(1)

Regulation (EC) No 994/98 empowers the Commission to declare, in accordance with Article 87 of the Treaty that under certain conditions aid to small and medium-sized enterprises (‘SMEs’), aid in favour of research and development, aid in favour of environmental protection, employment and training aid, and aid that complies with the map approved by the Commission for each Member State for the grant of regional aid is compatible with the common market and not subject to the notification requirement of Article 88(3) of the Treaty.

(2)

The Commission has applied Articles 87 and 88 of the Treaty in numerous decisions and gained sufficient experience to define general compatibility criteria as regards aid in favour of SMEs, in the form of investment aid in and outside assisted areas, in the form of risk capital schemes and in the area of research and development, in particular in the context of the implementation of Commission Regulation (EC) No 70/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to State aid to small and medium-sized enterprises (3), the implementation of Commission Regulation (EC) No 364/2004 of 25 February 2004 amending Regulation (EC) No 70/2001 as regards the extension of its scope to include aid for research and development (4) and the implementation of the Commission communication on State aid and risk capital (5) and Community guidelines on State aid to promote risk capital investments in small and medium-sized enterprises (6).

(3)

The Commission has also gained sufficient experience in the application of Articles 87 and 88 of the Treaty in the fields of training aid, employment aid, environmental aid, research and development aid and regional aid with respect to both SMEs and large enterprises, in particular in the context of the implementation of Commission Regulation (EC) No 68/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to training aid (7), Commission Regulation (EC) No 2204/2002 of 12 December 2002 on the application of Articles 87 and 88 of the EC Treaty to State aid for employment (8), the Community framework for State aid for research and development (9), the Community Framework for State aid for research and development and innovation (10), the Community guidelines on State aid for environmental protection (11) and the Guidelines on national regional aid (12).

(4)

In the light of this experience, it is necessary to adapt some of the conditions laid down in the regulations mentioned above. For reasons of simplification and to ensure more efficient monitoring of aid by the Commission, they should be replaced by a single Regulation.

(5)

This Regulation should exempt any aid that fulfils all the relevant conditions of this Regulation, and any aid scheme, provided that any aid that could be granted under such scheme fulfils all the relevant conditions of this Regulation. In order to ensure more efficient monitoring of the aid individual aid granted under an aid scheme and ad hoc individual aid granted outside any aid scheme, but to the exclusion of aid schemes, should contain an express reference to this Regulation and to the identification number attributed to any such measure by the Commission. In order to monitor the implementation of this Regulation, the Commission should also be in a position to obtain all necessary information from Member States concerning the measures implemented under the benefit of this Regulation. A failure of the Member State to provide information within a reasonable deadline on these aid measures may therefore be considered as an indication that the conditions of this Regulation are not being respected. A failure by a Member State to provide information allowing for monitoring of an aid measure may therefore lead the Commission to decide that the Regulation, or the relevant part of the Regulation, should be withdrawn as regards the Member State concerned. As soon as the Member State has provided correct and complete information, the Commission should allow the Regulation to be fully applicable again.

(6)

State aid within the meaning of Article 87(1) of the Treaty not covered by this Regulation should remain subject to the notification requirement of Article 88(3) of the Treaty. This Regulation is without prejudice to the possibility for Member States to notify aid the objectives of which correspond to objectives covered by this Regulation. Such aid will be assessed by the Commission in particular on the basis of the conditions set out in this Regulation and in accordance with the criteria laid down in specific guidelines or frameworks adopted by the Commission wherever the aid measure at stake falls within the scope of application of such specific instrument.

(7)

This Regulation should not apply to export aid or aid favouring domestic over imported products. In particular, it should not apply to aid financing the establishment and operation of a distribution network in other countries. Aid towards the cost of participating in trade fairs, or of studies or consultancy services needed for the launch of a new or existing product on a new market does not normally constitute export aid.

(8)

This Regulation should apply across virtually all sectors. In the sector of fisheries and aquaculture, this Regulation should only exempt aid in the fields of research and development, aid in the form of risk capital, training aid and aid for disadvantaged and disabled workers.

(9)

In the agricultural sector, in view of the special rules which apply in the primary production of agricultural products, this Regulation should only exempt aid in the fields of research and development, aid in the form of risk capital, training aid, environmental aid and aid for disadvantaged and disabled workers.

(10)

In view of the similarities between the processing and marketing of agricultural products and of non-agricultural products this Regulation should apply to the processing and marketing of agricultural products, provided that certain conditions are met.

(11)

Neither on-farm activities necessary for preparing a product for the first sale, nor the first sale to resellers or processors should be considered as processing or marketing for the purposes of this Regulation. The Court of Justice of the European Communities has established that, once the Community has legislated for the establishment of a common organisation of the market in a given sector of agriculture, Member States are under an obligation to refrain from taking any measure which might undermine or create exceptions to it. This Regulation should therefore not apply to aid, the amount of which is fixed on the basis of price or quantity of products purchased or put on the market, nor should it apply to aid which is linked to an obligation to share it with primary producers.

(12)

In view of Council Regulation (EC) No 1407/2002 of 23 July 2002 on State aid to the coal industry (13), this Regulation should not apply to aid granted to undertakings active in the coal sector with the exception of training aid, research and development aid and environmental aid.

(13)

Where a regional aid scheme purports to realise regional objectives, but is targeted at particular sectors of the economy, the objective and likely effects of the scheme may be sectorial rather than horizontal. Therefore, regional aid schemes targeted at specific sectors of economic activity should not be covered by the exemption from notification. However, the tourism sector plays an important role in national economies and in general has a particularly positive effect on regional development. Regional aid schemes aimed at tourism activities should therefore be exempt from the notification requirement

(14)

Aid granted to undertakings in difficulty within the meaning of the Community guidelines on State aid for rescuing and restructuring firms in difficulty (14) should be assessed under those Guidelines in order to avoid their circumvention. SMEs which are incorporated since less than three years and whose business plan foresees losses in those first three years shall not be considered as being in difficulty for this period for the purposes of this Regulation.

