Information from the Commission - Draft Commission Regulation on the application of Articles 87 and 88 of the EC Treaty to State aid to small and medium-sized enterprises
28. 3. 2000 EN Official Journal of the European Communities C 89/15 DRAFT COMMISSION REGULATION ON THE APPLICATION OF ARTICLES 87 AND 88 OF THE EC TREATY TO STATE AID TO SMALL AND MEDIUM-SIZED ENTERPRISES (2000/C 89/08) Invitation to submit comments on the draft Commission Regulation on the application of Articles 87 and 88 of the EC Traty to State aid to small and medium-sized enterprises. Interested parties may submit their coments within one month of the date of publication of this draft Regulation to: European Commission Directorate-General for Competition Directorate G Rue de la Loi/Wetstraat 200 B-1049 Brussels Fax (32-2) 296 98 13. Draft Commission Regulation on the application of Articles 87 and 88 of the EC Treaty to State aid to small and medium-sized enterprises THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, Having regard to Council Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid (1), and in particular point (a)(i) and (b) of Article 1(1) thereof, Having published a draft of this Regulation (2), Having consulted the Advisory Committee on State Aid, Whereas: (1) Regulation (EC) No 994/98 empowers the Commission to declare, in accordance with Article 87 of the Treaty, that under certain conditions aid to small and medium-sized enterprises is compatible with the common market and not subject to the notification requirements of Article 88(3) of the Treaty. (2) Regulation also (EC) No empowers the Treaty, the 994/98 in accordance with Article 87 Commission to declare, of that aid that complies with the map approved by the Commission for each Member State for the grant of regional aid is compatible with the common market and is not subject to the notification requirements of Article 88(3) of the Treaty. (3) The Commission has applied Articles 87 and 88 of the Treaty to small and medium-sized enterprises in and outside assisted areas in numerous decisions and has also stated its policy, most recently in the Community guidelines on State aid for small and medium-sized enter- prises (3) and in the guidelines on national regional aid (4). In the light of the Commission’s considerable experience in applying those Articles to small and medium-sized enterprises and in the light of the general texts relating to small and medium-sized enterprises and to regional aid those issued by the Commission on the basis of is appropriate, with a view to ensuring provisions, administration efficient simplifying without weakening Commission monitoring, the that Commission should make use of the powers conferred by Regulation (EC) No 994/98. supervision and it (4) Small and medium-sized enterprises play a decisive role in job creation and, more generally, act as a factor of social stability and economic drive. However, their development may be limited by market imperfections. They often have difficulties in obtaining capital or credit, given the risk-shy nature of certain financial markets and the limited guar- antees that they may be able to offer. Their limited resources may also restrict their access to information, potential notably markets. Having regard to those considerations, the purpose of the aid exempted by this Regulation should be to facilitate the development of the economic activities of small and medium-sized enterprises, provided that such aid does not adversely affect trading conditions to an extent contrary to the common interest. new technology regarding and (1) OJ L 142, 14. 5. 1998, p. 1. (2) OJ C 89, 28. 3. 2000, p. 15. (3) OJ C 213, 23. 7. 1996, p. 4. (4) OJ C 74, 10. 3. 1998, p. 9. C 89/16 EN Official Journal of the European Communities 28. 3. 2000 (5) This Regulation should exempt any individual aid that meets all the relevant requirements of this Regulation, and any aid scheme, provided that any aid that could be granted under the relevant requirements of this Regulation. With a view to ensuring efficient supervision and simplifying adminis- tration without weakening Commission monitoring, aid schemes and individual grants outside any aid scheme should contain an express reference to this Regulation. such scheme would meet all Commission on the basis of objective criteria and published European Communities and on the Internet. in the Official Journal the of (10) Having regard to the differences between small enterprises and medium-sized enterprises, different ceilings of aid intensity should be set for small enterprises and for medium-sized enterprises. (6) This Regulation should apply without prejudice to special rules in Regulations and Directives concerning State aid in certain sectors, such as shipbuilding and steel, and should not apply to agriculture and fisheries. (11) The ceilings of aid intensity should be