Brussels, 21/05/2014 (Agence Europe) - On Wednesday 21 May, the European Commission unveiled more flexible rules for the granting of state aid for research, development and innovation (RDI).
The changes aim to ensure that the European Union can meet its R&D spending targets for 2020. As EU Competition Commissioner Joaquin Almunia noted, the EU failed to meet the 3% of GDP target, spending barely 2% on RDI. The new rules also aim to reduce uneven playing fields caused by the granting of state aid.
The new rules are divided into rules for state aid for RDI and a new general per-category exemption regulation for state aid, both of which will come into force on 1 July 2014.
New rules for state aid in RDI.
The new RDI state aid Framework sets out the conditions under which member states can grant state aid to companies to carry out RDI activities without notifying it to the Commisison because of the low risk of creating an uneven playing field.
The authorised levels of aid not requiring notification have been raised in order to deal with the financial gaps that have arisen due to lower private sector investment. “The new framework will help to overcome such market failures and foster a smart use of public resources for research, development and innovation activities, in complement to private funding”, said Almunia. In order to help industry overcome financing gaps, the RDI Framework will, for individually notified measures, allow aid up to 70% of eligible costs for large companies and 90% for small companies doing applied research, including the costs of prototyping and demonstration. The higher aid levels will be available if there is a genuine financing gap and the Commission will carry out a detailed analysis, based on the Framework's criteria, to confirm the necessity for granting such higher rates, so as to avoid undue distortions of competition in the single market.
Simplification and greater legal certainty. In order to simplify the assessment of large aid amounts for projects that are clearly in the common European interest, R&D projects that are co-financed by the EU will now be presumed to constitute necessary and appropriate state aid. Since public funding of non-economic activities does not constitute state aid, the new rules in the RDI Framework provide clearer criteria and guidance for distinguishing between economic and non-economic activities. Sector-wide comparisons will now be allowed, for example. The new rules should establish greater legal certainty and speed up the assessment process.
The requirement for member states to provide an annual report on the incentive provided by state aid to big companies has been removed. The idea is that aid should not be used to finance projects that would have gone ahead without public support and the profitability of projects receiving state aid must still be compared with hypothetical projects in the private sector without state aid. The new rules give more details about the criteria required in this connection and the definition of hypothetical cases has been fine-tuned.
The proportionality of aid must still be assessed in the light of the beneficiary's business plan, which must demonstrate the risk benefits of the project compared with a hypothetical project. The new rules law down proportionality criteria in the light of “net extra costs”. If a hypothetical case cannot be drawn up, the aid must not exceed the amount needed to make the project profitable, failing which aid must not exceed net extra costs, calculated by comparing the current net investment in a project that is receiving aid with hypothetical investment in a project that does not get any state aid.
The new rules lay down the conditions under which a project shall be deemed to be having a negative impact on competition in the single market. Public financing of non-economic activities shall not be considered to be state aid and the rules give clearer guidelines on how to distinguish economic and non-economic activities.
More aid exempt from prior notification rules. The European Commission has relaxed the rules on which aid has to be notified in advance to the Commission. Governments will now be allowed to grant greater state aid without having to ask for permission in advance. The previous rules covered 60% of state aid measures and 30% of the amount granted in the EU each year. The Commission says that some three-quarters of aid measures and two-thirds of total aid shall now be exempt. For example, the upper limit for basic research has been raised from €20 million to €40 million.
The exemption system has been expanded to cover new categories of aid, such as infrastructure for research and energy, regional urban development funds, high-speed internet connections and protection of culture.
Almunia said the new rules would cut red tape at European and national levels alike, but would give the Commission a higher workload when it comes to verification of non-notified aid.
The Commission demands greater transparency
The Commission has decided to introduce new transparency demands. For all state aid of half a billion euro or more, member states will be required to publish a webpage giving details of the aid beneficiary, the exact amount of aid, along with the aid's aims and legal basis. Member states will have six months from the date that the aid is granted to publish this information on national and regional websites, and this is a precondition for the aid being allowed under the new EU rules. Transparency is also required for tax incentives, for which special rules are set out to ensure confidentiality. (EL)