Answers to the following frequently asked questions
are given below. If you have any queries that are not
answered here, please submit your question to the
State Aid Unit.
What happens when an undertaking receives
aid from more than one public source ?
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.
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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.
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 Euros 200,000 over a 3 year fiscal period
(and taking into account any de minimis funding
received in the previous 3 years).
Where a company is in clear financial difficulties and
unlikely to survive in the short to medium term, there
limited scope to provide aid to keep the company
temporarily afloat - whilst a viable restructuring plan
is formulated. Strict conditions apply. Contact the
State Aid Unit for further details.
Limited operating aid may also be provided for the
treatment of industrial waste under specific circumstances.
Contact the State Aid Unit for further details
Commercial rate loans do not count as state aid, and
so provide an alternative option for supporting operating
costs.
What do aid intensity limit and
cash grant equivalent mean?
Particular aid intensity limits are specified for each
approved scheme. These determine the maximum level
of aid 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; for soft loans and guarantees
however 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 the Commission website has
details on how to work this out for soft loans and other
measures.
What is the difference between gross grant
equivalent (GGE) and net grant equivalent (NGE)?
The gross grant equivalent is simply the aid element of a
measure expressed before company taxes are deducted,
while with net grant equivalent, all relevant company taxes
have been deducted.
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 investment and job creation.
There are two types of Assisted Area - Tier 1 and Tier 2.
The former allows for higher aid intensity levels.
The Commission has approved the UK's map of Assisted
Areas, which sets out the aid limits that apply in each
area until 31 December 2013, although Tier 1 areas in
Scotland will be subject to review during 2010.
The Regional Aid map illustrating geographical coverage
can be viewed here.
Having Assisted Area status does not automatically
entitle an undertaking to receive aid. It must be provided
under an approved scheme such as the Scottish
Government's Regional Selective Assistance (RSA) scheme.
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 financial 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 see Annex III
of the regulations.
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.
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. See the Five Key Questions to
determine whether support you are considering might
be a State aid.
What is the Commission s definition of an SME ?
A new Commission 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 circumstances -
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*
Micro enterprises are those that :
- have fewer than 10 employees
- have an annual turnover not exceeding EUR 2 million
or
annual balance sheet total not exceeding EUR 2 million
- are independent*
*Independent enterprise 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.
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.
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.
The current UK reference rate is 1.35% (from 1 July)
but when determining the appropriate rate, weightings based
on the credit rating of the company and collateral offered
should be applied.
More information on these weightings, or margins, can be
found in this Commission notice.
Note : the reference rate was previously -
1.16% for 2010 (1 January to 30 June)
1.20% for 2009 (1 December to 30 December)
1.53% for 2009 (1 October to 30 November)
1.85% for 2009 (1 August to 30 September)
2.20% for 2009 (1 June to 31 July)
2.84% for 2009 (1 April to 31 May)
3.58% for 2009 (1 March to 31 March)
4.81% for 2009 (1 February to 28 February)
5.70% for 2009 (1 January to 31 January)
5.66% for 2008 (1 July to 31 December)
6.29% for 2008 (1 January to 30 June)
6.83% for 2007 (1 October to 31 December)
5.90% for 2007 (1 January to 30 September)
5.33% for 2006
5.81% for 2005