1.7.2014   

EN

Official Journal of the European Union

C 204/1

PART I.

Chapter 1.

Chapter 2.

2.1.

2.2.

2.3.

2.4.

2.5.

Chapter 3.

3.1.

3.2.

3.3.

3.4.

3.5.

3.6.

3.7.

PART II.

Chapter 1.

1.1.

1.1.1.

1.1.1.1.

1.1.1.2.

1.1.1.3.

1.1.1.4.

1.1.2.

1.1.3.

1.1.4.

1.1.5.

1.1.5.1.

1.1.5.2.

1.1.6.

1.1.7.

1.1.8.

1.1.9.

1.1.10.

1.1.10.1.

1.1.10.2.

1.1.10.3.

1.1.11.

1.2.

1.2.1.

1.2.1.1.

1.2.1.2.

1.2.1.3.

1.2.1.4.

1.2.1.5.

1.2.1.6.

1.2.1.7.

1.2.2.

1.2.2.1.

1.2.2.2.

1.3.

1.3.1.

1.3.2.

1.3.3.

1.3.4.

1.3.5.

1.3.6.

Chapter 2.

2.1.

2.1.1.

2.1.2.

2.1.3.

2.1.4.

2.1.5.

2.1.6.

2.2.

2.3.

2.4.

2.5.

2.6.

2.7.

2.8.

2.8.1.

2.8.2.

2.8.3.

2.8.4.

2.8.5.

2.8.6.

2.9.

2.9.1.

2.9.2.

Chapter 3.

3.1.

3.2.

3.3.

3.4.

3.5.

3.6.

3.7.

3.8.

3.9.

3.10.

3.11.

PART III.

1.

2.

3.

4.

5.

6.

(1)

Article 107(1) of the Treaty on the Functioning of the European Union (‘the Treaty’) stipulates that, ‘(s)ave as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.’

(2)

However, despite that general prohibition State aid may be necessary to address market failures in order to ensure a well-functioning and equitable economy. Therefore, the Treaty leaves room for the granting of State aid in respect of several policy objectives. With particular relevance to the agricultural sector and forestry, firstly in accordance with Articles 107(2)(b) of the Treaty, aid to make good the damage caused by natural disasters or exceptional occurrences shall be compatible with the internal market. Secondly, on the basis of Articles 107(3)(c) of the Treaty, the Commission may consider compatible with the internal market State aid to promote the economic development of the agricultural and forestry sectors and of rural areas, provided that it does not adversely affect trading conditions.

(3)

Furthermore, due to the specificities of the agricultural sector, Article 42 of the Treaty provides that the rules on competition apply to production of and trade in agricultural products only to the extent determined by the European Parliament and the Council.

(4)

In these Guidelines, the Commission sets out the conditions and criteria under which aid for the agricultural and forestry sectors and for rural areas will be considered to be compatible with the internal market and establishes the criteria for identifying the areas that fulfil the conditions of Article 107(3) of the Treaty. As regards aid granted pursuant to Article 107(2)(b), the Commission hereby sets out the conditions which will be verified in order to determine whether a measure constituting aid to make good the damage caused by natural disasters or exceptional occurrences is indeed covered by that Article.

(5)

State aid to promote the economic development of the agricultural and forestry sectors and of rural areas is embedded in the broader common agricultural policy (‘the CAP’). Within the CAP, the Union provides financial support to the agricultural and forestry sectors and to rural areas. As the economic effects of State aid do not change depending on whether it is (even partly) financed by the Union, or whether it is financed by a Member State alone, the Commission considers that there should in principle be consistency and coherence between its policy in respect of the control of State aid and the support which is granted under the Union’s own common agricultural policy. Consequently, the use of State aid can be justified only if it is in line with the objectives of this policy and, in particular, the underlying objectives of the CAP reform towards 2020 (1). Therefore, when the Commission applies and interprets the rules of these Guidelines for specific aid schemes, it takes into consideration the CAP rules and policies.

(6)

The following European instruments are of particular relevance for State aid considerations related to the CAP:

(7)

The CAP is based on two pillars: the first pillar consists of instruments related to the functioning of agricultural markets and the food supply chain (Regulation (EU) No 1308/2013, Regulation (EC) No 3/2008, Regulation (EU) No 228/2013 and Regulation (EU) No 229/2013) and to direct payments (Regulation (EU) No 1307/2013) conditional upon statutory management requirements, good agricultural and environmental conditions. Combined, those measures provide a fundamental layer of support to farmers in the Union, creating the basis for keeping sustainable farming in place throughout the Union. The first pillar measures are mandatory for Member States and, with very few exceptions, there is no co-financing. This ensures the application of a common policy within the internal market. The second pillar of the CAP is the rural development policy which is governed by Regulation (EU) No 1305/2013 which aims at improving the competitiveness of agriculture, the sustainable management of natural resources and climate action and a balanced territorial development of rural areas. Rural development measures are largely voluntary, contractual in nature, co-financed and delivered within a strategic framework and implemented via rural development programmes meeting the Union's priorities for rural development at national, regional and local level.

(8)

According to Article 39(1) of the Treaty, the objectives of the CAP are to increase agricultural productivity, to ensure a fair standard of living for the agricultural community, to stabilise markets, to assure the availability of supplies reaching the consumer at reasonable prices. According to Article 39(2) of the Treaty, in working out the CAP and the special methods for its application, account has to be taken of the particular nature of agricultural activity, which results from the social structure of agriculture and from structural and natural disparities between the various agricultural regions, the need to effect the appropriate adjustments by degrees and the fact that agriculture constitutes a sector closely linked with the economy as a whole.

(9)

Agriculture has to adapt to new realities and to face challenges in terms of food security, environment, climate change and keeping the rural economy alive. In order to address those major challenges, in the Communication on the CAP towards 2020 (10) the Commission has outlined the following objectives for the CAP 2014-2020: (1) viable food production; (2) sustainable management of natural resources and climate action; and (3) balanced territorial development.

(10)

As an integral part of the CAP, the rural development policy 2014-2020 shall contribute to achieving the following objectives: (1) fostering the competitiveness of agriculture; (2) ensuring the sustainable management of natural resources, and climate action; and (3) achieving a balanced territorial development of rural economies and communities including the creation and maintenance of employment. The achievement of these objectives of rural development shall be pursued through the following Union priorities for rural development: (1) fostering knowledge transfer and innovation in agriculture, forestry, and rural areas; (2) enhancing farm viability and competitiveness of all types of agriculture in all regions and promoting innovative farm technologies and sustainable management of forests; (3) promoting food chain organisation, including processing and marketing of agricultural products, animal welfare and risk management in agriculture; (4) restoring, preserving and enhancing ecosystems related to agriculture and forestry; (5) promoting resource efficiency and supporting the shift towards a low carbon and climate resilient economy in agriculture, food and forestry sectors; and (6) promoting social inclusion, poverty reduction and economic development in rural areas (11).

(11)

The CAP's objectives also fall within the scope of the objectives set out in the Communication from the Commission of 3 March 2010‘Europe 2020 - A strategy for smart, sustainable and inclusive growth’ (12) and its flagship initiative for a resource-efficient Europe (13), which set targets in areas such as competitiveness, climate, energy and biodiversity.

(12)

State aid policy in the agricultural and forestry sectors and in rural areas also has to be embedded into the overall State aid modernisation initiative of the Commission. In its Communication on State aid modernisation (14), the Commission announced three objectives to be pursued through the modernisation of State aid control: (1) to foster sustainable, smart and inclusive growth in a competitive internal market; (2) to focus Commission ex ante scrutiny on cases with the biggest impact on the internal market while strengthening the cooperation with Member States in State aid enforcement; and (3) to streamline the rules and provide for faster decisions. In particular, the Communication called for a common approach in the revision of the different Guidelines and frameworks with a view to strengthening the internal market, promoting more effectiveness in public spending through a better contribution of State aid to the objectives of common interest, greater scrutiny on the incentive effect, limiting the aid to the minimum, and avoiding the potential negative effects of aid on competition and trade. The compatibility conditions set out in these Guidelines are based on those common assessment principles and are applicable to notifiable aid schemes and individual aid.

(13)

In accordance with Article 42 of the Treaty, in so far as agricultural products listed in Annex I to the Treaty are concerned, the rules on State aid laid down in Articles 107 to 109 of the Treaty apply only to the extent determined by the European Parliament and the Council.

(14)

As a general rule, pursuant to Article 211(1) of Regulation (EU) No 1308/2013 the rules on State aid are applicable to the production of and trade in agricultural products. However, there are various derogations from this general principle which are laid down, amongst others, in Article 211(2) of Regulation (EU) No 1308/2013, Article 13 of Regulation (EU) No 1307/2013, Article 13(6) of Regulation (EC) No 3/2008, Article 23 of Regulation (EU) No 228/2013 and Article 17 of Regulation (EU) No 229/2013.

(15)

As regards support for rural development, the general principle of the applicability of State aid rules in that context is set out in Article 81(1) of Regulation (EU) No 1305/2013. Articles 81(2) and 82 of that Regulation stipulate that the State aid rules do not apply to payments made by Member States pursuant to, and in conformity with Regulation (EU) No 1305/2013 or to additional national financing within the scope of Article 42 of the Treaty.