(15)

The Commission has to ensure that authorised aid does not alter trading conditions in a way contrary to the general interest. Therefore, aid in favour of a beneficiary which is subject to an outstanding recovery order following a previous Commission decision declaring an aid illegal and incompatible with the common market, should be excluded from the scope of this Regulation. As a consequence, any individual ad hoc aid paid out to such a beneficiary and any aid scheme not containing a provision explicitly excluding such beneficiaries remains subject to the notification requirements of Article 88(3) of the Treaty. This provision shall not affect the legitimate expectations of beneficiaries of aid schemes which are not subject to outstanding recovery orders.

(16)

In order to ensure the consistent application of Community State aid rules, as well as for reasons of administrative simplification, the definitions of terms which are relevant in context of different categories of aid covered by this Regulation should be harmonised.

(17)

For the purposes of transparency, equal treatment and effective monitoring, this Regulation should apply only to aid which is transparent. Transparent aid is aid for which it is possible to calculate precisely the gross grant equivalent ex ante without a need to undertake a risk assessment. Such precise calculation can, for instance, be realised as regards grants, interest rate subsidies and capped tax exemptions.

(18)

Aid comprised in guarantee schemes should be considered as transparent when the methodology to calculate the gross grant equivalent has been approved following notification of this methodology to the Commission, and, in the case of regional aid, also when the Commission has approved such methodology after adoption of Commission Regulation (EC) No 1628/2006 of 24 October 2006 on the application of Articles 87 and 88 of the Treaty to national regional aid (15). The Commission will examine such notifications on the basis of the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees (16). In view of the difficulty in calculating the grant equivalent of aid in the form of repayable advances such aid should be covered by this Regulation only if the total amount of the repayable advance is inferior to the applicable individual notification threshold and the maximum aid intensities provided under this Regulation.

(19)

Due to the higher risk of distortion of competition, large amounts of aid should continue to be assessed by the Commission on an individual basis. Thresholds should therefore be set for each type of aid within the scope of this Regulation, at a level which takes into account the type of aid concerned and its likely effects on competition. Any aid granted above those thresholds remains subject to the notification requirement of Article 88(3) of the Treaty.

(20)

With a view to ensuring that aid is proportionate and limited to the amount necessary, thresholds should, whenever possible, be expressed in terms of aid intensities in relation to a set of eligible costs. For the purpose of calculating aid intensities, aid payable in several instalments should be discounted to its value at the moment of granting. The interest rate to be used for discounting purposes and for calculating the aid amount in aid not taking the form of a grant, should be the reference rate applicable at the time of grant. Because it is based on a form of aid for which eligible costs are difficult to identify, the threshold with regard to aid in the form of risk capital should be formulated in terms of maximum aid amounts.

(21)

The thresholds in terms of aid intensity or aid amount should be fixed, in the light of the Commission's experience, at a level that strikes the appropriate balance between minimising distortions of competition in the aided sector and tackling the market failure or cohesion issue concerned. With respect to regional aid, this threshold should be set at a level taking into account the allowable aid intensities under the regional aid maps.

(22)

In order to determine whether the individual notification thresholds and the maximal aid intensities laid down in this Regulation are respected, the total amount of public support for the aided activity or project should be taken into account, regardless of whether that support is financed from local, regional, national or Community sources.

(23)

Moreover, this Regulation should specify the circumstances under which different categories of aid covered by this Regulation may be cumulated. As regards cumulation of aid covered by this Regulation with State aid not covered by this Regulation, regard should be had to the decision of the Commission approving the aid not covered by this Regulation, as well as the State aid rules on which this decision is based. Special provisions should apply in respect to cumulation of aid for disadvantaged and disabled workers with other types of aid. This Regulation should also make provision for cumulation of aid measures with identifiable eligible costs and aid measures without identifiable eligible costs.

(24)

In order to ensure that the aid is necessary and acts as an incentive to develop further activities or projects, this Regulation should not apply to aid for activities in which the beneficiary would already engage under market conditions alone. As regards any aid covered by this Regulation granted to SMEs, such incentive should be considered present when, before the activities relating to the implementation of the aided project or activities are initiated, the SME has submitted an application to the Member State. [As regards any aid covered by this regulation granted to beneficiaries which are large enterprises, the Member State should, in addition to the conditions applying to SMEs, also verify that that the beneficiary has analysed, in an internal document, the feasibility of the aided project or activity with aid and without aid. This analysis should be realised by the beneficiary ex ante on the basis of quantitative and qualitative indicators. The Member State should verify that analysis and keep such documents in its records. Moreover, as the incentive effect of ad hoc aid granted to large enterprises is considered to be difficult to establish, this form of aid should be excluded from the scope of application of this Regulation. The Commission will examine the existence of such incentive effect in the context of the notification of the aid concerned on the basis of the criteria established in the applicable guidelines, frameworks or other Community instruments.]

(25)

In order to ensure transparency and effective monitoring in accordance with Article 3 of Regulation (EC) No 994/98, it is appropriate to establish a standard form to be used by Member States to provide the Commission with summary information whenever, in pursuance of this Regulation, an aid scheme or ad hoc individual aid are implemented. The summary information form shall be used for the publication of the measure in the Official Journal of the European Union and on the internet. The summary information should be sent to the Commission in electronic format making use of the established IT application before the measure is implemented. The Commission will attribute an identification number to each aid measure which is communicated to it. The fact that such number is attributed to an aid measure does not imply that the Commission has examined whether the aid fulfils the conditions of this Regulation. It creates therefore no legitimate expectations for the Member State or beneficiary as regards the compatibility of the aid measure with this Regulation.

(26)

For the same reasons, the Commission should establish specific requirements as regards the form and the content of the annual reports to be submitted to the Commission by Member States. Moreover, it is appropriate to establish rules concerning the records that Member States should keep regarding the aid schemes and individual aid exempted by this Regulation.

(27)

It is necessary to establish further conditions that should be fulfilled by any aid scheme or individual aid exempted by this Regulation. Indeed, having regard to Articles 87(3)(a) and 87(3)(c) of the Treaty, such aid should be proportionate to the market failures or handicaps that have to be overcome in order to be in the Community interest. It is therefore appropriate to limit the scope of this Regulation, as far as it concerns investment aid to SMEs, environmental investment aid and regional aid, to aid granted in relation to certain tangible and intangible investments. In the light of Community overcapacity and the specific problems of distortion of competition in the road freight and air transport sectors eligible investment costs for undertakings having their main economic activity in these transport sectors should not include transport means and equipment. Special provisions apply as regards the definition of tangible assets for the purpose of environmental aid.

