Ukraine Plans to Align the Definition of Small and Medium‑Sized Enterprises with EU Legislation
To implement the European Commission Recommendation of 6 May 2003 No. 2003/361/EC on the definition of micro, small and medium‑sized enterprises, the Ministry of Economy has developed the draft Law of Ukraine “On Amendments to Certain Laws of Ukraine to Align the Definition of Small and Medium‑Sized Enterprises with the Legislation of the European Union”.
Ukraine is a candidate country for EU accession, and therefore harmonization of national legislation with EU acts is mandatory. Recommendation No. 2003/361/EC sets out common criteria for classifying enterprises as micro, small, or medium‑sized. Current Ukrainian norms differ from this Recommendation. The draft law aims to establish unified, transparent rules for enterprise classification, improve the quality of statistical data, and promote deeper integration into the EU single market.
The draft law amends the Law of Ukraine “On the Development and State Support of Small and Medium‑Sized Enterprises in Ukraine” and the Law “On the Specifics of Regulating the Activities of Legal Entities of Certain Organizational and Legal Forms in the Transitional Period and Associations of Legal Entities”.
The main innovation is the application of three criteria to determine the category of an enterprise:
– average number of employees (in full‑time equivalent),
– net revenue from sales of products (goods, works, services) per year, and/or
– the balance sheet total at the end of the year.
These criteria align with Recommendation No. 2003/361/EC and replace the current approach, which is based only on headcount and revenue.
New Classification Criteria
Microenterprise
• Average number of employees (per year): ≤ 9
• Net revenue (annual): ≤ EUR 2 million
• Balance sheet total: ≤ EUR 2 million
Small business (not qualifying as micro)
• Average number of employees (per year): ≤ 49
• Net revenue (annual): ≤ EUR 10 million
• Balance sheet total: ≤ EUR 10 million
Medium‑sized business (not qualifying as micro or small)
• Average number of employees (per year): ≤ 249
• Net revenue (annual): ≤ EUR 50 million
• Balance sheet total: ≤ EUR 43 million
Large business
• Exceeds the above criteria; not classified as SME
Other Key Provisions
Reference alignment: Terms “small enterprise” and “medium‑sized enterprise” are now taken from the Law on legal entities regulation, ensuring unified terminology.
Wider coverage: SMEs include legal entities of any organizational and ownership form, as well as sole proprietors.
Enterprise groups: If consolidated financial statements are filed, SME classification is determined for the entire group.
Entities exempt from accounting: Those not required to keep accounts obtain SME status without considering balance sheet total.
Public sector ownership limits: Entities with ≥ 25 % state or municipal ownership (except for small communities with budgets < EUR 10 million and population < 5 000) are not considered SMEs.
Euro exchange rate: The average annual official NBU rate is used for financial criteria.
Category changes: An enterprise changes category only after exceeding or falling below criteria for two consecutive years.
If adopted, the law will take effect one year after publication.