Malta to opt out of proposed accounts directive

Malta has declared it has no intention of implementing a proposed EU directive aimed at reducing the administrative burden on small companies in drawing up their annual accounts.

The directive, still being discussed at Council and European Parliament level, is part of the EU's drive to cut red tape for small businesses. It gives member states the option of whether to implement it or not.

The proposed rule would amend the existing directive on the accounts of certain companies so they would no longer be required to present the accounts on an annual basis, trimming down administrative costs and increasing efficiency.

Implementing the directive would mean micro-companies across the EU each saving over €1,500 annually, according to a Commission study.

The exemption would apply to companies with a balance sheet total under €500,000, those with a net turnover of under €1 million and/or companies having an average of 10 employees during the financial year. This means the majority of Malta's companies stand to benefit from it.

Malta has however declared that, while it agreed with the aim of the proposed directive, it did not plan to grant the exemption as this could hit the country's tax base.

A government spokesman said that, although the proposal was deemed to be a positive one, it would not be beneficial to Malta given the prevailing situation.

"In Malta's view, it is important that it should be left to each member state to determine (an exemption) in view of the different realities existing in different economies.

"Should this proposal be adopted, Malta will not grant this exemption. Malta's financial reporting has already been simplified and, given the large number of micro-enterprises that made up the bulk of the economy, a blanket exemption of this type could affect the country's tax base negatively."

At the same time, the spokesman said Malta had already implemented new rules aimed at easing the accounting burden on small firms.

He said the government had long been committed to alleviating the burden related to accounting and auditing obligations of smaller companies.

According to the government, Malta's financial reporting has already been simplified with the recent enactment of the General Accounting Principles for Smaller Entities (GAPSE) by virtue of Legal Notice 51 of 2009.

"The rules cater for the needs of small businesses without compromising their quality of financial reporting," the spokesman said, adding this measure positively affected over 13,000 companies last year.

However, Malta's position is not in sync with the European Parliament's.

According to the EP's rapporteur on the matter, German Klaus-Heiner Lehne, member states such as Malta should not be allowed to opt out.

Presenting his report to the Legal Affairs Committee, Mr Lehne said it would be preferable for all micro-companies in all member states to benefit from the exemption.

He noted, however, that "the political situation in the Council does not make such an advance possible for now".

At present, all small EU companies are bound by the same rules as large enterprises and it is argued that accounting obligations do not correspond to their real needs, creating a disproportionate burden.

According to the Commission's impact assessment on the directive, if all member states exempted micro-companies without imposing additional requirements, the proposal could save them an estimated €6.3 billion annually.

The EP is expected to vote on the proposal later this month.