Understanding the EU AI Act: Key Considerations for SMEs

The EU AI Act represents the first comprehensive legislative effort to regulate AI technologies on a global scale. It aims to foster a trustworthy environment for AI within the EU market by adopting a risk-based approach. This ensures that the obligations imposed on AI systems are proportionate to the risks they pose, aiming to minimise harm without stifling innovation.

Supporting SMEs and Start-ups

The EU AI Act includes several provisions specifically designed to support small and medium-sized enterprises (SMEs) and start-ups, acknowledging their crucial role in driving innovation. These provisions range from free access to regulatory sandboxes to simplified documentation requirements.

Key Benefits for SMEs

1. Access to Regulatory Sandboxes: SMEs and start-ups are granted free and prioritised access to regulatory sandboxes, allowing them to test and develop AI systems under regulatory supervision, provided they meet eligibility criteria.
2. Simplified Technical Documentation: SMEs can fulfil technical documentation requirements in a simplified format, reducing the burden of compliance.
3. Representation in Governance: The Act ensures SMEs are represented in governance structures, such as the Advisory Forum, ensuring their interests are considered.
4. Communication and Training: Member States are tasked with establishing communication channels and organising training activities to assist SMEs in understanding and complying with the AI Act.
5. Proportionate Compliance Costs: Compliance costs for SMEs are mandated to be reduced in proportion to their size and market share, ensuring financial feasibility.

Defining SMEs under the EU AI Act

The AI Act refers to Recommendation 2003/361/EC for the definition of SMEs. An enterprise is classified as an SME if it has fewer than 250 employees and an annual turnover of less than €50 million and/or an annual balance sheet total of less than €43 million. Within this bracket:

• Small Enterprise: Employs fewer than 50 individuals and has an annual turnover/balance sheet total of less than €10 million.
• Micro Enterprise: Employs fewer than 10 individuals and has an annual turnover/balance sheet total of less than €2 million.

Provisions for SMEs

Free and Priority Access to Regulatory Sandboxes

Regulatory sandboxes will be established by Member States to provide a controlled environment for developing and testing AI systems. These sandboxes offer regulatory oversight, helping authorities understand technical developments, improve supervision, and provide compliance guidance. Provisions for SMEs include:

• Free and priority access, provided they meet eligibility criteria.
• Simplified application procedures with clear instructions.
• Benefits from guidance on implementing the Act, standardisation documents, and certification.

Simplified Technical Documentation Requirements

High-risk AI systems must be accompanied by technical documentation demonstrating compliance. The AI Act allows SMEs to prepare this documentation in a simplified format, easing the compliance burden while ensuring adherence to required standards.

Representation in Governance Structures

SMEs are ensured representation in the AI Act’s governance structures, such as the Advisory Forum, which includes representatives from industry, civil society, and academia. This inclusion helps ensure that the needs and views of SMEs are considered in decision-making processes.

Communication and Training Initiatives

To support SME compliance, the AI Act mandates:

• The establishment or use of communication channels specifically for SMEs.
• Guidance and advice from national supervisory authorities.
• Specific awareness-raising and training activities tailored to SMEs’ needs.

Proportionate Compliance Costs

The AI Act mandates that compliance costs be reduced proportionately for SMEs. This includes lower fees for conformity assessments, which are necessary for high-risk AI systems before market deployment. The goal is to minimise financial barriers and support innovation among smaller players.

Consideration in Guidelines and Codes of Conduct

The specific needs of SMEs must be considered when developing guidelines, codes of conduct, and penalties under the AI Act. This ensures that compliance requirements are not disproportionately burdensome or costly for smaller enterprises.

Preparing for Compliance

The EU AI Act marks a significant step towards safer and fairer AI in the EU. While the legislation supports SMEs with additional initiatives and resources, achieving compliance will require substantial effort and investment. Early preparation is crucial to spread costs evenly and avoid last-minute challenges.

By understanding and leveraging the specific provisions for SMEs, small and medium-sized enterprises can navigate the EU AI Act more effectively, ensuring compliance while continuing to innovate and compete in the AI market.