Increase of the EU financial thresholds defining micro, small, medium and large entities 


On 17 October 2023, the European Commission adopted a delegated directive amending the accounting directive (the so-called Burden Reduction Package) the purpose of which is to reduce the burden on entities within the scope of financial accounting and sustainable development accounting.  

Increase of the EU financial thresholds defining micro, small, medium and large entities 

The classification of economic entities governs the rules of economic activity while belonging to individual groups determines, among others, whether a particular economic entity will keep books limited only to tax purposes, determine the scope in which they will fulfill the obligations related to financial statements or utilize EU programmes.

According to European regulations, whether an entity is classified as a micro, small, medium or large company depends on its size. In order to classify an entity in a specific group, it must not exceed at least two out of three criteria as of the balance sheet date, namely the balance sheet total, net revenue on sales and the average number of employees in the financial year. 

The new EU regulations increase the amount of the balance sheet total and net revenue on sales by 25% which, in concept, is to nullify the results of inflation in member states from the last 10 years. One should bear in mind that the said change does not refer to the number of workers – this threshold remains unchanged. The increased thresholds will apply to financial reporting and sustainability reporting (CSRD/ESRS) already for 2024 while member states will have time until 24 December 2024 to implement the European regulations. Legislative work has already been started in Poland in this scope. 

The table below presents the EU criteria defining an entity.  

Entity  Balance sheet total  Net revenue  Average number of employees 
micro  Up to EUR 450,000 (change from EUR 350,000)  Up to EUR 900,000 (change from EUR 700,000)  Up to 10 (no changes) 
small  Up to EUR 5,000,000 (changed from EUR 4 million)  Up to EUR 10,000,000 (changed from EUR 8 million)  Up to 50 (no changes) 
medium  Up to EUR 25,000,000 (changed from EUR 20 million)  Up to EUR 50,000,000 (changed from EUR 40 million)  Up to 250 (no changes) 
large  Over EUR 25,000,000 (changed from EUR 20 million)  Over EUR 50,000,000 (changed from 40 million)  over 250 (no changes) 

Postponement of publication of sector-specific ESRS (European Sustainability Reporting Standards) and ESRS for third-country entities 

According to the EU directive on reporting of entities within the scope of sustainable development, entities covered by the directive are obligated to supplement financial statements with information that will help to understand the impact of the enterprise on matters related to sustainable development (i.e. with regard to the environment, society, human rights and corporate governance) as well as information required to understand how matters connected to sustainable development influence the development, performance and situation of a particular entity.  Four standards will apply, the so-called full ESRS, simplified ESRS, sector-specific ESRS and ESRS for third-country entities. 

By the decision of the European Commission, the publication date of sector-specific ESRS and ESRS for third-country entities was delayed. As a result, the reporting requirements in the initial phase will be reduced to the necessary minimum while companies will be able to focus on the implementation of the first set of ESRS. According to the new proposal, they will most probably be published on 30 June 2026.  


Anna Piotrowska, Junior Manager at the MDDP Outsourcing office in Warsaw