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The State Aid Tests

There are four key tests or questions which need to be considered in order to establish whether a measure constitutes State aid. These tests are cumulative and all four must be met for State aid to be present. We recommend that you check with the State Aid Unit where any doubt exists.

Before the State aid tests can be applied it is necessary to determine whether the following two aspects are present:

  1.  

Is the beneficiary an 'undertaking'? An undertaking is defined as any entity, regardless of its legal status, which is engaged in economic (commercial/competitive) activity and where there is a market in comparable goods or services.

2.

Is an undertaking engaged in economic activity? This is defined as offering goods and/or services on a given market and which could, at least in principle, be carried out by a private operator for remuneration in order to make profits.

If these two initial assumptions are correct, the four tests must then be applied to determine the possible presence of State aid.   The tests are:

Test 1

 

  • There has been an intervention by the State or through State resources which can take a variety of forms (e.g. grants, interest and tax reliefs, guarantees, government holdings of all or part of a company, or providing goods and services on preferential terms, etc)

Test 2

  • The intervention gives the recipient an advantage on a selective basis, for example to specific companies or industry sectors, or to companies located in specific regions.

Test 3

  • Competition has been or may be distorted.

Test 4

  • The intervention is likely to affect trade between Member States.

Contact us if you require more clarification on any of these criteria, or if you would like to discuss a particular scenario or project that you have in mind.

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