(16)

Therefore, State aid rules do not apply to the co-financing of rural development support (both the EAFRD part and the national part) or to additional national financing on top of such support, provided that the measure in question is related to an agricultural activity falling within the scope of Article 42 of the Treaty and forms a part of the rural development programme.

(17)

However, State aid rules apply fully to all co-financed aid measures (both the EAFRD part and the national part) and to the additional national financing for such measures which fall outside the scope of Article 42 of the Treaty, envisaged in Regulation (EU) No 1305/2013 in the following cases: (a) measures supporting activities in the rural areas and (b) forestry measures.

(18)

If a Member State intends to finance exclusively from national funds (that is to say, without any EAFRD co-financing) a measure which is designed largely in accordance with the conditions of a given rural development measure (‘rural development like measure’), State aid rules fully apply, regardless of whether the measure falls within or outside the scope of Article 42 of the Treaty.

(19)

The Commission will apply these Guidelines to aid schemes and individual aid.

(20)

These Guidelines apply to State aid for the primary agricultural production, the processing of agricultural products resulting in another agricultural product and the marketing of agricultural products.

(21)

Based on the general considerations described in Section 2.1. of Part I of these Guidelines, in order to ensure coherence with the rural development policy and to achieve simplification for compliance with State aid rules, it is appropriate to also include in these Guidelines certain rural development measures falling outside the scope of Article 42 of the Treaty, whether co-financed by the EAFRD or additional national financing, as well as rural development like measures financed exclusively from national funds. Therefore, in addition to the agricultural sector, these Guidelines set out the compatibility criteria for State aid to the forestry sector and aid to undertakings active in rural areas which otherwise fall outside the scope of Article 42 of the Treaty.

(22)

When analyzing State aid and its compatibility with the general principles on State aid, the Commission will take into account, to the extent possible, the conditions laid down in Regulation (EU) No 1305/2013 and its implementing provisions and delegated act.

(23)

In view of the aforementioned considerations, these Guidelines cover the following categories of aid:

(24)

Aid for LEADER local development referred to in Article 35 of Regulation (EU) No 1303/2013 and in Articles 42 to 45 of Regulation (EU) No 1305/2013, which involves individual projects designed and executed by local partnerships to address specific local problems, may be covered by these Guidelines to the extent that it meets the conditions of the related rural development measures as laid down in these Guidelines.

(25)

These Guidelines apply in principle to aid to SMEs and to large enterprises. Large enterprises tend to be less affected by market failures than SMEs. Moreover, large enterprises in the agricultural and forestry sectors and in rural areas are more likely to be significant players on the market and, consequently, in specific cases, aid granted to large enterprises may particularly distort competition and trade in the internal market. As aid to large enterprises in the agricultural and forestry sectors and in rural areas and to other large enterprises can potentially cause similar distortions of competition, State aid rules for large enterprises in these Guidelines should be harmonised with the general State aid rules, and should be subject to the common assessment principles as laid down in Chapter 3 of Part I of these Guidelines. Without prejudice to those common assessment principles, as regards rural development measures for reasons of consistency and coherence with the rural development policy, the State aid rules for large enterprises should be aligned with the relevant rules of Regulation (EU) No 1305/2013. As regards aid measures for the livestock sector, which do not fall within the scope of Regulation (EU) No 1305/2013, the Commission maintains its previous policy that large enterprises should be able to finance the costs of these measures themselves. Therefore, aid in the livestock sector should be limited to SMEs.

(26)

Undertakings in difficulty (15) are in principle excluded from the scope of these Guidelines. The Commission considers that when an undertaking is in financial difficulty, given that its very existence is in danger, it cannot be considered an appropriate vehicle for promoting other public policy objectives until such time as its viability is assured. Therefore, where the beneficiary of the aid is in financial difficulty within the meaning of point (35)15 , the aid will be assessed in accordance with the Community Guidelines on State aid for rescuing and restructuring firms in difficulty (16), as amended or replaced. This principle does not apply to compensatory aid for damage caused by natural disasters and exceptional occurrences referred to in Sections 1.2.1.1 and 2.1.3 of Part II of these Guidelines which is compatible with the internal market under Article 107(2)(b) of the Treaty. If the financial difficulty of an undertaking active in the agricultural and forestry sectors has been caused by the risk event referred to in Sections 1.2.1.2., 1.2.1.3, 1.2.1.5, 2.1.3 or 2.8.5 of Part II of these Guidelines, aid to compensate for or restore the losses or damage caused by such risk events and to cover the costs of eradication of plant pests can be granted in line with these Guidelines and may be still found compatible with the internal market under Article 107(3)(c) of the Treaty. In addition, for reasons of public health protection and having in mind the emergency situation, no distinction should be made, under certain conditions, as to the economic situation of an undertaking for aid for destruction and removal of fallen stock in Section 1.2.1.4 and for aid for eradication measures in the case of animal diseases referred to in point (375)(c) of Section 1.2.1.3.

(27)

When assessing aid granted to an undertaking which is subject to an outstanding recovery order following a previous Commission decision declaring an aid illegal and incompatible with the internal market, the Commission will take account of the amount of aid still to be recovered (17). This does not apply to aid to make good the damage caused by natural disasters under Article 107(2)(b) of the Treaty.

(28)

The Commission will not authorise aid for export-related activities to third countries or to Member States which would be directly linked to the quantities exported, aid contingent upon the use of domestic over imported goods, or aid to establish and operate a distribution network or to cover any other expenditure linked to export activities. 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 in principle does not constitute export aid.

(29)

Member States are reminded that the system of financing, for example, by parafiscal levies, should be notified, when the system forms an integral part of the aid measure (see paragraphs 41 to 44 of Case T-275/11) (18).

(30)

The Commission will assess any aid measures not covered by these Guidelines or by any other relevant State aid rules on a case by case basis directly on the basis of Article 107(3) of the Treaty, taking into account the rules laid down in Articles 107, 108 and 109 of the Treaty, the CAP and by analogy these Guidelines, where possible. Member States notifying State aid not covered by the scope of these Guidelines will have to demonstrate that the State aid in question meets the common assessment principles as laid down in Chapter 3 of Part I of these Guidelines. The Commission will only approve such measures if the positive contribution to the development of the sector clearly outweighs the risks of distorting competition in the internal market and affecting trade between Member States.

(31)

In principle, to streamline State aid rules and due to the similarities between undertakings active in the agricultural and forestry sectors and in rural areas and other undertakings, the general State aid instruments laying down the criteria for compatibility of aid are applicable to the sectors covered by these Guidelines. This concerns in particular the Community guidelines on State aid for rescuing and restructuring firms in difficulty, the Framework for state aid for research and development and innovation (19) as amended or replaced, the Guidelines on State aid for environmental protection and energy 2014-2020 (20) as amended or replaced, the EU Guidelines for the application of State aid rules in relation to the rapid deployment of broadband networks (21) as amended or replaced, the Guidelines on State aid to promote risk finance investments (22) as amended or replaced, the Communication from the Commission - Criteria for the compatibility analysis of training State aid cases subject to individual notification (23) as amended or replaced, the Communication from the Commission - Criteria for the compatibility analysis of State aid to disadvantaged and disabled workers subject to individual notification (24) as amended or replaced and the instruments related to services of general economic interest (25).

(32)

The above horizontal instruments apply to the production, processing and marketing of agricultural products unless the present Guidelines provide specific rules. These Guidelines provide for specific environmental aid measures, such as aid for agri-environment-climate and animal welfare commitments (Section 1.1.5 of Part II), aid for disadvantages related to Natura 2000 areas and to the Water Framework Directive (26) (Section 1.1.6 of Part II) and aid for organic farming (Section 1.1.8 of Part II). Aids for investments to pursue environmental objectives in the field of primary agricultural production are evaluated in accordance with the rules set out in Section 1.1.1.1. of Part II of these Guidelines. Aid for environmental protection in favour of undertakings active in the processing of agricultural products and the marketing of agricultural products will be declared compatible with the internal market under Article 107(3)(c) of the Treaty if it fulfils the conditions of the Guidelines on State aid for environmental protection and energy 2014-2020. Aid for investments in energy saving, biofuel and energy from renewable sources are excluded from the scope of Chapters 2 and 3 of Part II of these Guidelines as such aid should comply with the Guidelines on State aid for environmental protection and energy 2014-2020, unless it is exempted from notification obligation. However aid for investments linked to primary agricultural production related to the production of energy from renewable sources or to the production of biofuels on holdings can fall within the scope of these Guidelines provided that such production does not exceed the average annual consumption of fuels or energy of the agricultural holding in question (Section 1.1.1.1).

(33)

The Guidelines on regional State aid for 2014-2020 (27) do not apply to aid for the production of primary agricultural products due to the specificities of the sector. They do however apply to the processing of agricultural products and the marketing of agricultural products to the extent set out in these Guidelines.

(34)

Both the general State aid rules and the more specific provisions of these Guidelines may concern undertakings active in the forestry sector or in rural areas. Where applicable, aid to undertakings active in the forestry sector or in rural areas may also be found compatible under the conditions and in compliance with general Union rules on State aid (in particular, with the Guidelines on regional State aid for 2014-2020, the Framework for state aid for research and development and innovation and the Guidelines on State aid for environmental protection and energy 2014-2020).

