SMEs in the AI Era: The Impact of EU AI Act

The EU AI Act, proposed by the European Commission in April 2021, stands as the world's first comprehensive legislation on artificial intelligence, marking a significant step towards regulating this rapidly advancing technology. Following extensive negotiations and compromises, a provisional agreement between the European Parliament and the Council was reached in December 2023, anticipating the legislation's phased implementation starting in 2026. Amidst these regulatory shifts, small and medium-sized enterprises (SMEs) offering AI services find themselves navigating a landscape fraught with legal uncertainties.

Following the adoption, the EU AI Act sets a two-year timeline for most obligations to become binding, providing member states the necessary period to integrate the new rules domestically. The ban on prohibited AI systems becomes binding in six months, and obligations on foundation models, including transparency reports and risk assessments, are enforced after 12 months. Moreover, non-compliance with the law may incur penalties of up to 7% of global turnover or 35 million euros.