What is State Aid?

GENERAL

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The CPC provide advice and support to organisations responsible for the allocation of public resources in Macedonia and work across the public sector in Macedonia to raise awareness of European Commission State aid rules. We provide colleagues, and those involved in granting or approving public funding, information specifically relevant to State aid in Macedonia.

Any public assistance could be a State aid and must comply with European rules on State aid.

 

Important Note.

The advise provided through this website is intended to inform those organisations who may be managing state funded resources or beneficiaries receiving the benefit of state funded resources and the CPC seeks to ensure that the information published on this web site is up to date and accurate. However, the information on this website does not constitute legal or professional advice and the CPC cannot accept any liability for actions arising from its use. The CPC also cannot be held responsible for the contents of any pages referenced by an external link.

If you think that a measure you intend to implement, or aid that you intend to give or receive, is State aid, and have any doubts as to whether or not it is lawful aid, please contact the State Aid unit within the appropriate Ministry.  

 

Please also read the Legal Notice accessed through the State Aid Home page   http://www.kzk.gov.mk/eng/LegalNotice.asp

 

 


 

What is State aid?

State aid is a European Commission term which refers to forms of assistance from a public body, or publically funded body, and given to undertakings on a selective basis, with the potential to distort competition and affect trade between member states of the European Union.

 

State Aid rules aim to ensure fair competition and a single common market. Giving more favourable treatment to some businesses would:

  • harm their business competitors and risk distorting the normal competitive market
  • hinder the long-term competitiveness of the Community by propping up inefficient, aid dependent companies
  • allow those Member States with the deepest pockets to favour their own industries. 

 

and that is why the European Community founding Treaty generally forbids State Aid, with certain exemptions.

 

The State Aid rules contribute to the effective functioning of the Single Market and European Union economic reform in two key ways:

  1. They prevent State Aid that would seriously distort competition - thereby helping to achieve a fair market for businesses in all Member States.
  2. They allow State Aid that promotes economic development and other legitimate policy objectives, where this benefit outweighs any distortion of competition.

 

The 'State aid rules' are set out by the European Commission and comprise various articles of the Treaty on the Functioning of the European Union (TFEU), regulations, frameworks and guidelines - which set out what aid can be given. The European Commission governs member states' compliance with these rules and must be notified of all schemes involving State aid.

 

 


State Aid in Macedonia.

The Law on State Aid, adopted in April 2003, regulates the field of control of State aid in the Republic of Macedonia. It provides a legal framework that regulates the procedure and monitoring of granted State aid with aim of implementing the principles of market economy, maintaining fair competition and implementation of commitments undertaken by international agreements ratified by the Republic of Macedonia, containing State aid provisions. The Law is fully harmonized with the EU legislation.

The Law on State Aid defines the basic concepts used in the implementation of the control of state aid and defines compatible aid. Also, it defines which aid may be compatible and provides the State aid providers with basic obligations for submitting notifications and reports to the Commission. At the same time, the Law regulates the procedure before the Commission for assessment of State aid.

In accordance with the Law, and in order to achieve better elaboration in the implementation of the State aid legislation, the Government of the Republic of Macedonia in December 2003 has adopted the following by-laws: Regulation on the procedure and forms of notification to the Commission, Regulation on establishing conditions and procedure for granting regional aid and Regulation on establishing conditions and procedure for granting aid for rescue and restructuring of firms in difficulty. (Official Gazette of the Republic of Macedonia No. 81/03).

 

 


 

4 Key Questions

 

State aid rules only apply to State funded organisations involved in economic activity ('undertakings'). The publically funded organisation does not have to be profit-making if the activity carried out is one which has, or could have, commercial competitors. In some circumstances public and voluntary sector organisations, such as universities and charities, could be classified as undertakings.

There are 4 criteria or questions which need to be considered in order to establish whether a measure constitutes State aid. Where all 4 criteria are met, State aid is involved and the State aid rules apply. Where 1 or more of the criteria appears not to be met, then funding is unlikely to constitute State aid. We recommend that you check with the State Aid Unit within the appropriate Ministry where any doubt exists

1. Is the measure granted by the state or through state resources? As well as central government departments, this includes regional or local authorities and other public, or private sector, bodies designated or controlled by the state. State resources include tax exemptions, state owned assets and   funds not permanently belonging to the state but under state control, e.g. lottery funding.

2. Does it confer an advantage to an undertaking? A benefit to an undertaking, granted for free or on favourable (i.e.. non-commercial) terms could be State aid. This includes the direct transfer of resources, such as grants and soft loans, and also indirect assistance - for example, relief from charges that an undertaking normally has to bear, such as a tax exemption or the provision of services, loans, premises or assets at a favourable rate.