(35)

For the purposes of these Guidelines:

(36)

Where the conditions of Article 107(1) of the Treaty are met, Member States must notify to the Commission aid in the agricultural and forestry sectors and in rural areas pursuant to Article 108(3) of the Treaty and shall not put the proposed measure into effect until this procedure resulted in a final decision, with the exception of measures that fulfil the conditions laid down in a block exemption regulation.

(37)

Individual aid granted on the basis of an aid scheme remains subject to the notification obligation pursuant to Article 108(3) of the Treaty, if the aid exceeds the following notification thresholds:

(38)

To assess whether a notified aid measure can be considered compatible with the internal market under Article 107(3) of the Treaty, the Commission generally analyses whether the design of the aid measure ensures that the positive impact of the aid towards an objective of common interest exceeds its potential negative effects on trade and competition.

(39)

The Communication on State aid modernisation called for the identification and definition of common principles applicable to the assessment of compatibility of all the aid measures carried out by the Commission. For this purpose, the Commission will consider an aid measure compatible with the Treaty only if it satisfies each of the following criteria:

(40)

The overall balance of certain categories of schemes may further be made subject to a requirement of ex post evaluation as described in points (720) to (723). In such cases, the Commission may limit the duration of those schemes (normally to four years or less) with a possibility to re-notify their prolongation afterwards.

(41)

Moreover, if a State aid measure or the conditions attached to it (including its financing method when it forms an integral part of it) entail a non-severable violation of Union law, the aid cannot be declared compatible with the internal market (38). In particular, the following aid is considered to entail a non-severable violation of EU law:

(42)

The common assessment principles have to be seen in the specific context of the CAP. Therefore, these general competition policy considerations apply to all aid under these Guidelines, unless derogations are provided for in Sections 3.1. to 3.7 of Part I of these Guidelines, due to particular considerations applicable in the agricultural sector.

(43)

The objectives of aid in the agricultural and forestry sectors and in rural areas are to ensure viable food production and to promote the efficient and sustainable use of resources in order to achieve intelligent and sustainable growth.

(44)

Aid in the agricultural and forestry sectors and in rural areas should relate closely to the CAP, should be consistent with the rural development objectives referred to in point (10) of these Guidelines and should be compatible with the rules on the common organisation of the markets in agricultural products.

(45)

The rural development objectives taken jointly with the general principles on State aid will be taken into account for the assessment of compatibility of the aid.

(46)

The Commission considers that measures, implemented pursuant to and in conformity with Regulation (EU) No 1305/2013 and its implementing and delegated acts or as an additional national financing in the framework of a rural development programme, are per se consistent with and contribute to the objectives of rural development.

(47)

As regards rural development like measures financed exclusively from national funds, in order to ensure coherence with the rural development measures co-financed by the EAFRD under rural development programmes, Member States should demonstrate how the State aid under consideration fits into and is consistent with the relevant rural development programmes. Every notification must be accompanied by such documentation.

(48)

The Commission considers that the principle of contribution to the objectives of rural development is met regarding the aid measures in Sections 1.2, 1.3, 2.8 and 2.9 of Part II of these Guidelines, which are outside the scope of rural development, since the Commission has gained sufficient experience as to the contribution of those measures to the rural development objectives.

(49)

When awarding aid to individually notifiable investment projects on the basis of a scheme, the granting authority must demonstrate that the selected project will contribute towards the objective of the scheme and thus towards the objectives of aid in the agricultural and forestry sectors and in rural areas. For this purpose, Member States can rely on the information provided by the applicant for aid where the positive effects of the investment must be described.

(50)

Due to the specificity of the agricultural sector (39), although State aid rules are generally applicable to this sector, their application nevertheless remains subject to the provisions laid down in the regulations of the first pillar of the CAP. In other words, Member States' recourse to State aid measures cannot take precedence over Regulation (EU) No 1308/2013 (40). Therefore, the Commission will not authorise State aid which is incompatible with the provisions governing the common organisation of the market or which would interfere with the proper functioning of the common organisation.

(51)

Further, specific conditions on the compliance with the principles of the common organisation of the markets in agricultural products are set out in Section 1.1.1.1 on investment aid on agricultural holdings linked to the primary agricultural production, in Section 1.1.4. on start-up aid for producer groups and organisations and in Section 1.2.2. on aid for closing of production capacity, of Part II of these Guidelines.

(52)

Article 11 of the Treaty provides that ‘Environmental protection requirements must be integrated into the definition and implementation of the Union's policies and activities, in particular with a view to promoting sustainable development.’ The legal basis for the substantial environmental measures in the first and second pillars of the CAP is Article 11 of the Treaty. In line with this requirement, the Union's priorities for rural development should be pursued in the framework of sustainable development. The Union's promotion of the aim of protecting the environment as set out in Article 11 of the Treaty also takes into account the polluter pays principle (41). Therefore, particular attention should be given to environmental issues in future State aid notifications. All State aid notifications should in the future contain an assessment on whether or not the aided activity is expected to have any environmental impact. In cases where there is an environmental impact, State aid notifications should provide information demonstrating that the aid measure will not result in an infringement of applicable Union environmental protection legislation. For example, in the case of an aid scheme for investments which are intended to increase production, and which involve an increased use of scarce resources or an increase in pollution, it will be necessary to show that the scheme will not result in an infringement of the applicable Union legislation, including environmental protection legislation (42), and the Good Agricultural and Environmental Conditions (GAECs) of cross-compliance under Regulation (EU) No 1307/2013. Where State aid is notified, which forms part of the rural development programme, the environmental requirement for such State aid measure should be identical with the environmental requirement of the rural development measure.

(53)

In order to assess whether State aid is necessary to achieve the objective of common interest, it is necessary first to diagnose the problem to be addressed. State aid should be targeted towards situations where it can bring about a material improvement that the market cannot deliver on its own.

(54)

State aid measures can indeed, under certain conditions, correct market failures thereby contributing to the efficient functioning of markets and enhancing competitiveness. Furthermore, where markets provide efficient outcomes but these are deemed unsatisfactory from an equity or cohesion point of view, State aid may be used to obtain a more desirable, equitable market outcome.

(55)

For the purposes of these Guidelines, the Commission considers that the market is not delivering the expected objectives without State intervention concerning the aid measures fulfilling the specific conditions laid down in Part II of these Guidelines. Therefore, such aid should be considered necessary to achieve the objectives of common interest specified under Section 3.1. of Part I of these Guidelines.

(56)

The proposed aid measure must be an appropriate policy instrument to address the policy objective concerned. An aid measure will not be considered compatible if other less distortive policy instruments or other less distortive types of aid make it possible to achieve the same positive contribution to the objectives of CAP and in particular of rural development. It is important to keep in mind that there may be other, better placed instruments such as regulation, market-based instruments, infrastructure development and improvement in the business environment to achieve those objectives.

(57)

The Commission considers that aid granted in the agricultural and forestry sectors and in rural areas, which fulfils the specific conditions laid down in the relevant Sections of Part II of these Guidelines, is an appropriate policy instrument.

(58)

Where a Member State decides to put in place a rural development like aid measure financed exclusively from national funds, when at the same time the same measure is provided for in the relevant rural development programme, the Member State should demonstrate the advantages of such a national aid instrument compared to the rural development programme measure at stake.

(59)

Aid can be granted in various forms. The Member State should however ensure that the aid is granted in the form that is likely to generate the least distortions of trade and competition.

(60)

Where a specific form is foreseen for an aid measure described in Part II of these Guidelines, such form is considered as an appropriate aid instrument for the purpose of these Guidelines.

(61)

The Commission further considers as regards rural development measures, co-financed by EAFRD or granted as an additional financing for such co-financed rural development measures, that aid granted in the form provided for in the respective rural development measure is an appropriate aid instrument.

(62)

As regards investment aid not covered by Regulation (EU) No 1305/2013 as part of the rural development programme or as additional financing for such a rural development measure, where the aid is granted in forms that provide a direct pecuniary advantage (for example, direct grants, exemptions or reductions in taxes, social security or other compulsory charges, etc.), the Member State must demonstrate why other potentially less distortive forms of aid such as repayable advances or forms of aid that are based on debt or equity instruments (for example, low-interest loans or interest rebates, State guarantees or an alternative provision of capital on favourable terms) are less appropriate.

(63)

With regard to forestry measures in Section 2.8 of Part II of these Guidelines, Member States must demonstrate that the ecological, protective and recreational objectives they are aiming for cannot be achieved with the rural development like forestry measures in Chapters 2.1 to 2.7 of Part II of these Guidelines.

(64)

In the case of several categories of aid, such as aid towards the costs of market research activities, product conception and design and for the preparation of applications for the recognition of quality schemes, aid for knowledge transfer and information actions, aid for advisory services, aid for farm replacement services, aid for promotion measures, aid to compensate for the costs of the prevention and eradication of animal diseases and plant pest and aid to the livestock sector, the aid must be granted to the final aid beneficiaries indirectly, in kind, by means of subsidised services. In these cases the aid is paid to the provider of the service or activity in question.

(65)

The compatibility assessment of an aid measure with the internal market is without prejudice to the applicable public procurement rules and to the principles of transparency and openness and non-discrimination in the selection process of a service provider.