(28)

Consistent with the principles governing the aid falling within Article 87(1) of the Treaty, aid should be considered to be granted at the moment the legal right to receive the aid is conferred on the beneficiary under the applicable national legal regime.

(29)

In order not to favour the capital factor of an investment over the labour factor, provision should be made for the possibility of measuring aid to investment in favour of SMEs and regional aid on the basis of either the costs of the investment or the costs of employment directly created by an investment project.

(30)

Environmental aid in the form of tax reductions, aid for disadvantaged or disabled workers, rregional aid or aid in the form of risk capital granted to a beneficiary on an ad hoc basis may have a major impact on competition in the relevant market because it favours the beneficiary over other undertakings which have not received such aid. Because it is granted only to a single undertaking, ad hoc aid is likely to have only a limited positive structural effect on the environment, the employment of disabled and disadvantaged workers regional cohesion or the risk capital market failure. For this reason, aid schemes providing environmental aid in the form of tax reductions regional aid or aid in the form of risk capital should be exempted under this Regulation, whilst individual ad hoc awards should be notified to the Commission. This Regulation should however exempt ad hoc regional aid when this ad hoc aid is used to supplement aid granted on the basis of a regional aid scheme, with a maximum limit for the ad hoc component of 50 % of the total aid to be granted for the investment.

(31)

The provisions relating to SME investment and employment aid do not provide, as was the case in Regulation (EC) No 70/2001, any possibility for increasing the maximum aid intensities by means of a regional bonus. However, the maximum aid intensities provided in the section concerning regional aid can be granted also to SMEs as long as the conditions for granting regional aid are fulfilled. Similarly, the provisions relating to environmental investment aid do not provide any possibility for increasing the maximum aid intensities by means of a regional bonus. The maximum aid intensities provided for under the section concerning regional aid can however also be applied to projects which have a positive impact on the environment, as long as the conditions for granting regional aid are fulfilled.

(32)

By addressing the handicaps of the disadvantaged regions, national regional aid promotes the economic, social and territorial cohesion of Member States and the Community as a whole. National regional aid is designed to assist the development of the most disadvantaged regions by supporting investment and job creation in a sustainable context. It promotes the expansion, rationalization, modernization and diversification of the economic activities of undertakings located in the less favoured regions, in particular by encouraging firms to set up new establishments there.

(33)

In order to prevent large regional investment projects from being artificially divided into sub-projects, thereby escaping the notification thresholds provided under this Regulation, a large investment project should be considered to be a single investment project if the investment is undertaken within a period of three years by the same undertaking or undertakings and consists of fixed assets combined in an economically indivisible way. To assess whether an investment is economically indivisible, Member States should take into account the technical, functional and strategic links and the immediate geographical proximity. The economic indivisibility should be assessed independently from ownership. This means that to establish whether a large investment project constitutes a single investment project, the assessment should be the same irrespective of whether the project is carried out by one undertaking, by more than one undertaking sharing the investment costs or by more undertakings bearing the costs of separate investments within the same investment project (for example in the case of a joint venture).

(34)

In contrast to regional aid, which may be granted in assisted areas only, SME investment and employment aid may be granted both in assisted and in non-assisted areas. The Member States may thus provide, in assisted areas, investment aid as long as they respect either all conditions applying to the section concerning regional aid or all conditions applying to the section concerning SME investment aid.

(35)

Sustainable development is one of the main pillars in the Lisbon Strategy for Growth and Jobs, together with competitiveness and security of energy supplies. Sustainable development is based, amongst others, on a high level of protection and improvement of the quality of the environment. Promoting environmental sustainability and combating climate change leads as well to increasing security of supply and ensuring the competitiveness of European economies and the availability of affordable energy. The area of environmental protection is often confronted with market failures in the form of negative externalities. Under normal market conditions, undertakings may not necessarily have an incentive to reduce their pollution since such reduction may increase their costs. When undertakings are not obliged to internalise the costs of pollution, society as a whole bears these costs. This internalisation of environmental costs can be ensured by imposing environmental regulation or taxes. The lack of full harmonization of environmental standards at Community level creates an uneven playing field. Furthermore, an even higher level of environmental protection can be achieved by the initiatives to go beyond the mandatory Community standards, which may harm the competitive position of the undertakings concerned.

(36)

In view of the sufficient experience gathered in the application of the Community guidelines on State aid for environmental protection, investment aid for environmental protection improving on Community standards or in the absence of Community standards (for example in the case of retrofitting existing vehicles), aid for early adaptation to future Community standards by SMEs, environmental aid for investment in energy saving, environmental aid for investment in high efficiency cogeneration, environmental aid for investments to promote renewable energy sources and environmental aid in the form of tax reductions should be exempt from the notification requirement. In particular, aid for the acquisition of new transport vehicles complying with adopted Community standards is permissible before their entry into force when the new standards, once mandatory, do not apply retroactively to already purchased vehicles.

(37)

A correct calculation of the extra investment or production costs to achieve environmental protection is essential to determine whether or not aid is compatible with Article 87(3) of the Treaty. Such calculation should take place on the basis of a comparable reference investment not providing the environmental benefits concerned, with the same capacity in terms of effective production. In view of the difficulties which may arise, in particular, with respect to the deduction of benefits deriving from extra investment, provision should be made for a simplified method of calculation of the extra investment costs. Therefore, and with the exception of environmental aid for investment in energy saving measures, these costs should, for the purpose of applying this Regulation, be calculated without taking into account operating benefits, cost savings or additional ancillary production and without taking into account operating costs engendered during the life of the investment. The maximum aid intensities provided for the different types of environmental investment aid concerned have been determined accordingly.

(38)

As regards environmental aid for investment in cogeneration and environmental aid for investments to promote renewable energy sources, the extra costs should, for the purpose of the application of this Regulation, be calculated without taking into account other support measures granted for the same eligible costs, with the exception of other environmental investment aid.

