Some of the more frequently asked questions about State aid are listed below with answers. If you have any queries which are not addressed here, please contact the State Aid Unit.
1) What happens when an undertaking receives aid from more than one public source? Where State aid is present, if an undertaking receives State aid from more than one source towards the same eligible costs, the total amount of State aid must be cumulated and remain within the relevant aid intensity ceiling. This rule applies to all sources of State aid, and also European structural funds if involved in the project.
2) Can support be given for export activities? No - following the World Trade Organisation (WTO) Agreement on Subsidies and Countervailing Measures, aid for export activities is prohibited. Export aid is defined as aid to export-related activities, namely aid directly linked to the quantities exported, to the establishment and operation of a distribution network or to other current expenditure linked to the export activity. Aid favouring domestic over imported goods is also prohibited under the WTO agreement.
3) Can aid be given for the operating costs of an undertaking? Operating aid is generally prohibited under the State aid regulations - e.g. any support for running costs, ongoing expenditure and working capital. The Commission considers that a company which needs support to meet its operating costs cannot be considered competitive and should not be propped up by State aid.
There are several exceptions to this :-
De minimis funding may be used to provide operating aid - up to €200,000 over a 3 year fiscal period (and taking into account any other de minimis received in the previous 3 years).
Limited operating aid may also be provided for the treatment of industrial waste under specific circumstances.
Commercial rate loans do not count as State aid, and so provide an alternative option for supporting operating costs. Contact the State Aid Unit for further details.
4) What do aid intensity limit and cash grant equivalent mean? Particular aid intensity limits are specified for each scheme approved under a block exemption or other framework. These determine the maximum level of public funding that can be given under the rules that apply to your project, and are expressed as a percentage of the total costs eligible for support. In the case of grants it is relatively easy to translate this into the amount of money that can be provided; however for soft loans and guarantees the aid element will have to be calculated - e.g. for loans this would be the difference between the soft and commercial interest rates. This aid element is called the cash grant equivalent.
5) What are the Assisted Areas (AAs) and regional aid limits? Certain areas of the EU, known as Assisted Areas, have been approved by the Commission as economically underdeveloped, and are eligible for specific levels of aid particularly aimed at creating investment and job creation in those areas. Based on the current EU Regional Aid Map there are three types of Assisted Area in Scotland - Tier 1, Tier 2 and Tier 3, all with differing aid intensity levels.
The Commission has approved the UK's map of Assisted Areas until 31 December 2020, setting out the aid limits that apply in each area. A copy of the UK map is available here.
Having Assisted Area status does not automatically entitle an undertaking to receive aid. It must be provided under an approved scheme, such as Scottish Enterprise's Regional Selective Assistance (RSA) scheme or similar.
6) What reporting requirements are there for State aid schemes? All public bodies must submit annual reports to the Commission, via the State Aid Unit, for each aid scheme they are authorised to operate. These should cover the calendar year and show:
- actual payments
- expenditure committed
- the number of companies aided
- the number of jobs created or maintained
More detailed information is required for aid given under one of the block exemptions. In some instances public bodies have cover to give the same kind of aid under both a block exemption and a separately approved scheme, in which case the aid must be reported under one or the other to ensure it is not double counted.
7) Is support to charities and universities exempt from State aid rules? Not necessarily. If they are involved in any commercial activities then State aid issues will need to be considered. Even where the organisation is not-for-profit, State aid rules may well apply. Apply the four key questions to determine whether support you are considering might be a State aid.
8) What is the Commission’s definition of an SME? The Commission’s guidance on the definition of what constitutes an SME came into force on 1 January 2005. The Commission considers a company to be an SME according to the following criteria –
Medium sized enterprises are those that :
- have fewer than 250 employees
- have an annual turnover not exceeding EUR 50 million or annual balance sheet total not exceeding EUR 43 million
- are independent*
Small enterprises are those that :
- have fewer than 50 employees
- have an annual turnover not exceeding EUR 10 million or annual balance sheet total not exceeding EUR 10 million
- are independent*
*Independent enterprise means no more than 25% of the capital or voting rights are owned by one or more enterprises which fall outside the SME definition. This threshold may be exceeded when an enterprise is held by a public investment corporation, Venture Capital Company or other institutional investors, provided they exercise no control.
Click here to get more information on SME definitions from the European Commission’s website
9) What exchange rate should be used when determining the value of a de minimis award? The official Commission exchange rate applicable on the date the offer of de minimis funding is made (date of written offer) should be used. The rate is updated monthly and can be accessed here.
10) What is the Commission’s reference interest rate to determine commercial rate loans? In January 2008, the European Commission (EC) published a new method of calculating reference and discount rates applicable to commercial loans. The new method conforms to market principles as it takes account of the specific situation of the company or project. It is based on IBOR (the InterBank Offered Rate) with weightings based on the credit worthiness of the specific undertaking. The new method applies from 1 July 2008 and details can be found here.
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