(66)

Aid in the agricultural and forestry sectors and in rural areas can only be found compatible with the internal market, if it has an incentive effect. An incentive effect is present when the aid changes the behaviour of an undertaking in such a way that it engages in additional activity contributing to the development of the sector which it would not have engaged in without the aid or in which would only have engaged in a restricted or different manner. The aid must however not subsidise the costs of an activity that an undertaking would have incurred in any event and must not compensate for the normal business risk of an economic activity.

(67)

Unless exceptions are expressly provided for in Union legislation or in these Guidelines, unilateral State aid measures which are simply intended to improve the financial situation of undertakings but which in no way contribute to the development of the sector, and in particular aid which is granted solely on the basis of price, quantity, unit of production or unit of the means of production are considered to constitute operating aid which is incompatible with the internal market. Furthermore, by its very nature, such aid is also likely to interfere with the mechanisms regulating the organisation of the internal market.

(68)

These same reasons have led the Commission to authorise aid to facilitate compliance with obligatory standards only to the extent that it meets the objectives of rural development policy.

(69)

For the same grounds, aid granted under Sections 1.2. and 2.8.5 of Part II of these Guidelines should be limited to helping undertakings active in the agricultural and forestry sectors facing various difficulties despite having undertaken reasonable efforts to minimise such risks. State aid should not have as an effect to entice undertakings into taking unnecessary risk. Undertakings active in the agricultural and forestry sectors should themselves bear the consequences of imprudent choices of production methods or products.

(70)

For the same reasons, the Commission considers that aid does not present an incentive for the beneficiary wherever work on the relevant project or activity has already started prior to the aid application by the beneficiary to the national authorities.

(71)

The aid application must include at least the applicant's name and the size of the undertaking, a description of the project or activity, including its location and start and end dates, the amount of aid needed to carry it out and the eligible costs.

(72)

In addition, large enterprises must describe in the application, the situation without the aid, which situation is referred to as the counterfactual scenario or alternative project or activity and submit documentary evidence in support of the counterfactual described in the application.

(73)

When receiving an application, the granting authority must carry out a credibility check of the counterfactual and confirm that the aid has the required incentive effect. A counterfactual is credible if it is genuine and relates to the decision-making factors prevalent at the time of the decision by the beneficiary regarding the project or activity concerned.

(74)

By derogation from points (70) to (73), aid in the form of tax advantages granted to SMEs is deemed to have an incentive effect if the aid scheme establishes a right to aid in accordance with objective criteria and without further exercise of discretion by the Member State and if the aid scheme has been adopted and in force before work on the aided project or activity has started. The latter requirement does not apply in the case of fiscal successor schemes provided the activity was already covered by the previous schemes in the form of tax advantages.

(75)

By way of derogation from points (70) to (74), the following categories of aid of these Guidelines are not required or are deemed to have an incentive effect:

(76)

In addition to the requirements set out above, for individually notifiable investment aid, the Member State must provide clear evidence that the aid effectively has an impact on the investment choice. To allow for a comprehensive assessment, the Member State must provide not only information concerning the aided project but also a comprehensive description of the counterfactual scenario, in which no aid is granted to the beneficiary by any public authority.

(77)

The Member States are invited to rely on documents, such as official board documents, risk assessments, including the assessment of location-specific risks, financial reports, internal business plans, expert opinions and other studies related to the investment project under assessment. Documents containing information on demand forecasts, cost forecasts, financial forecasts, documents that are submitted to an investment committee and that elaborate on various investment scenarios, or documents provided to the financial institutions could help the Member States to demonstrate the incentive effect.

(78)

In this context the level of profitability may be evaluated by reference to methodologies which are standard practice in the sector concerned and which may include methods to evaluate the net present value of the project (NPV) (43), the internal rate of return (IRR) (44) or the average return on capital employed (ROCE). The profitability of the project is to be compared with normal rates of return applied by the undertaking in other investment projects of a similar kind. Where these rates are not available, the profitability of the project is to be compared with the cost of capital of the undertaking as a whole or with the rates of return commonly observed in the sector concerned.

(79)

Where no specific counterfactual scenario is known, the incentive effect can be assumed when there is a funding gap, that is to say when the investment costs exceed the NPV of the expected operating profits of the investment on the basis of an ex ante business plan.

(80)

If the aid does not change the behaviour of the beneficiary by stimulating additional investment, it has no positive effects for development of the sector concerned. Therefore, aid will not be approved in cases where it appears that the same investment would still be pursued without the aid.

(81)

Aid in the agricultural and forestry sectors and in rural areas is considered to be proportionate if the aid amount per beneficiary is limited to the minimum needed to achieve the common objective aimed for.

(82)

In principle, in order for the aid to be proportionate, the Commission considers that the aid amount should not exceed the eligible costs. This is without prejudice to rules for environmental or other public incentives that are expressively provided for in Sections 1.1.3 and 1.2.2 of Part II of these Guidelines.

(83)

In order to ensure predictability and a level playing field, in these Guidelines the Commission further applies maximum aid intensities for aid. Where the maximum aid intensity cannot be set, for example in the case of start-up aid for young farmers and the development of small farms, maximum aid amounts defined in nominal terms are set out in order to ensure the proportionality of the aid.

(84)

If the eligible costs are correctly calculated and the maximum aid intensities or maximum aid amounts set out in Part II of these Guidelines are respected, the criterion of proportionality is deemed to be fulfilled.

(85)

The maximum aid intensity and aid amount must be calculated by the granting authority when granting the aid. The eligible costs must be supported by documentary evidence which should be clear, specific and contemporary. For the purposes of calculating the aid intensity and the eligible costs, all figures used must be taken before any deduction of tax or other charge.

(86)

Value added tax (VAT) is not eligible for aid, except where it is not-recoverable under national VAT legislation.

(87)

Where aid is granted in a form other than a grant, the aid amount is the gross grant equivalent of the aid.

(88)

Aid payable in several instalments is discounted to its value at the moment of granting the aid. The eligible costs are discounted to their value at the moment of granting the aid. The interest rate to be used for discounting purposes is the discount rate applicable on the date of granting the aid.

(89)

Where aid is granted by means of tax advantages, the discounting of aid tranches takes place on the basis of the discount rates applicable at the various times the tax advantage takes effect.

(90)

As regards investment aid in rural areas, the maximum aid intensity for large investment projects must be scaled down to the adjusted aid amount as defined in point (35).31. In addition, large investment projects cannot benefit from the increased aid intensities for SMEs.

(91)

Where commitments under Sections 1.1.5.1, 1.1.8, 2.3 and 3.4 of Part II of these Guidelines are expressed in units other than those set out in Annex II to Regulation (EU) No 1305/2013, Member States may calculate payments on the basis of those other units. In such cases, the Member States must ensure that the maximum amounts per year are complied with.

(92)

Except for aid for commitments for the rearing of local breeds in danger of being lost to farming referred to in Section 1.1.5.1, aid under Sections 1.1.5.1, 1.1.8, 2.3 and 3.4 of Part II of these Guidelines cannot be granted per livestock unit. The conversion rates of the various categories of animals to livestock units are set out in Annex II of the implementing act to Regulation (EU) No 1305/2013.

(93)

Member States may fix the aid amount for the measures or types of operations referred to in Sections 1.1.5, 1.1.6, 1.1.7, 1.1.8, 2.3, 3.4 and 3.5 of Part II of these Guidelines on the basis of standard assumptions of additional costs and income foregone. Member States should ensure that the calculations and the corresponding aid (a) contain only elements that are verifiable; (b) are based on figures established by appropriate expertise; (c) indicate clearly the source of the figures used; (d) are differentiated to take account of regional or local site conditions and actual land use, where applicable; and (e) do not contain elements linked to investment costs.

(94)

When assessing the compatibility of aid, the Commission will consider any insurance taken out, or which could have been taken out by the aid beneficiary. Regarding aid to compensate for losses caused by adverse climatic events which can be assimilated to a natural disaster, in order to avoid the risk of distorting competition, aid at the maximum aid intensity should be granted only to an undertaking that cannot be covered for such losses by insurance. This is why, in order to further improve risk management, beneficiaries must be encouraged to take out insurance wherever possible.

(95)

As a general rule, individually notifiable investment aid will be considered to be limited to the minimum, if the aid amount corresponds to the net extra costs of implementing the investment in the area concerned, compared to the counterfactual scenario in the absence of aid. Likewise, in the case of investment aid granted to large enterprises under notified schemes, Member States must ensure that the aid amount is limited to the minimum on the basis of a ‘net-extra cost approach’.

(96)

The aid amount should not exceed the minimum necessary to render the project sufficiently profitable, for example, it should not lead to an increase of its IRR beyond the normal rates of return applied by the undertaking concerned in other investment projects of a similar kind or, if these rates are not available, to an increase of its IRR beyond the cost of capital of the undertaking as a whole or beyond the rates of return commonly observed in the sector concerned.

(97)

For investment aid to large enterprises under notified schemes, the Member State must ensure that the aid amount corresponds to the net extra costs of implementing the investment in the area concerned, compared to the counterfactual scenario in the absence of aid. The method explained in point (96) must be used together with maximum aid intensities as a cap.

