Aid to small and medium-sized enterprises

Small and medium-sized enterprises (SMEs) play a decisive role in job creation and, more generally, in enhancing social stability and boosting economic dynamism. However, the modest resources available to them may limit their development. The regulation presented here is designed to help develop their economic activities by exempting from the prior notification requirement state aid to SMEs that is compatible with competition rules.

ACT

Commission Regulation (EC) No 70/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to state aid to small and medium-sized enterprises [See amending acts].

SUMMARY

In line with Regulation (EC) No 994/98, which enables the European Commission to grant exemptions to certain categories of state aid, the regulation presented here recognises the role played by small and medium-sized enterprises (SMEs) in creating jobs and economic dynamism in Europe and exempts them from the prior notification requirement where the granting of state aid is concerned.

In view of the difficulties which SMEs may face in gaining access to the new technologies and to technology transfers, the Commission has amended Regulation (EC) No 70/2001 by means of Regulation (EC) No 364/2004. As a result, it will now be possible to set higher ceilings for the exemption of aid to SMEs for research and development purposes. This does not apply to large enterprises, for which the Community framework for state aid to research and development will continue to be used.

The Regulation refers to the definition of "SMEs" used in the Commission recommendation of 3 May 2003.

Scope

The Regulation covers aid granted by a Member State to SMEs, without prejudice to the specific rules laid down by certain regulations and directives on state aid in given sectors such as shipbuilding, but it does not apply to the agriculture, fishing and/or aquaculture and coalmining sectors.

As regards agriculture, SMEs engaged in processing and marketing agricultural products are now covered by the Regulation. However, SMEs active in primary agricultural production are covered by Regulation (EC) No 1857/2006.

Aid for investment

6. SMEs may be granted aid for investment. The investment may be made:

• in areas which do not qualify for regional aid under Article 87(3)(a) and (c) of the EC Treaty; in this case, the aid intensity may not exceed 15% for small enterprises and 7.5% for medium-sized enterprises;
• in areas which qualify for regional aid under Article 87(3) (c) of the EC Treaty; in this case, the ceiling for investment aid determined in the regional aid map authorised by the Commission applies and may be increased by ten percentage points, provided that the total net aid intensity does not exceed 30%;
• in areas which qualify for regional aid under Article 87(3)(a) of the EC Treaty; in this case, the ceiling for investment aid determined in the regional aid map authorised by the Commission applies and may be increased by fifteen percentage points, provided that the total net aid intensity does not exceed 75%.

To find out which regions are covered by Article 87(3)(a) and (c) of the EC Treaty, read the guidelines on regional aid.

The amount of the aid, calculated either as a percentage of eligible investment costs or as a percentage of the wage costs of employment created, may be increased if the aid is maintained in the beneficiary's region for at least five years and if the beneficiary contributes at least 25% of its funding.

Aid to consultancy services and other services and activities

Under the Regulation, SMEs may be granted aid for consultancy and other services (such services do not constitute a permanent or regular activity and are not connected with the enterprise's ordinary running costs) and other activities (such as participation in trade fairs and shows) for up to 50% of the costs.

Aid to research and development

Provided that certain criteria are met, aid to research and development that meets the conditions outlined above is exempted from the notification requirement, provided that the aid intensity, calculated on the basis of the project's eligible costs, does not exceed:

• 100% for fundamental research;
• 60% (70% maximum if particular conditions are met) for industrial research;
• 35% (50% maximum if particular conditions are met) for pre-competitive development.

The definitions of "fundamental research", "industrial research" and "pre-competitive development" may be found in the Community framework for state aid for research and development.

The amount of aid, which may include staff costs and the costs of materials and research instruments, can be increased by 10% under certain conditions.

Aid for technical feasibility studies

Aid for technical feasibility studies preceding industrial research activities or pre-competitive development activities are exempted from the notification requirement, provided that the gross aid intensity, calculated on the basis of the costs of these studies, does not exceed 75%.

Aid to cover the costs of obtaining licences

Aid to cover the costs of obtaining and validating licences and other industrial property rights is exempted from the notification requirement up to an amount equivalent to that of the aid to research and development which could have been allocated to the research activities leading to the award of the industrial property rights in question.

Conditions for exemption from the notification requirement

The Regulation does not exempt state aid exceeding:

• total eligible costs of more than EUR 25 million for aid for investment, consultancy services, research and development, technical feasibility studies and licence costs;
• gross aid of more than EUR 15 million for aid for investment and consultancy services;
• gross aid of more than EUR15 million for aid for research and development, technical feasibility studies and licence costs;
• total eligible costs of more than EUR 40 million and gross aid for Eureka projects of more than EUR 10 million.

Exempted aid may not be cumulated with other state aid where such cumulation results in an aid intensity exceeding that fixed by the Regulation. The percentages allowed cover all national or Community aid. All aid over and above the ceilings or amounts mentioned must be notified to the Commission.

To be granted exemption, interested SMEs must apply to the Member State concerned before starting work.

Transparency and monitoring

To ensure effective monitoring and sufficient transparency, the Commission requires Member States:

• to forward it a summary of the information on an aid scheme within twenty days of its implementation (Annex II);
• to keep detailed records on aid schemes exempted by the Regulation;
• to compile an annual report on the application of the Regulation (Annex III).

The notifications of aid to research and development pending on 19 March 2004 are still being assessed in the context of the Community framework for state aid to research and development, whilst all the other notifications pending are assessed in the light of the Regulation's provisions.

Timeframe

The validity of Regulation (EC) No 70/2001 has been extended once until 31 December 2007 by Regulation (EC) No 1040/2006 and again until 30 June 2008 by Regulation (EC) No 1976/2006.

RELATED ACTS

Commission Regulation (EC) No 1857/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to State aid to small and medium-sized enterprises active in the production of agricultural products and amending Regulation (EC) No 70/2001 [Official Journal L 358 of 16.12.2006].

Last updated: 26.06.2007