State Aid Extension Update – Commission Adopts Amended State Aid Temporary Framework

This article was written by Dr Annalies Muscat and Dr Laura Spiteri

On 3 April, 2020, the European Commission adopted an extension to the State Aid Temporary Framework (the “Framework”), which is to form part of the Framework that was initially put into effect on 19 March, 2020. The amended Framework provides for additional types of aid measures intended to help businesses involved in the fight against the current pandemic and to preserve employment.

The extended Framework allows for more flexibility with the cumulation of State aid. While the initial Framework did not allow for aid in the form of guarantees on loans to be cumulated with aid in the form of subsidised interest rates on loans, the extended Framework does away with this, provided that the aid is not granted for the same underlying loan and the conditions in the Framework are met. Such State aid may also be cumulated with de minimis aid – aid that does not exceed €200,000 over a three year period.

The amended Framework also adds five additional types of aid measures:

• i. aid for COVID-19 related research and development – this allows Member States to grant aid in the form of direct grants, repayable advances, or tax advantages for relevant research and development. The aid must be granted by 31 December, 2020 and may cover 100% of the eligible costs for fundamental research but must not exceed 80% of eligible costs for industrial research and experimental development. The aid granted may be increased by 15% if more than one Member State supports the research project or if there is cross-border collaboration on the project. Such aid may not be combined with other investment aid for the same eligible costs.One of the conditions for this type of aid is that the aid beneficiary has to commit to grant non-exclusive licences under non-discriminatory market conditions to third parties in the EEA.

• ii. investment aid for testing and upscaling infrastructures – Member States can provide aid in the form of direct grants, tax advantages, repayable advances, and no-loss guarantees to support investments that enable the construction or upscaling of infrastructures that are required to develop and test products, up to first industrial deployment. These products include, inter alia, medicinal products, vaccines, and medical devices. The investment must be concluded within six months from the granting of the aid. Should this deadline not be met, 25% of the aid granted would have to be reimbursed. On the other hand, the maximum amount of aid may be increased by 15% if the investment is completed within two months or if the investment is supported by more than one Member State. Such aid may not be combined with other investment aid for the same eligible costs.

• iii. investment aid for the production of COVID-19 related products – Member States are allowed to grant aid in the form of direct grants, tax advantages, repayable advances, and no-loss guarantees to support investment enabling the rapid production of products related to COVID-19. The investment must be concluded within six months from the granting of the aid. Should this deadline not be met, 25% of the aid granted would have to be reimbursed unless the delay was caused by extraneous factors. On the other hand, the maximum amount of aid may be increased by 15% if the investment is completed within two months or if the investment is supported by more than one Member State. Such aid may not be combined with other investment aid for the same eligible costs.

• iv. aid in the form of tax payment deferrals and/or suspensions of social security contributions – to reduce liquidity problems that undertakings are facing and to preserve employment. Member States can grant temporary deferrals of taxes or of social security contributions to undertakings present on markets that have been hit the hardest by the viral outbreak. For this reason, for such aid to be compatible with the internal market, it cannot be of general application.

• v. aid in the form of wage subsidies for employees – Member States can contribute to the wage costs of those undertaking that operate in sectors that have suffered the most as a result of COVID-19, and which would otherwise lay off employees. The wage subsidy is granted over a maximum period of twelve months and must not exceed 80% of the monthly gross salary of the benefitting employees. Furthermore, such aid must be restricted to certain sectors, regions, or types of undertakings in order to be compatible with the internal market.

The amended Framework will be in place until the end of December, 2020, although the Commission reserves the right to extend this timeframe should the situation merit it.