Regional aid and aid for SMEs - Key issues identified by practitioners -

1. Regional aid and aid for SMEs- Key issues identified by practitioners - Yvonne SIMON, Legal officer, DG REGIO Disclaimer: The views expressed are those of the author and cannot be regarded as stating an official position of the European Commission.

2. "I do not understand why we need to apply State aid rules to funding which is coming from the Structural Funds. It is EU money and State aid rules should not apply to this."

3. Union resources are 'State resources' in the meaning of the State aid rules if national authorities have discretion as to the use of these resources (see para 60 of the Notion of Aid Notice). For Structural Funds, Member States have discretion about the use of the funding. It is therefore 'State resources', i.e. State aid rules can apply.

4. "I understand that a 100% public financing is possible under State aid rules if the support does not qualify as State aid. Can this apply to financings in the field of regional policy?"

5. It is true that financing which does not meet all criteria of Art. 107(1) TFEU for being a 'State aid', has, in principle, no aid intensity limits. • However: • Some State aid rules (e.g. Altmark, de minimis, etc) limit the amount of support as an element for falling outside the notion of aid, i.e. the 'support intensity' is limited even though it is not strictly a 'State aid'. • Where financing is 'no aid' it may still be necessary to avoid spill over to other activities of the recipient by keeping separate accounts

6. "We are an assisted region and we are planning a wind energy infrastructure. Instead of relying on the State aid provisions for energy, could we apply the State aid rules for regional aid?"

7. No. The application of the RAG and of the regional aid section of the GBER are excluded for energy generation, distribution and infrastructure. Please note that energy efficiency support is not covered by the exclusion and therefore possible under the regional aid section of the GBER.

8. "I understand that the regional aid section of the GBER can apply for innovation support, but it seems that the regional aid section cannot be applied to 'sectorial' schemes. Can my innovation scheme fit under the GBER even if it is targeted only at a few sectors?"

9. The objective of a measure is the starting point for choosing the relevant State aid rules • If the primary objective is 'regional', the GBER regional aid section can apply to innovation support • However, the GBER regional aid section does not apply to sectorial schemes • Sectorial: if it applies to < 5 classes of the NACE code, Art. 2(45) GBER 2014; • ad hoc aid is possible under the GBER • Notification can allow for sectorial schemes as regional aid • The RDI GBER section can apply to sectorial schemes

10. "Before the application for aid was handed in the aid applicant has entered already into a pre-contract for some equipment. He has also already acquired land that is needed for the investment project. Does this prevent us from granting aid to him under our GBER scheme?"

11. Art. 6 GBER: aid has to have an incentive effect • Aid granted under GBER schemes is deemed to have an incentive effect if the written application for aid is handed in before 'start of works'. • Art. 2(23) GBER defines 'start of works' as • Start of construction works or first legally binding commitment for equipment or other irreversible commitment • No 'start of works': buying of land, preparatory works (incl permits and feasibility studies)

12. In result: • The 'buying of land' does not hamper the incentive effect under the GBER. • The 'pre-contract' for equipment may prevent the incentive effect if it means a binding commitment that makes the investment irreversible. • Irreversibility is assessed from an economic standpoint (high costs to abandon the project) • If the pre-contract qualifies as 'start of works', the aid for the whole project does not have an incentive effect and may not be granted.

13. "For an investment project, can we consider the land as 'own contribution' of the investor? Could costs for land and/or for equipment be considered eligible cost?"

14. Own contribution • Regional aid requires an 'own contribution' of > 25% to the eligible cost as a compatibility criterion. • 'Own contribution' by aid recipient, free of public support • Land/equipment can be counted as own contribution if it is: • part of the eligible cost, and • acquired on market terms, i.e. free of public support Eligible cost • Depends on the applicable legal basis • Regional aid: land and equipment can count as eligible cost • Local infrastructure (Art. 56 GBER): land, if it was acquired for the project If for the land/equipment aid is granted it cannot count as 'own contribution'

15. "In 2010 we gave regional investment aid to a large enterprise (LE) under a scheme. We see now that the company did not hand in documentation for showing an incentive effect as required under the 2008 GBER. Can the retroactivity clause in Art. 58 of the new GBER help?"

16. 2008 GBER required that LEs provide documentation for showing the incentive effect • 2014 GBER requires documentation only for ad hoc aid to LEs • Art. 58(1) GBER provides that the 2014 GBER applies retroactively if the aid fulfils the conditions of the 2014 GBER • For regional aid, the conditions for aid to LEs have become stricter in that in c-areas it can only apply to 'new economic activities'. In result, 2014 GBER covers the regional aid granted to the LE only: • if it is an a-region, or • for a new activity in a c-region

17. "An SME applies for: • regional investment aid for a new production line, • working capital under a risk finance scheme, and • for de minimis aid for other unrelated investments. Assuming that the other requirements of the regional, risk finance and de minimis schemes are fulfilled, is there still an issue of cumulation of aid?"

18. For the GBER, Art. 8 sets out the cumulation rules There are also rules in the de minimis regulation, and for notified schemes in the rules governing these schemes • The basic distinction is always whether the aid relates to the 'same eligible cost' or to other costs • Different eligible cost: no cumulation issue, i.e. support can be cumulated • Same eligible cost: support may not exceed the highest permissible aid In result, if the regional aid scheme also covers working capital (possible in a-regions) there can be a cumulation issue for the working capital. For the rest is it understood that it relates to different eligible cost.

19. "In our regional aid scheme we want to cover overhead costs. For the calculation we want to use the 'simplified cost' methods of the CPR. Is this in line with the GBER rules?"

20. Draft GBER amendment: clarification that the CPR – 'simplified cost' rules are GBER-conform if the type of cost is covered by the relevant GBER provisions • It should be GBER-conform, if: • Project is at least partly financed from ESIF, and • Calculation of amounts is based on the CPR rules, and • The relevant GBER provision covers the cost category In result, if 'overheads' (operating aid) can be covered under the regional aid scheme, the calculation based on CPR rules is GBER-conform

21. "I need legal certainty for my project. Please tell me how I should to set it up and draft my support scheme to have it compliant with State aid rules"

22. MS have flexibility on how to set up projects/schemes. Commission services may not replace MS' choices. • For achieving State aid compliance, MAs • should first discuss with their State aid contact points in national administrations • TA budget may be used for getting expert advice • For advise on setting up of schemes or individual projects, MS may contact COMP for pre-notification talks • It is a key part of cohesion policy for 2014-2020 to increase administrative capacity in MS in the field of State aid

23. "I have a question about the interpretation of State aid rules. Where can I get guidance?"

24. Get in touch with the State aid contact point in your national administration • 'eStateAid-WIKI' • Forum where MS' authorities can submit questions on the interpretation of State aid rules; • Submitting question is limited to few authorities per MS; 'read-access' is provided more widely – first step is sending a request to the national State aid authority • Other ways of obtaining guidance (expert advice, or contacting COMP, or REGIO) remain possible.

25. Thank you for your attention!