fixed, in the light of the Commission’s experience, at a level that strikes the appropriate balance between minimising distortions of competition in the aided sector and the objective of facili- tating the development of the economic activities of small and medium-sized enterprises. (12) (7) In order to eliminate differences that might give rise to in order to facilitate coor- distortions of competition, dination betrween different Community and national initiatives concerning small and medium-sized enterprises, and for reasons of administrative clarity and legal certainty, the definition of ásmall and medium-sized enter- prisesí used in this Regulation should be that laid down in the Annex to Commission Recommendation 96/280/EC of 3 April 1996 concerning the definition of small and medium-sized enterprises (1). That definition was also used in the Community guidelines on State aid for small and medium-sized enterprises (2) It that is appropriate to establish further conditions should be fulfilled by any aid scheme or individual aid exempted by this Regulation. Having regard to Article 87(3)(c) of the Treaty, such aid should not normally have the sole effect of continuously or periodically reducing the operating costs which the beneficiary be to would proportionate to be overcome in order to secure the socio-economic benefits deemed to be in the Community interest. It is therefore appropriate to limit the scope of this Regulation to aid granted in relation to certain tangible and intangible investments, certain services supplied to beneficiaries and certain other activities. to the handicaps that have normally should bear, have and (8) In accordance with the established practice of the Commission, and with a view to better ensuring that aid is proportionate and limited to the amount necessary, thresholds should be expressed in terms of aid intensities in relation to a set of eligible costs, rather than in terms of maximum aid amounts. (9) In order to determine whether or not aid is compatible with the common market pursuant to this Regulation, it is necessary to take into consideration the aid intensity and thus the aid amount expressed as a gant equivalent. The calculation of the grant equivalent of aid payable in instalments and aid in the form of a soft loan several requires the use of market interest rates prevailing at the time of grant. With a view to a uniform, transparent, and simple application of the State aid rules, the market rates for this Regulation should be deemed to be the reference rates, provided that, in the case of a soft loan, the loan is backed by normal security and does not involve abnormal risk. The reference rates should be those, which are periodically fixed by the the purposes of (13) This Regulation should exempt regardless enterprises aid to small of and medium-sized location. Investment and job creation can contribute to the economic development of less favoured regions in the in Community. Small and medium sized enterprises those regions suffer from both the structural disadvantage of the location and the difficulties deriving from their and size. should medium-sized enterprises benefit from higher ceilings. in assisted regions appropriate therefore small that is It (14) In order not to favour the capital factor of an investment over the labour factor, provision should be made for the possibility of measuring aid to investment on the basis of either the costs of the investment or the costs of new employment linked to the carrying-out of the investment project. (15) In the light of the World Trade Organisation (WTO) Agreement on Subsidies and Countervailing Measures (3), this Regulation should not exempt export aid or aid favouring domestic over imported products. (1) OJ L 107, 30. 4. 1996, p. 4. (2) See footnote 3. (3) OJ L 336, 23. 12. 1994, p. 156. 28. 3. 2000 EN Official Journal of the European Communities C 89/17 (16) Having regard to the need to strike the appropriate balance between minimising distortions of competition in the aided sector and the objectives of this Regulation, it should not exempt individual aid grants which exceed a fixed maximum amount, whether or not made under an aid scheme exempted by this Regulation. That amount should be fixed also having regard to the Commission’s experience in this area, notably when applying the multi- sectoral framework on regional aid for large investment projects (1). (17) In order to ensure that the aid is necessary and acts as an incentive to develop certain activities, this Regulation should not exempt aid for activities in which the bene- ficiary would already engage under market conditions alone. HAS ADOPTED THIS REGULATION: Article 1 Scope 1. Without prejudice to special Community regulations or directives under the EC Treaty governing the granting of State aid in specific sectors, this Regulation applies to aid granted to small and medium-sized enterprises in all sectors. 