(39)

In order to eliminate differences that might give rise to distortions of competition and to facilitate coordination between different Community and national initiatives concerning SMEs, as well as for reasons of administrative clarity and legal certainty, the definition of SME used for the purpose of this Regulation should be based on the definition in Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of small and medium sized enterprises (17).

(40)

SMEs play a decisive role in job creation and, more generally, act as a factor of social stability and economic drive. However, their development may be limited by market failures, leading to these SMEs suffering from typical handicaps. SMEs often have difficulties in obtaining capital, risk capital or loans, given the risk-averse nature of certain financial markets and the limited collateral that they may be able to offer. Their limited resources may also restrict their access to information, notably regarding new technology and potential markets. In order to facilitate the development of the economic activities of SMEs, this Regulation should therefore exempt certain categories of aid when they are granted in favour of SMEs. Consequently, it is justified to exempt such aid from prior notification and to consider that, for the purposes of application of this Regulation, when a beneficiary fulfils the conditions of the SME definition provided in annex to this Regulation, that SME can be presumed, when the aid amount does not exceed the applicable notification threshold, to be limited in its development by the typical SME handicaps prompted by market failures.

(41)

Having regard to the differences between small enterprises and medium-sized enterprises, different basic aid intensities and different bonuses should be set for small enterprises and for medium-sized enterprises. Market failures affecting SMEs in general, amongst others as regards access to finance, result in even greater obstacles to the development of small enterprises as compared to medium-sized enterprises.

(42)

On the basis of the experience gained in applying the Communication on State aid and risk capital (18), there appear to be a number of specific risk capital market failures in the Community in respect of certain types of investments at certain stages of undertakings' development. These market failures result from an imperfect matching of supply and demand of risk capital. As a result, the level of risk capital provided in the market may be too restricted, and undertakings do not obtain funding despite having a valuable business model and growth prospects. The main source of market failure relevant to risk capital markets, which particularly affects access to capital by SMEs and which may justify public intervention, relates to imperfect or asymmetric information. Consequently, risk capital schemes taking the form of investment funds in which a sufficient proportion of the funds are considered as private equity should be exempt from the notification requirement under certain conditions. This regulation will not affect the EIF and EIB status as defined in the Community guidelines on risk capital.

(43)

Aid for research and development can contribute to economic growth, strengthening competitiveness and boosting employment. On the basis of its experience with the application of Regulation (EC) No 364/2004, the Community framework for State aid for research and development (19), the Community Framework for State aid for research and development and innovation (20), it appears that given the available research and development capabilities of both SMEs and large enterprises, market failures may prevent the market from reaching the optimal output and lead to an inefficient outcome. Such inefficient outcomes generally relate to positive externalities/knowledge spill-overs, public goods/knowledge spill-overs, imperfect and asymmetric information and coordination and network failures.

(44)

Aid for research and development for SMEs is of particular importance, because one of the structural disadvantages of SMEs lies in the difficulty they may experience in gaining access to new technological developments, technology transfers or highly qualified personnel. Therefore, aid for research and development projects, aid for technical feasibility studies and aid to cover industrial property rights costs for SMEs should be exempt from the requirement of prior notification, under certain conditions.

(45)

As regards project aid for research and development, the aided part of the research project must completely fall within the categories of fundamental research, industrial research or experimental development. When a project encompasses different tasks, each task must be qualified as falling under the categories of fundamental research, industrial research or experimental development or as not falling under any of those categories at all. This qualification need not necessarily follow a chronological approach, moving sequentially over time from fundamental research to activities closer to the market. Accordingly, a task which is carried out at a late stage of a project may be qualified as industrial research. Similarly, it is not excluded that an activity carried out at an earlier stage of the project may constitute experimental development.

(46)

In the agricultural sector, on the basis of the experience gained in particular when applying the Commission communication amending the Community framework for State aid for research and development (21), certain aid for research and development should be exempted if conditions similar to those provided in the specific provisions laid down for the agricultural sector in the Community framework for State aid for research and development and innovation are fulfilled. If those specific conditions are not fulfilled, aid may be exempted if it fulfils the conditions set out in the general provisions related to research and development in this regulation.

(47)

The promotion of training and the recruitment of disadvantaged and disabled workers and compensation of additional costs for the employment of disabled workers constitute a central objective of the economic and social policies of the Community and of its Member States.

(48)

Training usually has positive externalities for society as a whole since it increases the pool of skilled workers from which other firms may draw, improves the competitiveness of Community industry and plays an important role in the Community employment strategy. Training, including e-learning, is also essential for the constitution, the acquisition and the diffusion of knowledge, a public good of primary importance. In view of the fact that undertakings in the Community generally under-invest in the training of their workers, especially when this training is general in nature and does not lead to an immediate and concrete advantage for the undertaking concerned, State aid can help to correct this market failure. Therefore such aid should be exempt, under certain conditions, from prior notification. In view of the particular handicaps with which SMEs are confronted and the higher relative costs that they have to bear when they invest in training, the intensities of aid exempted by this Regulation should be increased for SMEs.

(49)

A distinction can be drawn between general and specific training. The permissible aid intensities should differ according to the type of training provided and the size of the undertaking. General training provides transferable qualifications and substantially improves the employability of the trained worker. Aid for this purpose has less distortive effects on competition, meaning that higher intensities of aid can be exempted from prior notification. Specific training, which mainly benefits the undertaking, involves a greater risk of distortion of competition and the intensity of aid which can be exempted from prior notification should therefore be much lower. Training shall be considered to be general in nature also when it relates to environmental management, eco-innovation or corporate social responsibility and thereby increases the capacity of the beneficiary to contribute to general objectives in the environment field.

(50)

Certain categories of disabled or disadvantaged workers still experience particular difficulty in entering the labour market. For this reason there is a justification for public authorities to apply measures providing incentives to undertakings to increase their levels of employment, in particular of workers from these disadvantaged categories. Employment costs form part of the normal operating costs of any undertaking. It is therefore particularly important that aid for the employment of disabled and disadvantaged workers should have a positive effect on employment levels of these categories of workers and should not merely enable undertakings to reduce costs which they would otherwise have to bear. Consequently, such aid should be exempt from prior notification when it is likely to assist these categories of workers in re-entering the job market or, as regards disabled workers, re-entering and staying in the job market.