(98)

As regards individually notifiable investment aid, the Commission will verify whether the aid amount exceeds the minimum necessary to render the project sufficiently profitable, by using the method set out in point (96). Calculations used for the analysis of the incentive effect can also be used to assess if the aid is proportionate. The Member State must demonstrate the proportionality on the basis of documentation such as that referred to in point (77). This requirement does not apply to investment aid related to the primary agricultural production.

(99)

Aid may be granted concurrently under several schemes or cumulated with ad hoc aid, provided that the total amount of State aid for an activity or project does not exceed the aid ceilings laid down in these Guidelines.

(100)

Aid with identifiable eligible costs may be cumulated with any other State aid, as long as those aids concern different identifiable eligible costs. Aid with identifiable eligible costs may be cumulated with any other State aid, in relation to the same eligible costs, partly or fully overlapping, only if such cumulation does not result in exceeding the highest aid intensity or aid amount applicable to this type of aid under these Guidelines.

(101)

Aid without identifiable eligible costs under Sections 1.1.2 and 3.3. of Part II of these Guidelines may be cumulated with any other State aid measure with identifiable eligible costs. Aid without identifiable eligible costs may be cumulated with other State aid without identifiable eligible costs, up to the highest relevant total financing threshold fixed in the specific circumstances of each case by these Guidelines or other State aid guidelines, a block exemption regulation or a decision adopted by the Commission.

(102)

State aid in favour of the agricultural sector should not be cumulated with payments referred to in Articles 81(2) and 82 of Regulation (EU) 1305/2013 in respect of the same eligible costs if such cumulation would result in an aid intensity or aid amount exceeding those laid down in these Guidelines.

(103)

Where Union funding centrally managed by the institutions, agencies, joint undertakings or other bodies of the Union that is not directly or indirectly under the control of the Member State is combined with State aid, only the latter will be considered for determining whether notification thresholds and maximum aid intensities and ceilings are respected, provided that the total amount of public funding granted in relation to the same eligible costs does not exceed the most favourable funding rate(s) laid down in the applicable rules of Union law.

(104)

Aid authorised under these Guidelines should not be cumulated with any de minimis aid in respect of the same eligible costs if such cumulation would result in an aid intensity or aid amount exceeding that fixed in these Guidelines.

(105)

Aid for investments aimed at the restoration of agricultural production potential as referred to in point (143)(e) should not cumulated with aid for the compensation of material damage referred to in Sections 1.2.1.1, 1.2.1.2 and 1.2.1.3 of these Guidelines.

(106)

Double funding of agricultural practices beneficial for the climate and the environment under Sections 1.1.5.1., 1.1.6, 1.1.8 and 3.5 of Part II of these Guidelines and equivalent practices referred to in Article 43 of Regulation (EU) No 1307/2013 should be excluded. The revision clause foreseen in point (724) of these Guidelines should also ensure avoiding double funding.

(107)

Start-up aid for producer groups and organisations in the agricultural sector as referred to in Section 1.1.4 of Part II of these Guidelines should not be cumulated with aid for the setting-up of producers groups and organisations in the agricultural sector laid down in Article 27 of Regulation (EU) No 1305/2013. Start- up aid for young farmers and start-up aid for the development of small farms as referred to in Section 1.1.2 should not be cumulated with business start-up aid for young farmers or the development of small farms as referred to in Article 19(1)(a)(i) and (iii) of Regulation (EU) No 1305/2013 if such cumulation would result in an aid amount exceeding those laid down in these Guidelines.

(108)

For the aid to be compatible, the negative effects of the aid measure in terms of distortions of competition and impact on trade between Member States must be limited and outweighed by the positive effects in terms of contribution to the objective of common interest.

(109)

In assessing the negative effects of the aid measure, the Commission will focus its analysis of the distortions of competition on the foreseeable impact the aid in the agricultural and forestry sectors and in rural areas has on competition between undertakings in the product markets affected (45).

(110)

As a starting point, if the aid is well targeted, proportionate and limited to the net extra costs, the negative impact of the aid is softened and the risk that the aid will unduly distort competition will be more limited. Second, the Commission establishes maximum aid intensities. These constitute a basic requirement for compatibility, the aim of which is to prevent the use of State aid for projects where the ratio between aid amount and eligible costs is to be deemed very high and particularly likely to be distortive. In general, the greater the positive effects the aided project is likely to give rise to and the higher the likely need for aid, the higher the cap on aid intensity.

(111)

However, even where aid is necessary and proportionate, it may result in a change of the behaviour of the beneficiaries which distorts competition. This is more likely in the agricultural sector which differs from other markets by the specific structure of primary agricultural production that is characterized by a high number of small undertakings involved. On such markets the risk of distortion of competition is high even when only small amounts of aid are granted.

(112)

Two main potential distortions of competition and trade may be caused by aid for the agricultural and forestry sectors and for rural areas. These are product market distortions and location effects. Both types may lead to allocative inefficiencies, undermining the economic performance of the internal market and distributional concerns, in that the aid affects the distribution of economic activity across regions.

(113)

In principle, due to its positive effects on the development of the sector, the Commission considers that where an aid fulfils the conditions and does not exceed the relevant maximum aid intensities, laid down in the applicable Sections of Part II of these Guidelines, the negative effect on competition and trade is limited to the minimum.

(114)

However, because investment aid to undertakings active in the processing of agricultural products and the marketing of agricultural products and to undertakings active in other sectors, for example, in the food processing sector (46), tends to have similar distortive effects on competition and trade, the general competition policy considerations on the effect on competition and trade should apply equally to all those sectors. Therefore, the conditions described in points (115) to (127) must be respected as regards investment aid for the processing of agricultural products and for the marketing of agricultural products, in the forestry sector and in rural areas.

(115)

Aid schemes must not lead to significant distortions of competition and trade. In particular, even where distortions may be considered limited at an individual level (provided all conditions for investment aid are fulfilled), on a cumulative basis investment aid schemes might still lead to high levels of distortion. Such distortions might concern the output markets by creating or aggravating a situation of overcapacity or creating, increasing or maintaining the substantial market power of some beneficiaries in a way that will negatively affect dynamic incentives. Aid available under investment aid schemes might also lead to a significant loss of economic activity in other areas of the Europan Economic Area (EEA). In the case of an investment aid scheme focusing on certain sectors, the risk of such distortions is even more pronounced.

(116)

Therefore, the Member State concerned must demonstrate that any negative effects will be limited to the minimum taking into account, for example, the size of the projects concerned, the individual and cumulative aid amounts, the expected beneficiaries as well as the characteristics of the targeted sectors. In order to enable the Commission to assess the likely negative effects, the Member State is encouraged to submit any impact assessment at its disposal as well as ex-post evaluations carried out for similar predecessor schemes.

(117)

In appraising the negative effects of individual investment aid, the Commission places particular emphasis on the negative effects linked with the build-up of overcapacity in declining markets, the prevention of exit, and the notion of substantial market power. These negative effects are described in points (118) to (127) and must be counterbalanced with the positive effects of the aid.

(118)

In order to identify and assess the potential distortions of competition and trade, Member States should provide evidence permitting the Commission to identify the product markets concerned (that is to say, products affected by the change in the behaviour of the aid beneficiary) and to identify the competitors and customers/consumers affected.

(119)

The Commission uses various criteria to assess those potential distortions, such as market structure of the product concerned, performance of the market (declining or growing market), process for selection of the aid beneficiary, entry and exit barriers, product differentiation.

(120)

A systematic reliance on State aid by an undertaking might indicate that the undertaking is not able to withstand competition on its own or that it enjoys undue advantages compared to its competitors.

(121)

The Commission distinguishes two main sources of potential negative effects on product markets:

(122)

In order to evaluate whether the aid may serve to create or maintain inefficient market structures, the Commission will take into account the additional production capacity created by the project and whether the market is underperforming.

(123)

Where the market in question is growing, there is normally less reason to be concerned that the aid will negatively affect dynamic incentives or will unduly impede exit or entry.

(124)

More concern is warranted when markets are in decline. In this respect the Commission distinguishes between cases for which, from a long-term perspective, the relevant market is structurally in decline (that is to say, shows a negative growth rate), and cases for which the relevant market is in relative decline (that is to say, shows a positive growth rate, but does not exceed a benchmark growth rate).

(125)

Underperformance of the market will normally be measured compared to the EEA GDP over the last three years before the start of the project (benchmark rate); it can also be established on the basis of projected growth rates in the coming three to five years. Indicators may include the foreseeable future growth of the market concerned and the resulting expected capacity utilisation rates, as well as the likely impact of the capacity increase on competitors through its effects on prices and profit margins.

(126)

In certain cases, assessing the growth of the product market in the EEA may not be appropriate to entirely assess the effects of aid, in particular if the geographic market is worldwide. In such cases, the Commission will consider the effect of the aid on the market structures concerned, in particular, its potential to crowd out producers in the EEA.

(127)

In order to evaluate the existence of substantial market power, the Commission will take into account the position of the beneficiary over a period of time before receiving the aid and the expected market position after finalising the investment. The Commission will take account of the market shares of the beneficiary, as well as of the market shares of its competitors and other relevant factors, including, for example the market structure by looking at the concentration in the market, possible barriers to entry (47), buyer power (48) and barriers to expansion or exit.