2. This Regulation shall not apply: (a) to activities linked to the production, processing or marketing of products listed in Annex I to the Treaty; (b) to aid to export-related activities, namely aid directly linked to the establishment and to the quantities exported, operation of a distribution network or to other current expenditure linked to the export activity. (18) This Regulation should not exempt the aid cumulated with other State aid, including aid granted by national, regional or local authorities, or Community assistance, when such cumulation exceeds the thresholds fixed in this Regulation. Article 2 Definitions For the purpose of this Regulation: (19) In order to ensure transparency and effective monitoring, in accordance with Article 3 of Regulation (EC) No 994/98, it is appropriate to establish a standard format in which Member States should provide the Commission with summary information whenever, in pursuance of this Regulation, an aid scheme is implemented or an indi- vidual aid outside such schemes is granted, with a view to publication in the Official the European it is appropriate to Communities. For the same reasons, establish rules concerning the records that Member States should keep regarding the aid exempted by this Regulation. For the purposes of the annual report to be submitted to the Commission by Member States, it is appropriate for the Commission to establish its specific requirements, including, in view of the wide availability of the necessary technology, information in computerised form. Journal of (20) Having regard to the Commission’s experience in this is area, aid in particular the frequency with which it generally necessary to revise State aid policy, it is appro- priate to limit the period of application of this Regulation to five years. Should this Regulation expire without being extended, aid schemes already exempted by this Regu- lation should continue to be exempted for six months, in accordance with Article 4 of Regulation (EC) No 994/98; (1) OJ C 107, 7. 4. 1998, p. 7. (a) áaidí shall mean any measure fulfilling all the criteria laid down in Article 87(1) of the Treaty; (b) ásmall and medium-sized enterprisesí shall mean enterprises as defined in Annex I; extension of an existing establishment, or (c) áinvestment in tangible assetsí shall mean an investment in fixed assets relating to the creation of a new establishment, the the engagement in an activity involving a fundamental change in the product or production process of an existing estab- lishment (in particular through rationalisation, diversifi- in fixed assets cation or modernisation). An investment undertaken in the form of the takeover of an establishment which has closed or which would have closed had it not been purchased shall tangible also be investment; regarded as (d) áinvestment in intangible assetsí shall mean investment in transfer of technology by the acquisition of patent rights, licences, know-how or unpatented technical knowledge; (e) ágross aid intensityí shall mean the aid amount expressed as a percentage of the project’s eligible costs. All figures used shall be taken before any deduction for direct taxation. Where aid is awarded in a form other than a grant, the aid amount shall be the grant equivalent of the aid. Aid payable in several instalments shall be discounted to its value at the moment of granting. The interest rate to be used for discounting purposes and for calculating the aid amount in a soft loan shall be the reference rate applicable at the time of grant; (f) ánet aid intensityí shall mean the aid amount net of tax expressed as a percentage of the project’s eligible costs; C 89/18 EN Official Journal of the European Communities 28. 3. 2000 (g) ánumber of employeesí shall mean the number of annual (ALU), namely the number of persons time in one year, part-time and seasonal labour units employed full work being ALU fractions. Article 3 Preliminary conditions for exemption fulfilling all Individual aid outside any scheme, the 1. conditions of this Regulation, shall be compatible with the common market within the meaning of Article 87(3) of the Treaty and shall be exempt from the notification requirement of Article 88(3) of the Treaty provided that it constains an express reference to this Regulation, by citing its full title and publication reference in the Official the European Communities. Journal of Aid schemes fulfilling all the conditions of this Regulation 2. shall be compatible with the common market within the meaning of Article 87(3) of the Treaty and shall be exempt from the notification requirement of Article 88(3) of the Treaty provided that: (a) any aid that could be awarded under such scheme fulfils all the conditions of this Regulation; (b) the scheme provided that all aid awarded under it must also fulfil all the conditions of this Regulation; (c) the scheme contains an express reference to this Regulation, title and publication reference in the by citing its full Official Journal of the European Communities. Article 4 Investment 1. Aid for investment in tangible and intangible assets inside or outside the Community shall be compatible with the common market within the meaning of Article 87(3) of the Treaty and shall be exempt from the notification requirements of Article 88(3) of the Treaty if it fulfils the conditions of paragraphs 2 to 6. 