The purpose of EU national regional aid is to support investment and job creation and encourage firms to set up new establishments in Europe’s most disadvantaged regions.
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In order to support economic development in these regions during the period 2007-2013, these guidelines introduce criteria to assess the compatibility of national regional aid with the internal market under Article 87(3)(a) and (c) of the Treaty establishing the European Community (EC).
ACT
Guidelines on national regional aid for 2007-2013 [Official Journal C 54 of 4.3.2006].
SUMMARY
In order to assist the economic development of Europe’s most disadvantaged regions during the period 2007-2013, national regional aid is designed to support investment and job creation and encourage firms to set up new establishments.
National regional aid consists of investment aid granted to large companies and to small and medium-sized enterprises (SMEs), and operating aid (in certain limited circumstances). As a general rule, aid should be granted under a multi-sectoral aid scheme which forms an integral part of a regional development strategy.
Legal background
These guidelines contain the criteria applied by the Commission when examining the compatibility of national regional aid with the internal market under Article 87(3)(a) and (c) of the Treaty establishing the EC.
The permissible aid ceilings vary according to the relative seriousness of the problems affecting the development of the regions concerned in order to mitigate the distortionary effect of state aid on competition in the internal market. These guidelines include an aid instrument to encourage small business start-ups in the regions.
Scope
Activities in the following sectors are excluded from the scope of these guidelines:
- fisheries and the coal industry;
- the production of agricultural products referred to in Annex I to the EC Treaty;
- transport and shipbuilding;
- steel and synthetic fibres.
Demarcation of regions
The limit for the overall population coverage in assisted areas in the EU-25 has been set at 42%. However, no Member State loses more than 50% of the coverage of its population during the period 2000-2006.
Article 87(3)(a)
The guidelines stipulate that the conditions laid down in Article 87(3)(a) are fulfilled if the per capita gross domestic product (GDP) of a NUTS II region is less than 75% of the Community average.
The conditions laid down in Article 87(3)(a) of the EC Treaty are also fulfilled in the case of:
- regional aid for the outermost regions;
- certain regions where per capita GDP exceeds 75% of the EU-25 average because of the statistical effect of the 2004 enlargement. Their GDP per capita was less than 75% of the EU-15 average. These regions remain eligible on a transitional basis until 31 December 2010. The situation of these regions will be reviewed in 2010. If it has deteriorated, they will continue to be eligible under Article 87(3)(a). Otherwise, they will be eligible under Article 87(3)(c) for an aid rate of 20%, as of 1 January 2011.
Article 87(3)(c)
As the regional aid subject to the exception in Article 87(3)(c) of the EC Treaty is intended for regions which are less disadvantaged than those referred to in paragraph (a), the geographic scope of the exception and the aid intensity allowed must be strictly limited in accordance with the principle of geographical concentration.
The regions eligible for aid under Article 87(3)(c) are:
- the regions in which per capita GDP was less than 75% of the EU-15 average in 1998 but which no longer fulfil this condition for the period 2007-2013 (the ‘economic development regions’) ;
- regions with a population density of fewer than 8 inhabitants per km2 at NUTS II level or fewer than 12 inhabitants per km2 at NUTS III level;
- regions with a population of more than 100 000 inhabitants and which have either a per capita GDP lower than the EU-25 average or an unemployment rate higher than 115% of the national average;
- islands with fewer than 5 000 inhabitants;
- NUTS III regions which are adjacent to a region that is eligible for support under Article 87(3)(a) or which share a border with a third country;
- regions which have a population of more than 50 000 inhabitants and are in serious relative decline or are undergoing major structural change;
- regions with a population of more than 20 000 inhabitants which suffer from very localised regional disparities, below the NUTS III level, and wish to make use of regional aid for SMEs.