(128)

Member States must ensure the publication of the following information on a comprehensive State aid website at national or regional level:

(129)

For aid schemes in the form of tax advantages the information on individual aid amount can be provided in the following ranges (in EUR million): 0,06 – 0,5 only for primary agricultural production; 0,5-1; 1 to 2; 2 to 5; 5 to 10; 10 to 30; and 30 and more.

(130)

If the individual aid award falls within the scope of Regulation (EU) No 1305/2013 and is either co-financed by the EAFRD or granted as additional national financing for such co-financed measures, the Member State concerned may choose not to publish it on the State aid website referred to in point (128) provided that the individual aid award has already been published in accordance with Articles 111, 112 and 113 of Regulation (EU) No 1306/2013. In that case, the Member State should make a reference to the website referred to in Article 111 of Regulation (EU) No 1306/2013 on the State aid website referred to in point (128).

(131)

Such information must be published after the decision to grant the aid has been taken, must be kept for at least 10 years and be available for the general public without restrictions (49). Member States will not be required to publish the abovementioned information before 1 July 2016 (50).

(132)

For reasons of transparency Member States must carry out reporting and revision as required in Chapter 2 of Part III of these Guidelines.

(133)

This Section applies to investment in agricultural holdings linked to the primary agricultural production, to investment in connection with the processing of agricultural products and the marketing of agricultural products.

(134)

All aid for investment under Sections 1.1.1.1, 1.1.1.2, 1.1.1.3. and 1.1.1.4. of Part II of these Guidelines must comply with the following condition: where a common market organisation, including direct support schemes, financed by the European Agricultural Guarantee Fund (EAGF) places restrictions on the production or limitations on Union support at the level of individual undertakings, holdings or processing plants, no investment which would increase production beyond those restrictions or limitations may receive State aid support.

(135)

The Commission will consider aid for investment in tangible assets and intangible assets on agricultural holdings linked to primary agricultural production compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of these Guidelines, the general condition for investment aid set out in point (134) of these Guidelines and with the following conditions.

(136)

This Section applies to aid for investments in tangible assets and intangible assets on agricultural holdings linked to the primary agricultural production. The investment is carried out by one or more beneficiaries or concerns a tangible asset or intangible asset used by one or more beneficiaries.

(137)

This Section also applies to investment in tangible assets and intangible assets linked to the production of biofuels or to the production of energy from renewable sources on holdings, which fulfils the following conditions:

(138)

Where more than one agricultural holding carry out the investment for the production of energy from renewable sources with the aim to serve their own energy needs or for the production of biofuels on holdings, the annual average consumption is accumulated to the amount equivalent to the average annual consumption of all beneficiaries.

(139)

Member States must require compliance with minimum standards for energy efficiency for investments in renewable energy infrastructure that consume or produce energy, where such standards exist at national level.

(140)

Investments in installations, the primary purpose of which is electricity production from biomass, are not be eligible for aid unless a minimum percentage of heat energy is utilised, to be determined by the Member States.

(141)

Member States must establish thresholds for the maximum proportions of cereals and other starch rich crops, sugar and oil crops used for bioenergy production, including biofuels, for different types of installations. Aid to bioenergy projects must be limited to bioenergy meeting the applicable sustainability criteria laid down in Union legislation including Article 17(2) to (6) of Directive 2009/28/EC of the European Parliament and of the Council.

(142)

If the production capacity of the installation exceeds the average annual consumption of the beneficiary or beneficiaries as referred to in points (137) and (138) of these Guidelines, Member States must comply with the conditions laid down in the Guidelines on State aid for environmental protection and energy 2014-2020 unless such aid is exempt from notification obligation.

(143)

The investment must pursue at least one of the following objectives:

(144)

The aid covers the following eligible costs:

(145)

Aid must not be granted in respect of the following:

(146)

By derogation from point (145)(c) aid may be granted for the purchase of animals carried out for the objective of point (143)(e) of these Guidelines.

(147)

By way of derogation from point (145)(c) aid might be granted for the purchase of breeding animals for the improvement of the genetic quality of the herd, provided that it complies with the following conditions:

(148)

By way of derogation from point (145)(d) aid for meeting standards may be granted subject to the following conditions:

(149)

As regards irrigation in new and existing irrigated areas, only investments that fulfil the following conditions will be considered to be eligible costs:

(150)

Areas which are not irrigated but in which an irrigation installation was active in the recent past, to be established and justified by Member States, may be considered as irrigated areas for the purpose of determining the net increase of the irrigated area.

(151)

From 1 January 2017, in the case of irrigation, aid can be paid only by Member States which ensure, in respect of the river basin district in which the investment takes place, a contribution of the different water uses to the recovery of the costs of water services by the agricultural sector consistent with Article 9(1) first indent of Directive 2000/60/EC having regard where appropriate, to the social, environmental and economic effects of the recovery as well as the geographic and climatic conditions of the region or regions affected.

(152)

The aid intensity must not exceed the following:

(153)

The aid intensity rates referred to in point (152) above may be increased by 20 percentage points provided that the maximum combined aid does not exceed 90 % for the following:

(154)

As regards non-productive investments referred to in point (143)(d) and investments for the restoration of production potential referred to in point (143)(e), the maximum aid intensity must not exceed 100 % of the eligible costs.

(155)

As regards investment with preventive objectives in point (143)(e), the maximum aid intensity must not exceed 80 %. However, it may be increased up to 100 % if the investment is carried out collectively by more than one beneficiary.

(156)

The Commission will consider aid for investments in favour of the conservation of cultural and natural heritage located on the agricultural holding compatible with the internal market under Article 107(3) of the Treaty if it complies with the common assessment principles, the general condition for investment aid set out in point (134) of these Guidelines and with the following conditions.

(157)

This Section applies to undertakings active in the primary agricultural production.

(158)

The aid should be granted for cultural and natural heritage in the form of natural landscapes and buildings which is formally recognised as cultural or natural heritage by the competent public authorities of the Member State.

(159)

The following costs intended for the conservation of cultural and natural heritage are eligible:

(160)

The following aid intensities apply:

(161)

The Commission will consider aid for investments concerning the relocation of farm buildings compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of these Guidelines, the general condition for investment aid set out in point (134) and with the following conditions.

(162)

This Section applies to undertakings active in the primary agricultural production.

(163)

The relocation of the farm building must pursue an objective of public interest. The public interest invoked to justify the granting of aid under this Section must be specified in the relevant provisions of the Member State concerned.

(164)

The following aid intensities apply:

(165)

The Commission will consider aid for investments in connection with the processing of agricultural products and the marketing of agricultural products compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of these Guidelines, the general condition for investment aid set out in point (134) and with the following conditions.

(166)

Aid for food based biofuels should not be granted under this Section, in order to incentivise the shift towards the production of more advanced forms of biofuels, as foreseen by the horizontal environmental and energy State aid rules.

(167)

This Section applies to aid for investments in tangible assets and intangible assets in connection with the processing of agricultural products and the marketing of agricultural products as referred in point (35)11 and point (35)12.

(168)

Member States may grant aid for investments in connection with the processing of agricultural products and the marketing of agricultural products if the aid fulfils all the conditions of one of the following aid instruments:

(169)

The eligible costs under Point (168)(c) must be limited to:

(170)

The following costs are not eligible:

(171)

The maximum aid intensity under these Guidelines must not exceed the following:

(172)

The aid rates referred to in point (171) above may be increased by 20 percentage points, provided that the maximum aid intensity does not exceed 90 % for operations:

(173)

Individual aid exceeding the notification threshold referred to in point (37)(a) must be notified to the Commission in accordance with Article 108(3) of the Treaty.

(174)

The Commission will consider start-up aid for young farmers and start-up aid for the development of small farms compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of these Guidelines and with the following conditions.

(175)

This Section applies to undertakings active in the primary agricultural production.

(176)

The aid is granted to young farmers as defined in point (35).29 of these Guidelines, who are micro- and small undertakings or to small farms. Small farms must be defined by Member States based on objective criteria and must be limited to micro- and small undertakings.

(177)

Member States must define the upper and lower thresholds to access aid in terms of the production potential of the agricultural holding, measured in standard output, as defined in Article 5 of Commission Regulation (EC) No 1242/2008 (54), or an equivalent. for access to start-up aid for young farmers and the development of small farms. The lower threshold for access to start-up aid for young farmers must be higher than the upper threshold for access to aid for the development of small farms.

(178)

Where the aid is granted to a young farmer who is setting up a holding in the form of a legal person, the young farmer must exercise effective and long-term control over the legal person in terms of decisions related to management, benefits and financial risks. Where several natural persons, including persons who are not young farmers, participate in the capital or management of the legal person, the young farmer must be capable of exercising such effective and long-term control either solely or jointly together with other persons. Where a legal person is solely or jointly controlled by another legal person, those requirements must apply to any natural person having control over that other legal person.

(179)

The aid must be conditional on the submission of a business plan to the competent authority of the Member State concerned, the implementation of which must start within nine months from the date of the adoption of the decision granting the aid.

(180)

In the case of aid for young farmers, the business plan must provide that the beneficiary has to comply with the definition of active farmer provided for in Article 9 of Regulation (EU) No 1307/2013, within 18 months from the date of setting up.