2. The gross aid intensity shall not exceed: (a) 15 % in the case of small enterprises; (b) 7,5 % in the case of medium-sized enterprises. 3. Where the investment takes place in areas which qualify for regional aid, the aid intensity shall not exceed the level of regional investment aid determined in the map approved by the Commission for each Member State by more than: (a) 10 percentage points gross in areas covered by Article 87(3)(c), provided that the total net aid intensity does not exceed 30 %; or (b) 15 percentage points gross in areas covered by Article 87(3)(a), provided that the total net aid intensity does not exceed 65 %. The higher regional aid ceilings apply only if the aid is granted under the condition that the investment is granted under the condition that the investment is maintained in the recipient region for recipient’s and that contribution to its financing is at least 25 %. five years least the at 4. The thresholds fixed in paragraphs 2 and 3 apply to intensity of the aid calculated either as a percentage of the the wage investment’s eligible costs or as a percentage of costs of employment created by the carrying-out of an (aid to job creation) or a combination thereof, investment provided the aid does not exceed the most favourable amount resulting from the application of either calculation. the In case the aid is calculated on the basis of 5. investment’s costs, tangible investment the eligible costs of shall be the costs relating to investment in land, buildings, machinery and equipment. In the transport sector, semi-mobile and mobile transport equipment shall not be included in the eligible costs. The eligible costs of intangible investment shall be the costs of acquisition of the technology. 6. In case the aid is calculated on the basis of jobs created, the amount of the aid shall be expressed as a percentage of the relating to the wage costs over a period of employment created under the following conditions: two years (a) job creation shall be linked to the carrying-out of a project of investment in tangible or intangible assets. Jobs shall be created within three years of the investment’s completion; (b) it shall lead to a net increase in the number of employees in the particular establishment, compared with the average over the past twelve months; and (c) the employment created shall be maintained during a minimum period of two years. Where the aid ceilings for regional aid are applied, this period shall be five years. Article 5 Consultancy and other services and activities Aid to small and medium-sized enterprises that fulfils the following conditions shall be compatible with the common market within the meaning of Article 87(3) of the Treaty and shall be exempt from the notification requirements of Article 88(3) of the Treaty: (a) for services provided by outside consultants, the gross aid shall not exced 50 % of the costs of such services. The services concerned shall not be a continuous or periodic activity nor relate to the enterprise’s usual operating expen- diture, such as routine tax consultancy services, regular legal services, or advertising; 28. 3. 2000 EN Official Journal of the European Communities C 89/19 (b) for participation in fairs and exhibitions, the gross aid shall not exceed 50 % of the costs of renting, setting up and running the stand. This exemption shall only apply to the first participation of an enterprise in a certain fair or exhibition. Article 6 Large individual aid grants This Regulation shall not exempt an individual aid grant where either of the following two criteria are met: (a) the total project cost is at least EUR 50 000 000 and the aid intensity is at least 50 % of the aid ceiling in the area concerned and aid per job created amounts to at least EUR 40 000; or (b) the total aid is at least EUR 50 000 000. Article 7 Necessity for the aid is This Regulation shall only exempt aid if, before work on the aided project the recipient’s aid application is received by the Member State or the tax or similar legislation establishing in principle the legal right to the aid without further exercise of discretion by the Member State is adopted. started, Article 8 Cumulation The aid ceilings fixed in Articles 4, 5 and 6 shall apply 1. regardless of whether the support is financed entirely from State resources or is partly