European Commission extends temporary State aid framework until the end of 2021
The European Commission decided on 28 January 2021 to extend the temporary State aid rules until the end of this year. According to the Commission, the company-specific ceilings on the amount of aid will also increase. For example, the maximum amount of aid per company will rise from EUR 800,000 to EUR 1.8 million. In Finland, the changes will make it easier to implement new financial support due to the coronavirus epidemic.
The European Commission introduced more flexibility to the State aid rules several times during 2020. The aim is to give the Member States a wide range of tools to support companies and to mitigate the adverse economic effects of the coronavirus pandemic. The extension of the less stringent rules is driven in part by new restrictive measures caused by the mutated coronavirus, which are putting pressure on the EU economies.
Maximum amount of aid per company to rise
The temporary State aid rules contain company-specific ceilings for aid. The Commission will raise the ceilings for two types of aid. These changes will remain in force until 31 December 2021.
- Maximum amount of aid that a company can receive will increase to EUR 1.8 million from EUR 800,000. The aid can be allocated to any company costs, as long as it does not exceed the maximum limit. This is the first time that the Commission has raised the limit to allow Member States to support the liquidity of companies and enable them to continue operations during and after the crisis.
- The Commission will increase the maximum amount that a Member State can contribute to fixed costs of companies that are not covered by the revenues to EUR 10 million per company. The initial limit set in October 2020 was EUR 3 million. In order to be eligible for aid, the company’s turnover must have decreased by 30% compared to the corresponding period in 2019. Aid may be granted for a certain part of the firm’s fixed costs.
The amendments adopted by the Commission will help the Finnish Government to plan and implement its enterprise funding policies at national level. For example, the Government will be able to develop business cost support and other forms of national aid based on the new rules.
The increase in the maximum amount of aid to EUR 800,000 will apply, for example, to Finland’s State aid scheme, which has been widely used by many administrative sectors and municipalities to mitigate the negative economic effects of the coronavirus crisis.
The support measures require a notification of State aid to the Commission, and a prior approval by the Commission.
The new rules also provide incentives to use so-called repayable instruments. The rules enable the conversion of loans, guarantees and repayable advances into grants, as long as the maximum amount of EUR 1.8 million per company is not exceeded.
Several changes to State aid rules during the year
EU State aid rules apply if the aid fulfils all the criteria for State aid:
Public resources are channelled to an enterprise, i.e. economic activity; economic advantage is selective; aid distorts or threatens to distort competition; and aid affects trade between the Member States.
On 19 March 2020, the Commission temporarily relaxed the EU state aid rules due to the economic impact of the coronavirus. The temporary rules have been amended and extended four times since then. The rules allow, among other things, subsidies to ensure the liquidity of companies (loans, guarantees, direct grants), support to research, development and innovation activities on COVID-19-related products, and the granting of equity financing.
Decisions on the validity of temporary State aid framework:
- The temporary amendments to State aid rules were originally set to expire on 31 December 2020.
- European Commission decided in October to extend the temporary amendments until 30 June 2021, with the exception of the more flexible rules on recapitalisation, the validity of which was extended from the end of June 2021 until 30 September 2021.
- The Commission has now decided that all forms of aid will remain in force until the end of 2021.
Olli Hyvärinen, Senior Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. +358 295 047 026