What is state aid?

State aid is a European Commission term which refers to forms of assistance from a public body or publicly-funded body, given to undertakings engaged in economic commercial activity on a selective basis, with the potential to distort competition and affect trade between member states of the European Union.

Due to the fact that the South Baltic Programme offers support in the form of public funding, the support cannot be offered to project activities that could potentially provide economic advantage and distort the competition between different EU member states.

The state aid rules generally only apply where the recipient of aid is an “undertaking”. An undertaking is defined as an entity engaged in an economic activity, regardless of its legal status and the way in which it is financed, i.e. offering goods or services on a market. Therefore, it is not important for the state aid whether the project partner is a private or a public sector entity or whether it has been established to generate profit. It does not have to be profit-making as long as the activity carried out is one which, in principle, has commercial competitors. The undertaking may thus also be for example a non-profit organisation, a trade association, a local government unit, etc. What is important is that the project partner is engaged in economic activity within the project. The classification of an entity as an undertaking is always relative to a specific activity.

Economic activity means any activity consisting of offering goods or services on a given market.

Typical examples of “non-economic” activities are: police, armed forces, air and maritime traffic control, organisation of public education and compulsory social security contributions. "Non-economic" activities also could be public roads or bridges that are available for public use without any charge and are not for commercial exploitation. This could further be extended to facilities such as cycle paths, nature trails, promenades, piers, etc. that are available for public use without any charge (condition of not distorting the market applies to all examples mentioned).

The state aid definition translates into five criteria:

  • aid is granted by a member state or through state resources;

  • aid gives the recipient an economic advantage which would not have been obtained under normal market conditions;

  • it favours certain commercial undertakings or the production of certain goods (i.e. it must be selective in its nature);

  • it distorts or has the potential to distort competition;

  • the activity is tradable between Member States and the aid has the potential to affect trade.

All five of above-mentioned criteria must be met for state aid to be present. If any of the above criteria is not met, the support granted is not considered to be state aid.

Therefore, if the project involves state aid, the co-financing will be provided in line with applicable EU legislation. The main EU regulations for the 2014-2020 perspective with regard to de minimis aid and other types of state aid include the Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid and the Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty (General Block Exemption Regulation – GBER).

De minimis aid is aid which, due to its low amount, does not affect trade between Member States and/or does not distort competition. Pursuant to Regulation No 1407/2013, aid totalling € 200 000 (€ 100 000 for undertaking in the road freight transport sector) per single undertaking applies for aid granted in a concrete Member State and will not exceed this amount over any three fiscal year period.

Alternatively, the Programme may use other state aid instruments, such as a General Block Exemption Regulation (GBER). A GBER sets out categories of aid that have already been declared compatible by the Commission. So long as all the terms of the particular regulation are met, there is no requirement to notify the Commission in advance and request approval before awarding aid. The criteria of the GBER determine, in particular, eligible recipients, maximum aid level (i.e. the maximum proportion of the eligible costs of a project that can benefit from state aid) and eligible expenditure. Therefore, in cases where a GBER is used, separate, lower, co-financing rates could be applied.

The provisions on how the Managing Authority ensures granting the state aid in the South Baltic Programme are regulated by the Ordinance of the Minister of Infrastructure and Development of the Republic of Poland on granting state aid under the programmes of the European Territorial Cooperation 2014–2020.

The Managing Authority cannot grant prohibited state aid, i.e. aid granted in breach of these EU regulations. If such a situation occurs and the European Commission considers that it effectively constitutes prohibited State aid, the recipient will have to repay the aid together with interest.

How to identify state aid in a project?

The graph below shows all conditions that must be met for state aid to be present. It must be noted that State aid assessment refers to particular activities. A project can consist of activities, part of which can fall under State aid or to which State aid would not apply.
 


Due to the complex character of most undertakings that can be supported through the South Baltic Programme, the presence of State aid has to be assessed on a case by case basis (see Chapter V, 4.2. "Quality assessment", Section "Assessment of State aid") and where in doubt, it is recommended that  national or regional authorities relevant to State aid issues be consulted.

For more information about rules and restrictions concerning State aid, visit the website of the Directorate-General for Competition http://ec.europa.eu/competition/index_en.html.

Contact

For further information, please contact the Joint Secretariat or the Managing Authority:

Ms Malgorzata Skolmowska
Center of European Projects / Joint Secretariat
of the Interreg South Baltic Programme 2014-2020
malgorzata.skolmowska@southbaltic.eu
tel. +48 58 746 38 59

Ms Magdalena Mielczarska-Rogulska
Polish Ministry of Development
Magdalena.Mielczarska-Rogulska@mir.gov.pl
tel. +48 22 273 81 85