financed by the Community. for the aided project 2. Aid exempted by this Regulation shall not be cumulated with other State aid within the meaning of Article 87(1) of the Treaty, or with other Community funding, if such cumulation would result in an aid intensity exceeding that fixed by this Regulation. Article 9 Transparency and monitoring On implementation of an aid scheme, or grant of indi- 1. vidual aid outside any scheme, exempted by this Regulation, Member States shall, within 10 working days, forward to the Commission, with a view to its publication in the Official the Journal of information regarding such aid scheme or individual aid in the form laid down in Annex II. the European Communities, a summary of 2. Member States shall maintain detailed records regarding the aid schemes exempted by this Regulation, the individual aid granted under those schemes, and the individual aid exempted by this Regulation that is granted outside any existing aid scheme. Such records shall contain all information necessary to establish that the conditions for exemption, as laid down in this Regulation, are fulfilled. Member States shall keep a record regarding an individual aid for 10 years from the date on which it was granted, and regarding an aid scheme, for 10 years from the date on which the last individual aid was granted under such scheme. On written request, the Member State concerned shall provide the Commission, within a period of 20 working days or such longer period as may be fixed in the request, with all the information which the Commission considers necessary to assess whether the conditions of this Regulation have been complied with. 3. Member States shall compile a report on the application of this Regulation in respect of each whole or part calendar year during which this Regulation applies, in the form laid down in Annex III, also in computerised form. Member States shall provide the Commission with such report no later than three months after the expiry of the period to which the report relates. Article 10 Entry into force and period of validity 1. This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Communities. It shall remain in force for a period of five years. At the end of the period of validity of this Regulation, aid remain 2. this Regulation shall schemes exempted during an adjustment period of six months. exempted under This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels,. For the Commission. Member of the Commission C 89/20 EN Official Journal of the European Communities 28. 3. 2000 ANNEX I Definition of small and medium-sized enterprises (extract from the Commission Recommendation of 3 April 1996 concerning the definition of small and medium-sized enterprises (OJ L 107, 30. 4. 1996, p. 4)) 1. Small and medium-sized enterprises, hereinafter referred to as SMEsí, are defined as enterprises which: Article 1 - have fewer than 250 employees, and - have either, - an annual turnover not exceeding ECU 40 million, or - an annual balance-sheet total not exceeding ECU 27 million, - conform to the criterion of independence as defined in paragraph 3. 2. Where it is necessary to distinguish between small and medium-sized enterprises, the ásmall enterpriseí is defined as an enterprise which: - has fewer than 50 employees and - has either, - an annual turnover not exceeding ECU 7 million, or - an annual balance-sheet total not exceeding ECU 5 million, - conforms to the criterion of independence as defined in paragraph 3. 3. Independent enterprises are those which are not owned as to 25 % or more of the capital or the voting rights by one enterprise, or jointly by serveral enterprises, falling outside the definitions of an SME or a small enterprise, whichever may apply. This threshold may be exceeded in the following two cases: - if the enterprise is held by public investment corporations, venture capital companies or institutional investors, provided no control is exercised either individually or jointly; - if the capital is spread in such a way that it is not possible to determine by whom it is held and if the enterprise declares that it can legitimately presume that it is not owned as to 25 % or more by one enterprise, or jointly by several enterprises, falling outside the definitions of an SME or a small enterprise, whichever may apply. 4. In calculating the thresholds referred to in paragraphs 1 and 2, it is therefore necessary to cumulate the relevant figures for the beneficiary enterprise and for all the enterprises that it directly or indirectly controls through possession of 25 % or more of the capital or of the voting rights. 5. Where it is necessary to distinguish micro-enterprises from other SMEs, these are defined as enterprises having fewer than 10 employees. 