Reading and assigning a code

A business unit can perform many activities at once: a bakery might also run a small café; a joinery might install what it manufactures; a software house might host what it develops. NACE assigns a single class per unit, based on the unit's principal activity — the activity that contributes most to the value added of the unit.

Value added, not turnover. Turnover is a convenient proxy when value-added data are unavailable, but the principle is value added: how much of the unit's own labour and capital produced the observed output.

When several candidate classes are plausible, NACE prescribes a top-down decision procedure: pick the winning section first (by comparing value added across sections), then the winning division inside that section, then the winning group, then the winning class. This prevents a small niche activity from pulling the whole unit into an unrepresentative class just because that class is very specific.

A single legal unit roasts coffee, sells whole beans wholesale to restaurants, and runs a café on the ground floor. Three activities: manufacturing of coffee products (division 10.83), wholesale of beverages (46.34) and food and beverage service activities (56).

Applying the top-down method: compare value added at the section level first — section C (Manufacturing), section G (Wholesale and retail trade), section I (Accommodation and food service activities). Suppose the café produces more value added than the roasting and the wholesale combined. Section I wins. Descend: division 56 wins by construction. Group 56.1 (Restaurants and mobile food service activities). Class 56.10.

The whole unit is classified as 56.10, even though the roasting activity is genuinely present and might carry its own turnover line in the accounts.

· Confusing product with activity. A company that sells software is not automatically a software company: if it only resells, it belongs in wholesale/retail; if it develops, it belongs in 62.01.

· Using the trailing national digit to decide. Countries sometimes offer a very specific fifth-digit subclass that seems to describe the business perfectly. That is fine — but only after the four-digit class is settled by the top-down method.

· Registering a legal unit versus a local unit. NACE codes apply to statistical units. A holding company with subsidiaries in different sectors gets a code that reflects the holding activity, not the aggregate of its subsidiaries.