Inflation has finally caught up with the Luxembourg accounting framework. A Grand-Ducal Regulation of 25 October 2024, published on 7 November, transposes Commission Delegated Directive (EU) 2023/2775 and raises the financial thresholds used to classify companies and groups: by 25% for medium-sized undertakings, and by about 70% for small ones, as Luxembourg now aligns with the EU maximum. In a nutshell, here is what has changed, and how it may lighten your reporting burden.
What has changed
The total balance sheet and net turnover thresholds have been raised as follows, while the headcount criterion remains unchanged:
- Small undertakings: total balance sheet of EUR 7.5 million (previously EUR 4.4 million) and net turnover of EUR 15 million (previously EUR 8.8 million), with an average of up to 50 full-time employees.
- Medium-sized undertakings: total balance sheet of EUR 25 million (previously EUR 20 million) and net turnover of EUR 50 million (previously EUR 40 million), with an average of up to 250 full-time employees.
As before, a company falls into a given category when it does not exceed two of the three criteria, and a change of category only takes effect once the thresholds have been crossed, or no longer crossed, for two consecutive financial years.
An earlier start than it seems
Companies may apply the new thresholds to financial years starting on or after 1 January 2023. Because of the two-year rule, an existing company that stays below the new thresholds in both 2023 and 2024 can move to a lower category, at the earliest and save exceptions, for its 2025 financial year. Many companies that have been treated as medium-sized for years may then qualify as small, and some large companies may step down to the medium category. The Commission des Normes Comptables (CNC) has published Q&A 24/034 on the practical application of the new criteria, which is well worth reading before drawing conclusions.
What it means in practice
Moving to a lower category is not merely a matter of labels. Depending on your situation, it may open the door to:
- an abridged balance sheet, profit and loss account and notes;
- an exemption from preparing a management report;
- the end of the statutory audit requirement for companies that now qualify as small;
- an exemption from preparing consolidated accounts for groups that, taken together, no longer exceed two of the three group criteria (EUR 25 million total balance sheet, EUR 50 million net turnover, 250 employees), unless a group entity is a public-interest entity.
These simplifications can translate into significant savings in time and fees, but they should not be applied blindly. Lenders, investors or shareholders’ agreements may still require audited or consolidated accounts, and an S.A. that no longer needs an approved statutory auditor (réviseur d’entreprises agréé) must again appoint a supervisory auditor (commissaire aux comptes).
This update comes while the broader reform of the Luxembourg accounting law (Bill No. 8286, filed in July 2023) is still making its way through Parliament.
We are here to help
As always, JW Partner stands ready to reassess the size category of your companies and groups, and to help you take full advantage of the new thresholds. Feel free to reach out to us at contact@jwpartner.lu for a free review of your needs and a quote.