6. Where, at the final balance sheet date, an enterprise exceeds or falls below the employee thresholds or financial ceilings, this is to result in its acquiring or losing the status of SMEí, ámedium-sized enterpriseí, ásmall enterpriseí or ámicro-enterpriseí only if the phenomenon is repeated over two consecutive financial years. 7. The number of persons employed corresponds to the number of annual working units (AWU), that is to say, the number of full-time workers employed during one year with part-time and seasonal workers being fractions of AWU. The reference year to be considered is that of the last approved accounting period. The turnover and balance sheet total thresholds are those of the last approved 12-month accounting period. In the 8. case of newly-established enterprises whose accounts have not yet been approved, the thresholds to apply shall be derived from a reliable estimate made in the course of the financial year. 28. 3. 2000 EN Official Journal of the European Communities C 89/21 Form of summary information to be provided whenever an aid scheme exempted by this Regulation is implemented and whenever an individual aid exempted by this Regulation is granted outside any aid scheme ANNEX II Member State (Region): Date of implementation (aid scheme) or grant (individual aid): Name and address of responsible authority: Title of aid scheme implemented or name of beneficiary granted individual aid: Objective of aid: Sectors concerned: Legal basis: Annual budget: Maximum aid intensity: Duration (1) in years and months: Other information (optional): (1) Time-limit until which aid may be granted on the basis of the scheme. ANNEX III Form of periodic report to be provided to the Commission Joint annual reporting format on existing State aid under the EC Treaty, aid exempted under a regulation adopted pursuant to Council Regulation (EC) No 994/98 and subsidies under the WTO Agreement on subsidies and countervailing measures (SCM Agreement) EXPLANATORY NOTE Member States are advised to use those formats for their reporting obligations to the Commission under Article 88(1) of the EC Treaty and under group exemption regulations adopted on the basis of Council Regulation (EC) No 994/98. The formats are adapted to the two requirements and should be used instead of the format which was sent to the Member States by letter of 22 February 1994. As regards the notification obligations imposed by Article 25 ASCM the agreed WTO format should continue to be used. The reports should also be provided in computerised form. Existing State aid and exempted aid schemes The information exclusively reserved for the Commission on existing State aid and exempted aid schemes is contained in Section A of the joint format. This section can be filled in in any official language of the Union. WTO ASCM The information required under Article 25 ASCM and which will be copied on behalf of the Member States to the WTO is contained in the Section B of the joint format. This part has to be filled in in one of the official languages of the WTO which are English, French and Spanish. SECTION A: Information under Article 88(1) EC Treaty on the aid scheme (Information contained in this section A will not be transmitted to the WTO and can be filled in in any official language of the European Union) C 89/22 EN Official Journal of the European Communities 28. 3. 2000 A. 1. FORMAT OF DETAILED ANNUAL REPORT (not applicable) A. 2. FORMAT OF SIMPLIFIED ANNUAL REPORT TO BE SUBMITTED FOR ALL EXISTING SCHEMES NOT REPORTED UNDER A. 1 AND FOR ALL EXEMPTED AID For new aid schemes covered by the accelerated clearance procedure or schemes with an annual budget of not more than ECU 5 million, give only the information requested in points 1, 2. 1, 2. 2. 1 and 2. 2. 2 (very simplified report). 1. 2. Name of scheme in original language Expenditure under scheme Separate figures should be provided for each aid instrument in the scheme (e. g. grant, guarantees). Provide figures on expenditure or commitments, revenue losses and other financial loan, relevant to the granting of aid (e. g. period of recovered, default payments on guarantees net of premium income and sums recovered. low interest loans, factors interest subsidies, default rates on loans net of sums For exempted general training aid, documentary evidence should be given regarding the qualification of the training as general. These expenditure figures should be provided on the following basis: For year n, provide expenditure forecasts or estimated revenue losses due to tax expenditure For year n-1, indicate: 2. 1. 2. 2. 2. 2. 1. Expenditure committed, or estimated revenue losses due to tax expenditure, for new assisted projects and actual payments for new and current projects. 2. 2. 2. Number of new recipients and number of new projects assisted, together with estimated number of jobs created or maintained. 2. 2. 3. (not applicable) 2. 2. 4. (not applicable) 3. Changes (administrative or other) introduced during the year