(51)

It is appropriate to lay down transitional provisions for aid which was granted before the entry into force of this Regulation and was not notified in breach of the obligation in Article 88(3) of the Treaty. With the repeal of Regulation (EC) No 1628/2006 on the application of Articles 87 and 88 of the EC Treaty to national regional aid, the existing regional investment schemes, as exempted, will be allowed to continue being implemented under the conditions foreseen by that Regulation, in line with Article 9, paragraph 2, last indent, of that Regulation.

(52)

In the light of the Commission's experience in this area, and in particular the frequency with which it is generally necessary to revise State aid policy, it is appropriate to limit the period of application of this Regulation. Should this Regulation expire without being extended, aid schemes already exempted by this Regulation should continue to be exempted for a further period of six months, in order to give Member States time to adapt.

(53)

The following regulations should be repealed: Regulation (EC) No 70/2001, Regulation (EC) No 68/2001, Regulation (EC) No 2204/2002 and Regulation (EC) No 1628/2006,

(a)

regional investment and employment aid;

(b)

SME investment and employment aid;

(c)

aid for environmental protection;

(d)

aid for consultancy and SME participation in fairs;

(e)

aid in the form of risk capital;

(f)

aid for research and development;

(g)

training aid;

(h)

aid for disadvantaged or disabled workers.

(a)

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 costs linked to the export activity;

(b)

aid contingent upon the use of domestic over imported goods.

(a)

aid granted to undertakings active in the fishery and aquaculture sectors, as covered by Council Regulation (EC) No 104/2000 (22), except for training aid, aid in the form of risk capital, aid for research and development and aid for disadvantaged and disabled workers;

(b)

aid granted to undertakings active in the primary production of agricultural products as listed in Annex I to the Treaty, except for training aid, aid in the form of risk capital, aid for research and development, environmental aid, and aid for disadvantaged and disabled workers;

(c)

aid granted to undertakings active in the processing and marketing of agricultural products as listed in Annex I to the Treaty, in the following cases:

(d)

aid granted to undertakings active in the coal sector with the exception of training aid, research and development aid and environmental aid;

(e)

aid granted to undertakings active in the steel sector, with the exception of environmental aid, training aid and aid for disadvantaged and disabled workers;

(f)

regional aid granted to undertakings active in the shipbuilding sector;

(g)

regional aid granted to undertakings active in the synthetic fibres (23) sector.

(a)

aid schemes which do not explicitly exclude the payment of individual aid in favour of an undertaking which is subject to an outstanding recovery order following a previous Commission decision declaring an aid illegal and incompatible with the common market;

(b)

ad hoc individual aid in favour of an undertaking which is subject to an outstanding recovery order following a previous Commission decision declaring an aid illegal and incompatible with the common market;

(c)

aid to undertakings in difficulty.

1.

‘aid’ means any measure fulfilling all the criteria laid down in Article 87(1) of the Treaty;

2.

‘aid scheme’ means any act on the basis of which, without further implementing measures being required, individual aid awards may be made to undertakings defined within the act in a general and abstract manner and any act on the basis of which aid which is not linked to a specific project may be awarded to one or several undertakings for an indefinite period of time and/or for an indefinite amount;

3.

‘ad hoc individual aid’ means individual aid not awarded on the basis of an aid scheme;

4.

‘aid intensity’ means the aid amount expressed as a percentage of the eligible costs;

5.

‘transparent aid’ means aid in respect of which it is possible to calculate precisely the gross grant equivalent ex ante without need to undertake a risk assessment;

6.

‘small and medium-sized enterprises’ or ‘SME’ shall mean undertakings fulfilling the criteria laid down in Annex I;

7.

‘large enterprises’ shall mean undertakings not fulfilling the criteria laid down in Annex I;

8.

‘assisted areas’ means regions eligible for regional aid, as determined in the approved regional aid map for the Member State concerned for the period 2007-2013;

9.

‘tangible assets’ means assets relating to land, buildings and plant, machinery and equipment. In the transport sector, except for the road freight and air transport, transport means and transport equipment shall be considered as eligible assets except as regards regional aid;

10.

‘intangible assets’ means assets entailed in by transfer of technology by the acquisition of patent rights, licences, know-how or unpatented technical knowledge;

11.

‘large investment project’ means an investment in capital assets with eligible costs above EUR 50 million, calculated at prices and exchange rates on the date when the aid is granted;

12.

‘number of employees’ means the number of annual labour units (ALU), namely the number of persons employed full time in one year, part-time and seasonal work being ALU fractions;

13.

‘employment directly created by an investment project’ means employment concerning the activity to which the investment relates, including employment created following an increase in the utilisation rate of the capacity created by the investment;

14.

‘wage cost’ means the total amount actually payable by the beneficiary of the aid in respect of the employment concerned, comprising:

15.

‘SME investment and employment aid’ means aid fulfilling the conditions provided in Article 12;

16.

‘investment aid’ includes the types of aid foreseen in the following articles: Article 11 concerning regional investment and employment aid; Article 12 concerning SME investment and employment aid and Articles 14 to 18 concerning investment aid for environmental protection;

17.

‘disadvantaged worker’ means any person who belongs to any of the following categories:

18.

‘disabled worker’ means any person:

19.

‘sheltered employment’ means employment in an establishment where at least 50 % of workers are disabled;

20.

‘supported employment’ means employment of disabled workers in an establishment which offers personal assistance or support, but is not a ‘sheltered employment’ environment;

21.

‘agricultural product’ means:

22.

‘processing of agricultural products’ means any operation on an agricultural product resulting in a product which is also an agricultural product, except on farm activities necessary for preparing an animal or plant product for the first sale;

23.

‘marketing of agricultural products’ means holding or display with a view to sale, offering for sale, delivery or any other manner of placing on the market, except the first sale by a primary producer to resellers or processors and any activity preparing a product for such first sale; a sale by a primary producer to final consumers shall be considered as marketing if it takes place in separate premises reserved for that purpose;

24.

