of the annual accounts. We also note that if a Belgian company is part of an (international) group that draws up, has audited and publishes consolidated figures, it is always obliged to appoint an auditor for the Belgian company, even if it would be considered small based on the size criteria. For this reason, there are quite a few ‘small’ Belgian subsidiaries of international groups that still have to appoint an auditor.

Tax incentives for micro and small companies, such as reduced corporate tax rates, the possibility of paying out dividends under the VVPR-bis regime, the creation of liquidation reserves or a more favourable investment deduction. Please note that the criteria are always assessed on a consolidated basis for tax purposes (in the case of groups).

Small companies are often spared or additionally supported in new legislation or they are exclusively entitled to subsidies and other support measures.

In short, the qualification of your company as small or large is not just a label, it also has significant consequences.

Our PKF BOFIDI experts are happy to help you

If you have any questions about the calculation of the size criteria or about the consequences for your company, please do not hesitate to contact us. We are ready to help you.

This article was written by Jasper Meert, auditor at PKF BOFIDI Audit.