(181)

Young farmers who do not possess adequate occupational skills and competences are entitled to receive aid provided that they make a commitment to acquire those occupational skills and competences within 36 months from the date of the adoption of the decision on granting the aid. That commitment must be included in the business plan.

(182)

The business plan must describe at least the following:

(183)

Aid must be provided or paid in at least in two tranches or instalments over a maximum period of five years. For young farmers, the last aid tranche or the last instalment of the aid must be conditional upon the correct implementation of the business plan referred to in point (179).

(184)

The maximum aid must be limited to EUR 70 000 per young farmer and EUR 15 000 per small farm. Member States must define the amount of aid for young farmers also taking into account the socio-economic situation of the area concerned.

(185)

The Commission will consider aid for the transfer of agricultural holdings compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of these Guidelines and with the following conditions.

(186)

This Section applies to undertakings active in the primary agricultural production which permanently transfer their agricultural holding to another undertaking active in the primary agricultural production.

(187)

Aid is granted to undertakings, eligible to participate in the small farmers scheme, established by Title V of Regulation (EU) No 1307/2013, which on the date of submitting their aid application, have been so eligible for a period of at least one year and which undertake to permanently transfer their entire agricultural holding and the corresponding payment entitlements to another undertaking.

(188)

The aid must be paid either as annual payment or as a one-off payment.

(189)

The aid must be paid from the date of the transfer of the agricultural holding until 31 December 2020.

(190)

The aid corresponds to 120 % of the annual payment that the beneficiary is eligible to receive under the small farmer scheme.

(191)

The Commission takes a favourable view for start-up aid for producer groups and producer organisations as it creates an incentive for bringing together farmers. It will therefore consider start-up aid for producer groups and producer organisations compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of these Guidelines and with the following conditions.

(192)

This Section applies to the whole agricultural sector (55).

(193)

Only producer groups or organisations that have been officially recognised by the competent authority of the Member State concerned on the basis of a submission of a business plan are eligible for aid.

(194)

The start-up aid must be granted subject to the obligation of the Member State to verify that the objectives of the business plan have been reached within a period of five years from the date of the official recognition of the producer group or organisation.

(195)

The agreements, decisions and concerted practices concluded in the framework of the producer group or organisation must comply with the competition rules as they apply by virtue of Articles 206 to 210 of Regulation (EU) No 1308/2013.

(196)

As an alternative to providing start-up aid to producer groups or organisations, aid up to the same overall amount may be granted directly to producers to offset their contributions to the costs of running the groups or organisations during a period of the first five years following the formation of the group or organisation.

(197)

Member States may continue to grant start up aid for producer groups even after they have been recognised as producer organisations under the conditions of Regulation (EU) No 1308/2013.

(198)

Aid must be limited to producer groups and producer organisations falling with the definition of SMEs (56). The Commission will not authorise State aid towards the costs covered in this Section in favour of large enterprises (57).

(199)

Aid schemes authorised under this Section will be subject to a condition requiring them to adjust to take account of any changes in the regulations governing the common organisation of the markets in agricultural products.

(200)

The eligible costs may include the costs of the rental of suitable premises, the acquisition of office equipment, including computer hardware and software, administrative staff costs, overheads and legal and administrative fees. Where premises are purchased, the eligible costs for premises must be limited to rental costs at market rates.

(201)

Aid must not be granted to:

(202)

The aid must be paid as a flat rate aid in annual instalments for the first five years from the date on which the producer group or organisation was officially recognised by the competent authority on the basis of its business plan. Member States must only pay the last instalment after having verified the correct implementation of the business plan.

(203)

Aids which are granted to producer group or organisations to cover expenses which are not linked to start-up costs, such as investments or promotion activities, will be assessed in accordance with the rules governing such type of aids.

(204)

The aid intensity must be limited to 100 % of the eligible costs.

(205)

The total amount of aid must be limited to EUR 500 000. The aid must be degressive.

(206)

This Section applies to undertakings active in the primary agricultural production.

(207)

The Commission will consider aid for agri-environment-climate commitments compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of these Guidelines and with the following conditions.

(208)

This Section applies to aid to undertakings and groups of such undertakings which undertake, on a voluntary basis, to carry out operations consisting of one or more agri-environment-climate commitments on agricultural land which is to be defined by Member States, including but not limited to the agricultural area as defined under point (35)50 of these Guidelines.

(209)

The measure must aim at the preservation as well as at the promotion of the necessary changes to agricultural practices that make a positive contribution to the environment and climate.

(210)

The aid will cover only those voluntary commitments going beyond the relevant mandatory standards established pursuant to Chapter I of Title VI of Regulation (EU) No 1306/2013, the relevant criteria and minimum activities as established pursuant to points (c)(ii) and (c)(iii) of Article 4(1) of Regulation (EU) No 1307/2013, and relevant minimum requirements for fertiliser and plant protection products use as well as other relevant mandatory requirements established by national law. All such mandatory standards and requirements must be identified and described in the notification to the Commission.

(211)

Member States should endeavour to ensure that the undertakings that undertake to carry out operations under this measure are provided with the knowledge and information required to implement them, such as by commitment-related expert advice and/or by making aid under this measure conditional on obtaining relevant training.

(212)

Commitments under this measure must be undertaken for a period of five to seven years. However, where necessary in order to achieve or maintain the environmental benefits sought, Member States may determine a longer period for particular types of commitments, including by means of providing for their annual extension after the termination of the initial period (58). For new commitments directly following the commitment performed in the initial period, Member States may determine a shorter period.

(213)

Where relevant, the rules for area related payments provided for in Article 47 of Regulation (EU) No 1305/2013 and in any delegated act adopted pursuant to that provision should be complied with.

(214)

Aid for agri-environment-climate commitments to other land managers and other groups of beneficiaries than undertakings active in the agricultural sector may be granted under Section 3.4 of Part II these Guidelines.

(215)

Commitments under the agri-environment-climate measure to extensify livestock farming must comply with at least the following conditions:

(216)

Commitments under the agri-environment-climate measure to rear local breeds in danger of being lost to farming or to preserve plant genetic resources under threat of genetic erosion must require:

(217)

The following species of farm animals are eligible for aid: cattle; sheep; goats; equidae; pigs and birds.

(218)

Local breeds will be considered as being in danger of being lost to farming if the following conditions are fulfilled and if those conditions are also described and included in the notification to the Commission:

(219)

Plant genetic resources will be considered as being under threat of genetic erosion on condition that sufficient evidence of genetic erosion, based upon scientific results or indicators for the reduction of landraces/primitive local varieties, their population diversity and, where relevant, for modifications in the prevailing agricultural practices at local level, is described and included in the notification to the Commission.

(220)

Aid may be provided for the conservation and for the sustainable use and development of genetic resources in agriculture for operations not covered by the provisions under points (208) to (219) of this Section.

(221)

Aid, with the exception of aid for operations for the conservation of genetic resources as referred to in point (220), covers compensation to beneficiaries for all or part of the additional costs and income foregone resulting from the commitments they made. The aid must be granted annually.

(222)

In duly justified cases, for operations concerning environmental conservation, aid may be granted as a flat-rate or as a one-off payment per unit for commitments to renounce the commercial use of areas, calculated on the basis of additional costs incurred and income foregone.

(223)

Where necessary the aid may also cover transaction costs to a value of up to 20 % of the premium paid for the agri-environment-climate commitments. Where commitments are undertaken by groups of undertakings, the maximum level must be 30 %.

(224)

However, if a Member State wants to compensate for transaction costs caused by entering into agri-environment-climate commitments, it must provide convincing proof of such costs, for example by presenting cost comparisons with undertakings not entering into such commitments. The Commission will therefore not normally authorise State aid for transaction costs for the continuation of commitments already entered into in the past, unless a Member State demonstrates that such costs continue to occur or that new transaction costs are being incurred.

(225)

Where transaction costs are calculated on the basis of average costs and/or average farms, Member States should demonstrate that, in particular, large enterprises are not overcompensated. For the purpose of calculating compensation, Member States must take into account whether the transaction costs in question are incurred per undertaking or per hectare.

(226)

No aid under this measure may be granted for commitments that are covered under the organic farming measure defined in Section 1.1.8 of Part II of these Guidelines.

(227)

Aid for the conservation of genetic resources in agriculture covers the costs for the following operations:

(228)

Aid, with the exception of aid for operations for the conservation of genetic resources as referred to in point (220), must be limited to the following maximum amounts: EUR 600 per hectare per year for annual crops; EUR 900 per hectare per year for specialised perennial crops; EUR 450 per hectare per year for other land uses; EUR 200 per livestock unit per year for local breeds in danger of being lost to farming.

(229)

These amounts may be increased in duly substantiated cases taking into account specific circumstances to be justified in the notification to the Commission.

(230)

For the conservation of forest genetic resources in agriculture, the aid must be limited to 100 % of the eligible costs.

(231)

The Commission will consider aid for animal welfare commitments compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of these Guidelines and with the following conditions.

(232)

This Section applies to aid to undertakings active in the primary agricultural production which undertake, on a voluntary basis, to carry out operations consisting of one or more animal welfare commitments and which are active farmers.