3. Is it selective, favouring certain undertakings? Aid that targets particular businesses, locations, types of firm e.g. SMEs or sectors is considered selective. A general measure affecting the whole of the state's economy e.g. nation-wide fiscal measures is not considered a State aid.

4. Does the measure distort or have the potential to distort competition? If it strengthens the position of the beneficiary relative to other competitors then this criteria is likely to be met. The potential to distort competition does not have to be substantial or significant, and this criterion may apply to small amounts of aid and firms with little market share. Most interventions have the potential to distort competition.

 


Examples

Some examples of state aid

·          Grants to firms for investment, research and development, employee training, etc.

·          Loans and guarantees below market rates

·          Free or subsidised consultancy advice

·          Preferential Public ordering

·          Cash injections to and writing off losses of public enterprises

·          Sale, rent or lease of public land or property at discounted rates

·          Contracts not open to competitive tendering

·          Discretionary deferral of, or exemption from, tax, social security and other payments due to the state

·          Tax Exemptions

·          Tax Relief

·          Tax Credits

·          Preferential Interest Rates

·          Loan Guarantees

·          Dividend Guarantees

·          Legislation to protect or guarantee market share

·          Public funding of privately owned infrastructure

Support which is not State aid -

·          Aid to individuals, charities, organisations and public bodies not involved in an economic activity

·          Commercial payments for services rendered, where a company is contracted by a public body in accordance with competitive tendering requirements

·          General measures, which can apply to all firms throughout the UK, with no discretionary power

 

 


Getting it wrong

The European Commission allows State aid in specific circumstances; for example to promote Community investment in research and development, environmental protection and investment in training. However, in general, it considers State aid to be incompatible with the common market and to have a damaging effect on competition and trade across the Community area. Consequently, the Commission takes a serious view of aid provided without its approval and a particularly serious view of aid given in contravention of the State aid rules.

In these circumstances, there can be serious repercussions:

·          the aid payment could be halted

·          the recipient could be required to repay the aid, plus interest

·          aggrieved competitors may also seek legal action for damages

·          the Commission could commence infringement procedures against the member state, possibly resulting in a fine

In recent years the Commission has given increasing priority to applying state aid rules more rigorously. Money must be clawed back even if this means that the company concerned goes bankrupt.

It is therefore extremely important to establish whether your project or policy proposal constitutes State aid and, if so, how it can be taken forward in compliance with the State aid rules - whether they require notification to the Commission, or do they fit with an existing approved State aid scheme or block exemption.

If you think that a measure you intend to implement, or aid that you intend to give or receive, is State aid, and have any doubts as to whether or not it is lawful aid, please contact the State Aid unit within the appropriate Ministry.  

 

 


De Minimis Aid Regulations

De minimis aid is used to describe small amounts of State Aid that do not require European Commission approval.

The European Commission considers that public funding which complies with the de minimis regulation has a negligible impact on trade and competition, and does not require notification and approval. The total de minimis aid which can be given to a single recipient is €200,000 over a 3 year fiscal period. For Undertakings in the Road transport Sector the total de minimis aid should not exceed €100,000. This can be given for most purposes, including operating aid, and is not project-related.

This does not mean that all funding under the €200,000/€100,000 ceiling should be counted as de minimis.  It is strongly recommended to give even small amounts as aid under a specific approved scheme, or a block exemption, if possible, and to keep the de minimis cover as a back-up for when there are no other options. 

  • The maximum de minimis funding any single recipient can receive is €200,000/€100,000 (cash grant equivalent) over a 3-year fiscal period.
  • This ceiling takes into account all public assistance given as de minimis funding over the previous 3 fiscal years and which can take various forms (grants, loans, subsidised contracts, etc). Aid given under an approved scheme does not have to be cumulated with de minimis aid.
  • The Regulation requires that Member States record all the information necessary to ensure conformity to the regulation and that all records are retained for ten years after the last payment made

Further things that should keep in mind when considering de minimis aid: 

  • De minimis aid cannot be given for export related activities (except attendance at trade fairs), agriculture and fisheries or aid favouring domestic over imported products. 
  • De minimis aid does not affect the level of State Aid that a recipient can receive under any other schemes approved by the Commission, i.e. it is cumulated only with other de minimis aid.
  • De minimus aid cannot be given towards the same costs supported under another Block Exemption or Notified Scheme.

Administration

 

Commission for Protection of Competition
Sv. Kiril i Metodij br.54 (6th floor), 1000 Skopje, Republic of Macedonia
Tel: + 381 (0) 2 3298 666; Fax: + 381 (0) 2 3296 466