‘tourism activities’ means the following business activities in terms of NACE Rev. 1.1:

25.

‘repayable advance’ means a loan for a project which is paid in one or more instalments and the conditions for the reimbursement of which depend on the outcome of the research and development project;

26.

‘risk capital’ means finance provided through equity and quasi-equity financing to undertakings during their early-growth stages (seed, start-up and expansion phases);

27.

‘steel sector’ means the sectors covered by Annex I of the guidelines on national regional aid for 2007-2013 (25);

(a)

aid comprised in loans, where the gross grant equivalent has been calculated on the basis of the reference rate prevailing at the time of the grant and taking into account the existence of normal security and/or abnormal risk associated with the loan;

(b)

aid comprised in guarantee schemes, where the methodology to calculate the gross grant equivalent has been accepted following notification of this methodology to the Commission in the context of the application of this Regulation or Regulation (EC) No 1628/2006 and the approved methodology explicitly addresses the type of guarantees and the type of underlying transactions at stake;

(c)

aid comprised in fiscal measures, where the measure provides for a cap ensuring that the applicable threshold is not exceeded.

(a)

aid comprised in capital injections;

(b)

aid comprised in risk capital measures, with the exception of aid fulfilling the conditions of Article 23.

(a)

SME investment and employment aid: EUR 7,5 million per undertaking per investment project;

(b)

investment aid for environmental protection: EUR 5 million per undertaking per investment project;

(c)

aid for consultancy in favour of SMEs and aid for SME participation in fairs: EUR 2 million per undertaking per project;

(d)

research and development project aid and feasibility studies:

A project shall be considered to consist ‘predominantly’ of fundamental research or ‘predominantly’ of industrial research, if more than 50 % of the eligible project costs are incurred through activities which fall within the category of fundamental research, respectively industrial research. In cases where the predominant character of the project cannot be established, the lower threshold shall apply;

(e)

aid for industrial property rights costs for SMEs: EUR 5 million per undertaking per project;

(f)

training aid: EUR 2 million per training project;

(g)

aid for the recruitment of disadvantaged workers: EUR 5 million per undertaking per year;

(h)

aid for the employment of disabled workers in the form of wage costs: EUR 10 million per undertaking per year;

(i)

aid for the employment of disabled workers compensating for additional expenses: EUR 10 million per undertaking per year.

(a)

the increased size of the project/activity due to the aid;

(b)

the increased scope of the project/activity due to the aid;

(c)

the increased total amount spent by the beneficiary on the project/activity due to the aid.]

(a)

an investment in tangible and/or intangible assets relating to the setting-up of a new establishment, the extension of an existing establishment, diversification of the output of an establishment into new additional products or a fundamental change in the overall production process of an existing establishment; or

(b)

the acquisition of the capital assets directly linked to an establishment, where the establishment has closed or would have closed had it not been purchased, and the assets are bought by an independent investor.

(a)

they must be used exclusively in the establishment receiving the aid;

(b)

they must be regarded as amortizable assets;

(c)

they must be purchased from third parties under market conditions, without the acquirer being in a position to exercise control, within the meaning of Article 3 of Council Regulation (EC) No139/2004 (28), on the seller, or vice versa;

(d)

they must be included in the assets of the undertaking and remain in the establishment receiving the aid for at least five years or three years in the case of SMEs.

(a)

employment shall be created within three years of completion of the investment; and

(b)

the investment project shall lead to a net increase in the number of employees in the establishment concerned, compared with the average over the previous twelve months; and

(c)

the employment created shall be maintained during a minimum period of five years in case of large enterprise and a minimum period of three years in case of SMEs.

(a)

50 % of eligible investments in regions eligible under Article 87(3)(a) of the Treaty and 40 % of eligible investments in other regions eligible for regional aid, as determined in the regional aid map approved for the Member States concerned for the period 2007-2013, if the beneficiary is a small or medium-sized enterprise;

(b)

25 % of eligible investments in regions eligible under Article 87(3)(a) of the Treaty and 20 % of eligible investments in other regions eligible for regional aid, as determined in the regional aid map approved for the Member States concerned for the period 2007-2013, if the beneficiary has less than 750 employees and/or less than EUR 200 million turnover, calculated in accordance with Annex I.

(a)

20 % in the case of small enterprises;

(b)

10 % in the case of medium-sized enterprises.

(a)

the investment's eligible tangible and intangible costs; or

(b)

the estimated wage costs of employment directly created by the investment project, calculated over a period of two years.

(a)

75 % of eligible investments in the outermost regions;

(b)

65 % of eligible investments in the smaller Aegean Islands within the meaning of Council Regulation (EEC) No 2019/93 (29);

(c)

50 % of eligible investments in regions eligible under Article 87(3)(a) of the Treaty;

(d)

40 % of eligible investments in all other regions.

(a)

‘environmental protection’ means any action designed to remedy or prevent damage to physical surroundings or natural resources by the beneficiary's own activities, to reduce risk of such damage or to lead to a more efficient use of natural resources, including energy-saving measures and the use of renewable sources of energy;

(b)

‘energy-saving measures’ means action which enables undertakings to reduce the amount of energy used in their production cycle, to the exclusion of the design and manufacture of machines or means of transport which can be operated with fewer natural resources and to the exclusion of action taken with a view to improving safety or hygiene;

(c)

‘Community standard’ means a mandatory Community standard setting the level to be attained in environmental terms. Obligations provided under Council Directive No 96/61/EC (30) shall not be regarded as a Community standard for the purpose of this regulation;

(d)

‘renewable energy sources’ means renewable, non-fossil energy sources (wind, solar, geothermal, wave, tidal, hydropower installations with a capacity below 10 MW, direct biomass burning, landfill gas, sewage treatment plant gas and biogases);

(e)

‘energy generation from renewable energy sources’ means energy generated by processes using only renewable energy sources, as well as the proportion in terms of calorific value of energy produced from renewable energy sources in hybrid installations — like co-firing — also using conventional energy sources, including renewable electricity used for filling storage systems and excluding electricity produced as a result of storage systems;

(f)

‘cogeneration’ means the simultaneous generation in one process of thermal energy and electrical and/or mechanical energy;

(g)

‘high efficiency cogeneration’ means cogeneration meeting the criteria of Annex II and Annex III to Directive 2004/8/EC of the European Parliament and of the Council (31) and satisfying the harmonised efficiency reference values as defined in the Article 4 of that Directive;

(h)

‘environmental tax’ means a tax whose specific taxable base has a clear negative effect on the environment and which seeks to tax certain goods or services so that the environmental costs may be included in their price and/or so that producers and consumers are oriented towards activities which better respect the environment;

(i)

‘tangible assets’: for the purpose of section 3 of this regulation and by derogation to Article 2(9), road freight transport means and equipment shall also be considered as eligible tangible assets.

