State aid up to EUR 800 000 per company might be available to mitigate the economic damage caused by the COVID-19 epidemic, based on the so-called “Temporary Framework” issued by the European Commission on 19 March 2020, that extends the scope of state aids.
State aids included in the Temporary Framework are available to SMEs and, to some extent, large enterprises. The Temporary Framework will remain in force until 31 December 2020, but the Commission has not excluded the possibility of an extension.
The European Commission has ruled that state aids are considered compatible with the internal market in five priority areas, among which the most relevant for the companies might be the possibility of granting preferential interest-subsidized loans, direct subsidies, and selective tax credits. The five prioritized subsidy categories cover the following.
- Direct grants, selective tax credits, and advance payments: Member States may introduce programs whereby up to EUR 800 000 states aid per company can be granted to meet urgent liquidity needs.
- State guarantees for loans taken by companies from banks can be introduced, so the Member States can ensure that banks continue to finance the companies that need it most by providing government guarantees.
- Member States may support the provision of operating capital needs by enterprises and the promotion of investments through the introduction of subsidized state loans.
- The Temporary Framework also allows providing safeguards for banks that channel state aid to the economy, as some Member States wish to support businesses through bank intermediation.
- The use of short-term export-credit insurance provided by the state becomes more flexible.
Developing the details of the providing the state aids will be the duty of the Member States, so it is worth following the implementation in each country, mainly because the primary source of funding will be the national budget.
It should be highlighted that, similarly to the state aids currently available, the new measures also include more safeguards. For example, concerning subsidized loans and government guarantees, the utilization of the state aid, and the scope of the beneficiaries might be limited. In the latter case, the eligibility of enterprises might be decided based on their economic activity (revenue, number of employees).
Our tax experts are happy to assess the specific opportunities your business can take, as there will continue to be factors that need to be taken into consideration when applying for grants, such as avoiding cumulative subsidizing or examining eligibility.