(233)

The aid covers only those commitments going beyond the relevant mandatory standards established pursuant to Chapter I of Title VI of Regulation (EU) No 1306/2013 and other relevant mandatory requirements. These relevant requirements must be identified and described in the notification to the Commission.

(234)

Animal welfare commitments eligible to receive aid must provide upgraded standards of production methods in one of the following areas:

(235)

The animal welfare commitments must be undertaken for a renewable period of one to seven years.

(236)

The renewal of a contract can be also automatic, if its details are described in the contract. The mechanism of renewal of the animal welfare commitments must be set up by the Member States in accordance with their relevant national rules. Such mechanism must be communicated to the Commission as part of the notification of State aid pursuant to this Section. The renewal must always be subject to respect of conditions approved by the Commission for aid pursuant to this Section.

(237)

The aid must be granted annually and may compensate undertakings active in primary agricultural production for all or part of the additional costs and income foregone resulting from the commitment made by them.

(238)

Where necessary, they may also cover transaction costs to the value up to 20 % of the premium paid for the animal welfare commitments. However, if a Member State wants to compensate for transaction costs caused by entering into animal welfare commitments, it must provide convincing proof of such costs, for example by presenting cost comparisons with undertakings not entering into such animal welfare commitments. The Commission will, therefore, not normally authorise State aid for transaction costs for the continuation of animal welfare commitments already entered into in the past, unless a Member State demonstrates that such costs continue to occur or that new transaction costs are being incurred.

(239)

Where transaction costs are calculated on the basis of average costs and/or average farms, Member States should demonstrate that, in particular, large enterprises are not overcompensated. For the purpose of calculating compensation, Member States must take into account whether the transaction costs in question are incurred per undertaking or per hectare.

(240)

Aid must be limited to EUR 500 per livestock unit.

(241)

The Commission will consider aid for disadvantages related to Natura 2000 areas and to the Water Framework Directive compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of these Guidelines and with the following conditions.

(242)

This Section applies to undertakings active in the primary agricultural production.

(243)

Aid to other land managers other than undertakings active in the agricultural sector in duly justified cases may be granted in accordance with Section 3.5 of Part II of these Guidelines.

(244)

Aid covers compensation to beneficiaries for additional costs and income foregone resulting from disadvantages in the areas concerned, related to the implementation of the Habitats Directive, the Birds Directive and the Water Framework Directive (59).

(245)

Aid linked to the Habitats Directive and the Birds Directive may only be granted in relation to disadvantages resulting from requirements that go beyond the good agricultural and environmental condition provided for in Article 94 and Annex II of Council Regulation (EU) No 1306/2013 and the relevant criteria and minimum activities as established pursuant to points (c)(ii) and (iii) of Article 4(1) of Regulation (EU) No 1307/2013.

(246)

Aid linked to the Water Framework Directive may only be granted in relation to specific requirements that:

(247)

The requirements referred to in points (245) and (246) must be identified and described in the notification to the Commission.

(248)

The following areas are eligible for aid:

(249)

Aid must be limited to the following amounts: EUR 500 per hectare per year maximum in the initial period not exceeding five years; and EUR 200 per hectare per year maximum thereafter. Aid related to the Water Framework Directive must amount to a minimum of EUR 50 per hectare per year.

(250)

The maximum amounts of EUR 500 and EUR 200 may be increased in exceptional cases taking into account specific circumstances to be justified. The minimum amount of EUR 50 for aid related to the Water Framework Directive may be decreased in duly substantiated cases taking into account specific circumstances to be justified.

(251)

The Commission will consider aid in mountain areas and other areas facing natural or other specific constraints compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of these Guidelines and with the following conditions.

(252)

This Section applies to undertakings active in the primary agricultural production.

(253)

Aid may be granted to undertakings which undertake to pursue their farming activity in areas designated pursuant to Article 32 of Regulation (EU) No 1305/2013 and who are active farmers.

(254)

The aid covers compensation to undertakings active in the primary agricultural production for all or part of the additional costs and income foregone related to the constraints for agricultural production in the area concerned. Member States must demonstrate the constraints in question and provide proof that the amount of compensation to be paid does not go beyond income loss and additional costs resulting from those constraints.

(255)

Additional costs and income foregone must be calculated in comparison to areas which are not affected by natural or other specific constraints, taking into account payments pursuant to Chapter 3 of Title III of the Regulation (EU) No 1307/2013.

(256)

When calculating additional costs and income foregone, Member States may, where duly justified, differentiate the level of payment taking into account the following:

(257)

The aid will be granted annually per hectare of agricultural area.

(258)

Aid must be fixed between the following minimum and maximum amounts: EUR 25 minimum per hectare per year on average of the area of the beneficiary receiving aid, and EUR 250 maximum per hectare per year. However, the maximum amount may reach EUR 450 per hectare per year in mountain areas as defined in Article 32(2) of Regulation (EU) No 1305/2013.

(259)

The maximum amounts may be increased in duly substantiated cases taking into account specific circumstances to be justified in the notification to the Commission.

(260)

Member States must provide for degressivity of aid above a threshold level of area per holding, to be defined, except if the grant only concerns the minimum amount per hectare per year as laid down in point (258) of these Guidelines. To that effect, notifications should specify the size of the farm that will benefit from such aid.

(261)

In the case of a legal person, or a group of natural or legal persons, Member States may apply the degressivity of aid at the level of the members of these legal persons or groups where national law provides for the individual members to assume rights and obligations comparable to those of individual farmers who have the status of head of holding, in particular as regards their economic, social and tax status, provided that they have contributed to strengthening the agricultural structures of the legal persons or groups concerned.

(262)

In addition to the aid provided for in point (253) Member States may grant aid under this measure between 2014 and 2020 to beneficiaries in areas which were eligible under Article 36(a)(ii) of Regulation (EC) No 1698/2005 (60) during the 2007-2013 rural development programming period. For beneficiaries in areas that are no longer eligible following the new delimitation referred to in Article 32(3) of Regulation (EU) No 1305/2013, this aid must be degressive over a maximum period of four years starting on the date the delimitation in accordance with Article 32(3) of Regulation (EU) No 1305/2013 is completed and at the latest in 2018. Those aid must start at no more than 80 % of the average payment fixed in the rural development programme for the period 2007-2013 or, if the measure was granted exclusively from national funds, in the relevant State aid decision, in accordance with Article 36(a)(ii) of Regulation (EC) No 1698/2005, and must end in 2020 at the latest at no more than 20 %. When the application of degressivity results in the level of the payment reaching EUR 25, the Member State can continue to grant aid at this level until the phasing out period is completed.

(263)

Following completion of the delimitation, beneficiaries in the areas that remain eligible must receive full payment under this measure.

(264)

The Commission will consider aid for organic farming compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of these Guidelines and with the following conditions.

(265)

This Section applies to undertakings active in the primary agricultural production.

(266)

Aid per hectare of agricultural area may be granted to undertakings or groups of undertakings which undertake on a voluntarily basis to convert to or maintain organic farming practices and methods as defined in Council Regulation (EC) No 834/2007 (61) and who are active farmers.

(267)

Aid is granted only for commitments which go beyond the following standards and requirements which must be identified and described in the notification to the Commission:

(268)

Commitments must be carried out over an initial period of five to seven years. However, where aid is granted for conversion to organic farming Member States may determine a shorter initial period corresponding to the period of conversion. Where aid is granted for the maintenance of organic farming, Member States may provide for an annual extension after the termination of the initial period. For new commitments concerning maintenance directly following the commitment performed in the initial period, Member States may determine a shorter period.

(269)

Where relevant, the rules for area related payments laid down in Article 47 of Regulation (EU) No 1305/2013 and any delegated act adopted pursuant to that provision should be complied with.

(270)

Aid covers compensation to beneficiaries for part of or all additional costs and loss of income resulting from the commitments.

(271)

Where necessary, aid may also cover transaction costs with a maximum value of 20 % of the premium paid for the commitment. Where commitments are undertaken by groups of undertakings the maximum level is 30 %. This aid is granted on an annual basis.

(272)

However, if a Member State wants to compensate for transaction costs caused by entering into organic farming commitments, it must provide convincing proof of such costs, for example by presenting cost comparisons with undertakings not entering into such commitments. The Commission will, therefore, not normally authorise State aid for transaction costs for the continuation of organic farming commitments already entered into in the past, unless a Member State demonstrates that such costs continue to occur or that new transaction costs are being incurred.

(273)

Where transaction costs are calculated on the basis of average costs and/or average farms, Member States should demonstrate that in particular large enterprises are not overcompensated. For the purpose of calculating compensation, Member States should take into account whether the transaction costs in question are incurred per undertakings or per hectare.

(274)

Aid may not be granted under this Section for commitments covered by the agri-environment-climate measure, or for costs covered by the Section on aid to encourage the participation of producers of agricultural products in quality systems.

(275)

Aid for investment in primary production and the processing and marketing of organic products is subject to the provisions of the Sections on aid for investment.

(276)

The maximum amount of aid is: EUR 600 per hectare per year for annual crops; EUR 900 per hectare per year for specialised perennial crops; EUR 450 per hectare per year for other land use.

(277)

These ceilings may be exceeded in exceptional cases, taking into account specific circumstances which must be justified.

(278)