(a)

the investment enables the beneficiary to reduce the pollution resulting from its activities by means of improving on the Community standards applicable, irrespective of the presence of mandatory national standards that are more stringent than the Community standard;

(b)

the investment enables the beneficiary to reduce the pollution resulting from its existing activities in the absence of Community standards.

(a)

‘equity’ means ownership interest in an undertaking, represented by the shares issued to investors;

(b)

‘quasi-equity’ means financial instruments whose return for the holder is predominantly based on the profits or losses of the underlying target undertaking and are unsecured in the event of default;

(c)

‘private equity’ means private — as opposed to public — equity or quasi-equity investment in undertakings not listed on a stock-market, including venture capital;

(d)

‘seed capital’ means financing provided to study, assess and develop an initial concept, preceding the start-up phase;

(e)

‘start-up capital’ means financing provided to undertakings, which have not sold their product or service commercially and are not yet generating a profit for product development and initial marketing;

(f)

‘expansion capital’ means financing provided for the growth and expansion of an undertaking, which may or may not break even or trade profitably, for the purposes of increasing production capacity, market or product development or the provision of additional working capital;

(g)

‘exit strategy’ means a strategy for the liquidation of holdings by a venture capital or private equity fund in accordance with a plan to achieve maximum return, including trade sale, write-offs, repayment of preference shares/loans, sale to another venture capitalist, sale to a financial institution and sale by public offering, including Initial Public Offerings;

(h)

‘target undertaking’ means an undertaking in which an investor or investment fund is considering investing.

(a)

a business plan shall exist for each investment, containing details of product, sales and profitability development and establishing the ex ante viability of the project; and

(b)

a clear and realistic exit strategy shall exist for each investment.

(a)

there shall be an agreement between a professional fund manager or a management company and participants in the fund, providing that the manager's remuneration is linked to performance and setting out the objectives of the fund and proposed timing of investments; and

(b)

private equity investors shall be represented in the fund investment structure, such as through an investors' or advisory committee; and

(c)

best practices and regulatory supervision shall apply to the management of funds.

(a)

‘research organisation’ means an entity, such as a university or research institute, irrespective of its legal status (organised under public or private law) or way of financing whose primary goal is to conduct fundamental research, industrial research or experimental development and to disseminate their results by way of teaching, publication or technology transfer. All profits must be reinvested in these activities, the dissemination of their results or teaching. Undertakings that can exert influence upon such an organisation, for instance in their capacity of shareholders or members of the organisation, shall enjoy no preferential access to the research capacities of such an organisation or to the research results generated by it;

(b)

‘fundamental research’ means experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any direct practical application or use in view;

(c)

‘industrial research’ means the planned research or critical investigation aimed at the acquisition of new knowledge and skills for developing new products, processes or services or for bringing about a significant improvement in existing products, processes or services. It comprises the creation of components parts to complex systems, which is necessary for the industrial research, notably for generic technology validation, to the exclusion of prototypes;

(d)

‘experimental development’ means the acquiring, combining, shaping and using existing scientific, technological, business and other relevant knowledge and skills for the purpose of producing plans and arrangements or designs for new, altered or improved products, processes or services. These may also include, for instance, other activities aiming at the conceptual definition, planning and documentation of new products, processes or services. The activities may comprise producing drafts, drawings, plans and other documentation, provided that they are not intended for commercial use.

The development of commercially usable prototypes and pilot projects is also included where the prototype is necessarily the final commercial product and where it is too expensive to produce for it to be used only for demonstration and validation purposes. In case of a subsequent commercial use of demonstration or pilot projects, any revenue generated from such use must be deducted from the eligible costs.

The experimental production and testing of products, processes and services are also eligible, provided that these cannot be used or transformed to be used in industrial applications or commercially.

Experimental development does not include routine or periodic changes made to products, production lines, manufacturing processes, existing services and other operations in progress, even if such changes may represent improvements.

(a)

fundamental research;

(b)

industrial research;

(c)

experimental development.

(a)

100 % for fundamental research;

(b)

50 % for industrial research;

(c)

25 % for experimental development.

(a)

where the aid is given to SMEs, the aid intensity may be increased by 10 percentage points for medium-sized enterprises and by 20 percentage points for small enterprises; and

(b)

a bonus of 15 percentage points may be added, up to a maximum aid intensity of 80 %, if:

For the purposes of points (b)(i) and (ii) of the first subparagraph subcontracting shall not be considered to be effective collaboration.

(a)

personnel costs (researchers, technicians and other supporting staff to the extent employed on the research project);

(b)

costs of instruments and equipment to the extent and for the period used for the research project. If such instruments and equipment are not used for their full life for the research project, only the depreciation costs corresponding to the life of the research project, as calculated on the basis of good accounting practice, are considered as eligible;

(c)

costs for building and land, to the extent and for the duration used for the research project. With regard to buildings, only the depreciation costs corresponding to the life of the research project, as calculated on the basis of good accounting practice are considered as eligible. For land, costs of commercial transfer or actually incurred capital costs are eligible;

(d)

cost of contractual research, technical knowledge and patents bought or licensed from outside sources at market prices, where the transaction has been carried out at arm's length and there is no element of collusion involved, as well as costs of consultancy and equivalent services used exclusively for the research activity;

(e)

additional overheads incurred directly as a result of the research project;

(f)

other operating expenses, including costs of materials, supplies and similar products incurred directly as a result of the research activity.