REGIONAL INVESTMENT AID
Ceilings for regional investment aid large companies
Article 87(3)(a)
The maximum aid intensities (ceilings) for large companies in regions falling within the scope of Article 87(3)(a) must not exceed:
- 30% for regions with a per capita GDP less than 75% of the EU-25 average;
- 30% for the outermost regions. These regions are eligible for a further bonus of 20% if their GDP per capita is below 75% of the EU-25 average and a bonus of 10% in other cases;
- 30% for statistical effect regions until 1 January 2011;
- 40% for regions with a per capita GDP less than 60% of the EU-25 average;
- 50% for regions with a per capita GDP less than 45% of the EU-25 average;
Article 87(3)(c)
The aid ceilings for large companies in regions falling within the scope of Article 87(3)(c) must not exceed:
- 15% as a rule;
- 20% or 30% for statistical effect regions as of 1 January 2011;
- 10% for regions with a GDP per capita that is more than 100% of the EU-25 average and an unemployment rate lower than the EU-25 average measured at NUTS III level;
Ceilings for regional investment aid SMEs
Aid ceilings may be increased by 20% for aid granted to small enterprises and by 10% for aid granted to medium-sized enterprises.
Large investment projects
For a ‘large investment project’ with an eligible expenditure above EUR 50 million, the aid ceiling is 50% of the regional ceiling for investments between EUR 50 million and EUR 100 million. The aid ceiling is 34% of the regional ceiling for investments of over EUR 100 million.
Member States are required to notify the Commission of any aid awarded to an investment project with expenditure of more than EUR 100 million if the aid exceeds the maximum allowable amount. The notification thresholds for different regions with the most commonly encountered aid intensities are summarised below:
- EUR 7.5 million if the aid intensity is 10%;
- EUR 11.25 million if the aid intensity is 15%;
- EUR 15.0 million if the aid intensity is 20%;
- EUR 22.5 million if the aid intensity is 30%;
- EUR 30.0 million if the aid intensity is 40%;
- EUR 37.5 million if the aid intensity is 50%.
REGIONAL OPERATING AID
Although operating aid is normally prohibited, it may exceptionally be granted on a temporary basis in regions eligible for aid under Article 87(3)(a). It must be justified in terms of its contribution to regional development and its nature, and its level must be proportional to the handicaps it seeks to alleviate.
Aid for newly created small enterprises
In order to encourage start-up and early development of small enterprises in the regions which qualify for national regional aid, these guidelines authorise aid of up to:
- EUR 2 million per small enterprise in regions eligible for aid under Article 87(3)(a). The aid ceiling is 35% of eligible expenses incurred in the first three years after the creation of the enterprise and 25% in the two years thereafter;
- EUR 1 million per small enterprise in regions eligible for aid under Article 87(3)(c). The aid ceiling is 25% of eligible expenses incurred in the first three years after the creation of the enterprise and 15% in the two years thereafter.
The annual amounts of aid awarded must not exceed 33 % of the abovementioned total amounts of aid per enterprise.
Final provisions
These guidelines apply from 1 January 2007 until 31 December 2013.
Key terms in the Act
Investment aid: aid awarded for investment in material and immaterial assets relating to the setting up of a new establishment, the extension of an existing establishment, diversification of the output of an establishment into new, additional products, or a fundamental change in the overall production process of an existing establishment (‘initial investment project’);
Operating aid: regional aid intended to reduce a firm’s current expenses, for example in the form of tax exemptions or reductions in social security contributions which are not linked to eligible investment costs.
RELATED ACTS
Commission Regulation (EC) No 1628/2006 of 24 October 2006 on the application of Articles 87 and 88 of the Treaty to national regional investment aid [Official Journal L 302 of 1 November 2006].
Commission Regulation (EC) No 1627/2006 of 24 October 2006 amending Regulation (EC) No 794/2004 as regards the standard forms for notification of aid [Official Journal L 302 of 1 November 2006].
This Regulation amends Regulation (EC) No 794/2004 implementing Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 (now Article 88) of the EC Treaty. It modifies the standard forms for notification of state aid following the adoption of new guidelines on national regional aid for the period 2007-2013.
