Member Article

How can undertakings access state aid and under what conditions can the state grant this aid?

Concept of state aid

• State aid is any economic or financial support granted by the state, or from state resources, that gives an undertaking a selective advantage which may affect trade between Member States. State aid is, in principle, prohibited. Therefore, it must be notified to the European Commission in order for it to decide whether it is compatible with the internal market.

• Public support does not constitute state aid when the state acts as a private investor in a market economy, maximising the return on risk, or when the measures adopted apply generally, in a non-selective way, to different economic agents. Examples of this include wage subsidies and suspension of corporate income tax and/or VAT payments or social security contributions.

• In addition, there are European regulations that allow certain support to be granted, without imposing a duty to notify the European Commission. This is the case of the De Minimis Regulation (when the support granted does not exceed certain amounts) and of the General Block Exemption Regulation (an aid package aimed at SMEs considered compatible with the internal market provided the aid meets certain requirements).

The COVID-19 pandemic

• To combat the economic effect caused by the COVID-19 pandemic, the European Commission decided to relax the rules for granting state aid by creating a Temporary Framework (“TF19”). This will apply until the end of 2020, with some measures provided for in the framework possibly extending until July 2021. TF19 excludes from its scope of eligibility undertakings that were in difficulty as of 31 December 2019, subject to some limited exceptions.

• If it is not possible to use the measures provided for in TF19, especially when the undertaking was in difficulty as at 31 December 2019 , undertakings may benefit from public support under other aid schemes. In the context of the COVID-19 pandemic, the “compensation aid” scheme, which is aimed at remedying the damage caused by the pandemic and often takes the form of guarantees or loans, assumes particular relevance.

To read the article in full, go here