(a)

for SMEs, 75 % for studies preparatory to industrial research activities and 50 % for studies preparatory to experimental development activities;

(b)

for large enterprises, 65 % for studies preparatory to industrial research activities and 40 % for studies preparatory to experimental development activities.

(a)

all costs preceding the grant of the right in the first jurisdiction, including costs relating to the preparation, filing and prosecution of the application as well as costs incurred in renewing the application before the right has been granted;

(b)

translation and other costs incurred in order to obtain the granting or validation of the right in other legal jurisdictions;

(c)

costs incurred in defending the validity of the right during the official prosecution of the application and possible opposition proceedings, even if such costs occur after the right is granted.

(a)

it is of general interest to the particular sector or sub-sector concerned;

(b)

information that research will be carried out, and with which goal, is published on the internet, prior to the commencement of the research. An approximate date of expected results and their place of publication on the internet, as well as a mention that the result will be available at no cost, must be included;

(c)

the results of the research are made available on internet, for a period of at least 5 years. This information on the internet shall be published no later than any information which may be given to members of any particular organisation;

(d)

aid shall be granted directly to the researching institution or body and must not involve the direct granting of non-research related aid to a company producing, processing or marketing agricultural products, nor provide price support to producers of such products.

1.

‘specific training’ means training involving tuition directly and principally applicable to the employee's present or future position in the undertaking and providing qualifications which are not or only to a limited extent transferable to other undertakings or fields of work;

2.

‘general training’ means training involving tuition which is not applicable directly and principally to the employee's present or future position in the undertaking, but which provides qualifications that are largely transferable to other undertakings or fields of work.

Training shall be considered ‘general’ if, for example:

(a)

25 % for specific training; and

(b)

60 % for general training.

(a)

by 10 percentage points if the training is given to disabled or disadvantaged workers;

(b)

by 10 percentage points if the aid is awarded to medium-sized enterprises and by 20 percentage points if the aid is awarded to small enterprises.

(a)

trainers' personnel costs;

(b)

trainers' and trainees' travel expenses, including accommodation;

(c)

other current expenses such as materials and supplies directly related to the project;

(d)

depreciation of tools and equipment, to the extent that they are used exclusively for the training project;

(e)

cost of guidance and counselling services with regard to the training project;

(f)

trainees' personnel costs and general indirect costs (administrative costs, rent, overheads) up to the amount of the total of the other eligible costs referred to in (a) to (e). As regards the former type of costs, only the hours during which the trainees actually participate in the training, after deduction of any productive hours, may be taken into account.

(a)

costs of adapting premises;

(b)

costs of employing staff for time spent solely on the assistance of the disabled workers;

(c)

costs of adapting or acquiring equipment, or acquiring and validating software for their use by disabled workers, including adapted or assistive technology facilities, which are additional to those which the beneficiary would have incurred if employing workers who are not disabled;

(d)

where the beneficiary undertaking provides sheltered employment, the costs of constructing, installing or expanding the establishment concerned, and any costs of administration and transport which result directly from the employment of disabled workers;

(e)

where the beneficiary provides supported employment, any costs of administration and transport which result directly from the employment of disabled workers.

(a)

public investment corporations, venture capital companies, individuals or groups of individuals with a regular venture capital investment activity who invest equity capital in unquoted businesses (business angels), provided the total investment of those business angels in the same enterprise is less than EUR 1 250 000;

(b)

universities or non-profit research centres;

(c)

institutional investors, including regional development funds;

(d)

autonomous local authorities with an annual budget of less than EUR 10 million and less than 5 000 inhabitants.

(a)

an enterprise has a majority of the shareholders' or members' voting rights in another enterprise;

(b)

an enterprise has the right to appoint or remove a majority of the members of the administrative, management or supervisory body of another enterprise;

(c)

an enterprise has the right to exercise a dominant influence over another enterprise pursuant to a contract entered into with that enterprise or to a provision in its memorandum or articles of association;

(d)

an enterprise, which is a shareholder in or member of another enterprise, controls alone, pursuant to an agreement with other shareholders in or members of that enterprise, a majority of shareholders' or members' voting rights in that enterprise.

(a)

employees;

(b)

persons working for the enterprise being subordinated to it and deemed to be employees under national law;

(c)

owner-managers;

(d)

partners engaging in a regular activity in the enterprise and benefiting from financial advantages from the enterprise.

1.

Aid in favour of (name of the undertaking(s) receiving the aid, SME or not):

2.

Aid scheme reference (Commission reference of the existing scheme or schemes under which the aid is awarded):

3.

Public entity/entities providing the assistance (name and co-ordinates of the granting authority or authorities):

4.

Member State where the aided project or measure is carried out:

5.

Type of project or measure:

6.

Short description of project or measure:

7.

Where applicable, eligible costs (in EUR):

8.

Discounted aid amount (gross) in EUR:

9.

Aid intensity (% in gross grant equivalent):

10.

Conditions attached to the payment of the proposed aid (if any):

11.

Planned start and end date of the project or measure:

12.

Date of award of the aid:

1.

Aid in favour of (name of the undertaking(s) receiving the aid):

2.

Aid scheme reference (Commission reference of the existing scheme or schemes under which the aid is awarded):

3.

Public entity/entities providing the assistance (name and co-ordinates of the granting authority or authorities):

4.

Member State where the investment takes place:

5.

Region (NUTS 3 level) where the investment takes place:

6.

Municipality (previously NUTS 5 level, now LAU 2) where the investment takes place:

7.

Type of project (setting-up of a new establishment, extension of existing establishment, diversification of the output of an establishment into new additional products or a fundamental change in the overall production process of an existing establishment):

8.

Products manufactured or services provided on the basis of the investment project (with PRODCOM/NACE nomenclature or CPA nomenclature for projects in the service sectors):

9.

Short description of investment project:

10.

Discounted eligible cost of investment project (in EUR):

11.

Discounted aid amount (gross) in EUR:

12.

Aid intensity (% in GGE):

13.

Conditions attached to the payment of the proposed assistance (if any):

14.

Planned start and end date of the project:

15.

Date of award of the aid: