Commission Regulation (EU) No 702/2014 of 25 June 2014 declaring certain categories of aid in the agricultural and forestry sectors and in rural areas compatible with the internal market in application of Articles 107 and 108 of the Treaty on the Functioning of the European Union
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THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union, and in particular Article 108(4) thereof,
Having regard to Council Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of horizontal State aid(1) and in particular Article 1(1)(a) and (b) thereof,
Having published a draft of this Regulation in accordance with Article 6 and Article 8(2) of Regulation (EC) No 994/98,
Having consulted the Advisory Committee on State Aid,
Whereas:
(1) State funding meeting the criteria laid down in Article 107(1) of the Treaty constitutes State aid and requires notification to the Commission by virtue of Article 108(3) thereof. However, pursuant to Article 109 of the Treaty, the Council may determine categories of aid that are exempted from that notification requirement. In accordance with Article 108(4) of the Treaty the Commission may adopt regulations relating to those categories of aid. Regulation (EC) No 994/98 empowers the Commission to declare, in accordance with Article 109 of the Treaty, that certain categories of aid may be exempted from the notification requirement of Article 108(3) of the Treaty. On the basis of that Regulation, the Commission adopted Commission Regulation (EC) No 1857/2006(2) which applies until 30 June 2014.
(2) On 22 July 2013 Regulation (EC) No 994/98 was amended by Regulation (EU) No 733/2013(3) to empower the Commission to extend the block exemption to new categories of aid in respect of which clear compatibility conditions can be defined. Such new categories of aid in the agricultural and forestry sectors should include: aid in favour of heritage conservation, aid in favour of making good the damage caused by natural disasters and aid in favour of forestry which can, under certain conditions, be exempted from the notification requirement of Article 108(3) of the Treaty.
(3) Article 42 of the Treaty provides that the rules on competition apply to the production of and trade in agricultural products only to the extent determined by the European Parliament and the Council. Article 211(1) of Regulation (EU) No 1308/2013 of the European Parliament and the Council(4) provides that State aid rules apply to aid for the production of and trade in agricultural products, subject to specific derogations. Article 211(2) of Regulation (EU) No 1308/2013 provides that State aid rules do not apply to payments made by Member States for measures provided for in that Regulation which are partly or wholly financed by the Union and for measures included in Articles 213 to 218 of that Regulation. Moreover, State aid rules do not apply to payments made by Member States pursuant to Regulation (EU) No 1305/2013 of the European Parliament and of the Council(5) nor to additional national financing, within the scope of Article 42 of the Treaty. Such payments intended to provide additional national financing within the scope of Article 42 of the Treaty, have to comply with the criteria of Regulation (EU) No 1305/2013 in order to be approved by the Commission as part of the rural development programme of a given Member State. Nevertheless, State aid rules apply, both to the part co-financed under the European Agricultural Fund for Rural Development (EAFRD) and to additional national financing for measures falling outside the scope of Article 42 of the Treaty.
(4) As the economic effects of aid do not change depending on whether or not it is partly financed by the Union, or whether it is financed by a Member State alone, there should be consistency and coherence between the Commission's policy in respect of the control of State aid, and the support which is granted under the Union's own common agricultural and rural development policy.
(5) The scope of this Regulation should therefore be aligned with that of Regulation (EU) No 1305/2013, in particular as regards aid in favour of the forestry sector and aid in favour of micro and small and medium-sized enterprises (SMEs) active in rural areas. This Regulation should apply to aid measures in favour of forestry and in favour of SMEs active in the rural areas which fall outside the scope of Article 42 of the Treaty which are covered by Regulation (EU) No 1305/2013 only and insofar as those measures are included in the rural development programmes and are co-financed by the EAFRD. On the other hand, this Regulation should not apply to aid to undertakings in rural areas for activities falling outside the scope of Article 42 of the Treaty or to the forestry sector where there is no direct link to the rural development programmes and no co-financing from the EAFRD. However, aid for knowledge transfer and information actions in the forestry sector and aid for advisory services in the forestry sector should be possible to be granted outside the rural development programmes wholly financed by the Member States, provided that they comply with the respective compatibility conditions laid down in this Regulation.
(6) A simplified procedure should be made available for Member States when they are required to obtain State aid clearance for both the co-financed part and the additional financing of their national rural development programmes, in accordance with Article 81(1) of Regulation (EU) No 1305/2013. In that respect such aid should be exempted from the notification requirement of Article 108(3) of the Treaty provided that it complies with the respective compatibility conditions laid down in this Regulation.
(7) With the Communication of 8 May 2012 from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee on the Regions — EU State Aid Modernisation (SAM)(6), the Commission launched a wider review of the State aid rules. The main objectives of this modernisation are: (i) to achieve sustainable, smart and inclusive growth in a competitive internal market, while contributing to Member State efforts towards a more efficient use of public finances; (ii) to focus Commission ex ante scrutiny on cases with the biggest impact on the internal market, while strengthening Member State cooperation in State aid enforcement; and (iii) to streamline the rules and provide for faster, better informed and more robust decisions based on a clear economic rationale, a common approach and clear obligations.
(8) This Regulation should allow for a better prioritisation of State aid enforcement activities, and greater simplification and should enhance transparency, effective evaluation and the control of compliance with the State aid rules at national and Union levels, while preserving the institutional competences of the Commission and the Member States. In accordance with the principle of proportionality this Regulation does not go beyond what is necessary in order to achieve those objectives.
(9) The Commission has applied Articles 107 and 108 of the Treaty to SMEs active in the production, processing and marketing of agricultural products in numerous cases, in particular in the framework of Regulation (EC) No 1857/2006, Commission Regulation (EC) No 800/2008(7) and the Community Guidelines on State aid in the agriculture and forestry sector 2007 to 2013(8). It has thus gained considerable experience in this field. The Commission's experience has allowed it, on the one hand, to better define the conditions under which certain categories of aid can be considered compatible with the internal market and to extend the scope of block exemptions and, on the other hand, made clear the necessity to strengthen transparency as well as monitoring and allow for a proper evaluation of large schemes in light of their effect on competition in the internal market.
(10) The general conditions for the application of this Regulation should be defined on the basis of a set of common principles that ensure that the aid serves a purpose of common interest, has a clear incentive effect, is appropriate and proportionate, is granted in full transparency and subject to a control mechanism and regular evaluation, and does not adversely affect trading conditions to extent that is contrary to the common interest.
(11) Aid that fulfils all the conditions laid down in this Regulation, both general and specific to the relevant categories of aid, should be exempted from the notification requirement laid down in Article 108(3) of the Treaty. With a view to ensuring efficient supervision and simplifying administration, but without weakening Commission monitoring, exempted aid (aid schemes and individual aids) should contain an express reference to this Regulation.
(12) State aid within the meaning of Article 107(1) of the Treaty not covered by this Regulation remains subject to the notification requirement of Article 108(3) of the Treaty. This Regulation is without prejudice to the possibility for Member States to notify aid the objectives of which correspond to objectives covered by this Regulation.
(13) In view of the greater potential impact of large schemes on trade and competition, aid schemes with an average annual State aid budget exceeding a threshold based on an absolute value should in principle be subject to State aid evaluation. The evaluation should aim at verifying whether the assumptions and conditions underlying the compatibility of the scheme have been achieved, as well as the effectiveness of the aid measure in the light of its general and specific objectives and should provide indications on the impact of the scheme on competition and trade. In order to ensure equal treatment, State aid evaluation should be carried out on the basis of an evaluation plan approved by the Commission. While such plan should normally be drawn up at the moment of the design of the scheme and approved in time for the scheme to enter into force, this may not be possible in all cases. Therefore, in order not to delay their entry into force, this Regulation will apply to such schemes for a maximum period of six months. The Commission may decide to extend this period, upon approval of the evaluation plan. To this end, the evaluation plan should be notified to the Commission within 20 working days following the entry into force of the scheme. The Commission can also exceptionally decide that an evaluation is not necessary given the specificities of the case. The Commission should receive from the Member State the necessary information to be able to carry out the assessment of the evaluation plan and request additional information without undue delay allowing the Member State to complete the missing elements for the Commission to take a decision. In view of the novelty of this process, the Commission will provide, in a separate document, a detailed guidance on the procedure applicable during the 6 months period for the approval of the evaluation plan and the relevant templates through which the evaluation plans will have to be submitted. Alterations of schemes subject to evaluation, other than modifications which cannot affect the compatibility of the aid scheme under this Regulation or cannot significantly affect the content of the approved evaluation plan, should be assessed taking account of the outcome of such evaluation and should be excluded from the scope of this Regulation. The alterations such as purely formal modifications, administrative modifications or alterations carried out within the framework of the EU co-financed measures should not, in principle, be considered as significantly affecting the content of the approved evaluation plan.
(14) This Regulation should not apply to aid contingent upon the use of domestic over imported products or aid to export-related activities. In particular, it should not apply to aid financing the establishment and operation of a distribution network in another Member State or third country. Aid towards the cost of participating in trade fairs or of studies or consultancy services needed for the launch of a new or existing product on a new market in another Member State or third country should not normally constitute aid to export-related activities.
(15) The Commission should ensure that authorised aid does not adversely affect trading conditions to an extent that is contrary to the general interest. Therefore, aid in favour of a beneficiary which is subject to an outstanding recovery order following a previous Commission decision declaring an aid illegal and incompatible with the internal market should be excluded from the scope of this Regulation with the exception of aid to make good the damage caused by certain natural disasters.
(16) Aid granted to undertakings in difficulty should be excluded from the scope of this Regulation, since such aid should be assessed under the Guidelines on State aid for rescuing and restructuring firms in difficulty(9) or their successor Guidelines in order to avoid their circumvention, with the exception, under certain conditions, of aid granted to compensate for damages caused by natural disasters, by an adverse climatic event which can be assimilated to a natural disaster, by animal disease or plants pest and aid for the restoration of damage to forests from fires, natural disasters, adverse climatic events, pests, diseases, catastrophic events and climate change related events, as stipulated by this Regulation. In addition, for reasons of public health protection and having in mind the emergency situation no distinction should be made, under certain conditions, as to the economic situation of an undertaking for aid for the costs of the eradication of animal diseases and for aid for the destruction and removal of fallen stock. In order to provide legal certainty, it is appropriate to establish clear criteria that do not require an assessment of all the particularities of the situation of an undertaking to determine whether an undertaking is considered to be in difficulty for the purposes of this Regulation.
(17) If a State aid or the conditions attached to it, including its financing method when it forms an integral part of it, entail a non-severable violation of Union legislation, the aid may not be declared compatible with the internal market. This Regulation should therefore not apply to aid which entails a non-severable violation of Union legislation.
(18) State aid enforcement is highly dependent on the cooperation of Member States. Therefore, Member States should take all necessary measures to ensure compliance with this Regulation, including compliance of individual aid granted under block-exempted schemes.
(19) Due to the high risk of adversely affecting trading conditions, large amounts of aid granted either individually or cumulatively should be assessed by the Commission upon notification. Thresholds by maximum aid amount should therefore be set for certain categories of investment aid falling within the scope of this Regulation at a level which takes into account the category of aid concerned and its likely effect on trading conditions. Any aid granted above those thresholds should remain subject to the notification requirement of Article 108(3) of the Treaty. The thresholds laid down in this Regulation should not be circumvented by the artificial splitting up of aid schemes or aid projects, for example into several aid schemes or projects with similar characteristics, objectives or beneficiaries. Other categories of aid, to the extent that the compatibility conditions and the maximum aid intensities or the maximum aid amounts laid down in this Regulation are respected, should not be considered as having a high risk of adversely affecting trading conditions.
(20) For the purpose of transparency, equal treatment and effective monitoring, this Regulation should apply only to aid in respect of which it is possible to calculate precisely the gross grant equivalent ex ante without the need to undertake a risk assessment (‘transparent aid’).
(21) For certain specific aid instruments, such as loans, guarantees, tax measures and, in particular, repayable advances, this Regulation should define the conditions under which they can be considered transparent. Aid comprised in guarantees should be considered as transparent if the gross grant equivalent has been calculated on the basis of safe-harbour premiums laid down for the respective type of undertaking. For instance, for SMEs the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees(10) indicates levels of annual premium above which a State guarantee would be deemed not to constitute aid. It should also be considered transparent if before the implementation of the measure, the methodology used to calculate the aid intensity of the state guarantee has been notified to and approved by the Commission in line with the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees. For the purpose of this Regulation, aid comprised in risk finance measures and capital injections should not be considered as transparent aid.
(22) Aid which would otherwise fall within the scope of this Regulation but is not transparent should always be notified to the Commission. Notification of non-transparent aid should be assessed by the Commission in particular in the light of the criteria set out in the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020(11) or the other relevant frameworks, guidelines, communications and notices.
(23) In order to ensure that the aid is necessary and acts as an incentive to further develop activities or projects, this Regulation should not apply to aid for activities or projects in which the beneficiary would in any case engage even in the absence of the aid. No aid should be granted retroactively in respect of activities or projects which have already been undertaken by the beneficiary. Aid should only be exempted from the notification requirement of Article 108(3) of the Treaty in accordance with this Regulation where the activity or the work on the aided project starts after the beneficiary has submitted a written application for the aid.
(24) As regards any ad hoc aid covered by this Regulation granted to a beneficiary which is a large enterprise, the Member State should, in addition to the conditions on the incentive effect applicable to SMEs, also ensure that the beneficiary has analysed, in an internal document, the viability of the aided project or activity with aid and without aid. The Member State should verify that this internal document confirms a material increase in the scope of the project or activity, a material increase in the total amount spent by the beneficiary on the aided project or activity or a material increase in the speed of completion of the project or activity concerned. It should also be possible to establish the incentive effect on the basis of the fact that the investment project or the activity would not have been carried out as such in the rural area concerned in the absence of the aid.
(25) Automatic aid schemes in the form of tax advantages should continue to be subject to a specific condition concerning the incentive effect, in the light of the fact that the aid resulting from such aid schemes is granted within the framework of different procedures than other categories of aid. That specific condition means that those aid schemes should have been adopted before the activity or the work on the aided project/activity started. However, this condition should not apply in the case of fiscal successor schemes provided the activity was already covered by the previous fiscal schemes in the form of tax advantages. For the assessment of the incentive effect of such aid schemes, the crucial moment is the moment when the tax measure was set out for the first time in the original scheme, which is then replaced by the successor scheme.
(26) As regards aid for land consolidation, promotion measures in form of publications aimed at raising awareness of agricultural products among the wider public, aid to compensate for losses caused by adverse climatic event which can be assimilated to a natural disaster, aid to compensate for the costs of the eradication of animal diseases and plant pests and for losses caused by those animal diseases or plant pests, aid to cover the costs of the removal and destruction of fallen stock, aid for research and development, aid to make good the damage caused by natural disaster and aid for investments in favour of conservation of cultural and natural heritage on the agricultural holding the existence of an incentive effect should not be required or should be deemed to be present if the specific conditions set out for those categories of aid in this Regulation are fulfilled.
(27) With a view to ensuring that aid is proportionate and limited to the amount necessary, the maximum aid amounts should, whenever possible, be expressed in terms of aid intensities in relation to a set of eligible costs. Where the maximum aid intensity cannot be set, because the eligible costs cannot be identified or in order to provide simpler instruments for small amounts, maximum aid amounts defined in nominal terms should be set out in order to ensure proportionality of the aid. The aid intensity and the maximum aid amounts should be fixed, in the light of the Commission's experience, at a level that minimises distortions of competition in the aided sector while appropriately addressing the objective of facilitating the development of the economic activities of the beneficiaries in the agricultural sector, the rural areas, or the forestry sector. In the interests of coherence with Union-financed rural development measures, the ceilings should be harmonised with those set out in Regulation (EU) No 1305/2013 insofar as this is in line with the State aid principles.
(28) For the calculation of the aid intensity, only eligible costs should be included. The Regulation should not exempt aid which exceeds the relevant aid intensity as a result of including ineligible costs. The identification of the eligible costs should be supported by clear, specific and contemporary documentary evidence. All figures used should be taken before any deduction of tax or other charges. Aid payable in several instalments should be discounted to its value on the date of granting the aid. The eligible costs should also be discounted to their value on the date of granting the aid. The interest rate to be used for discounting purposes and for calculating the amount of aid in the case of aid which does not take the form of a grant should be respectively the discount rate and the reference rate applicable on the date of granting the aid, as laid down in the Communication from the Commission on the revision of the method for setting the reference and discount rates(12). Where aid is granted in a form other than a grant, the aid amount should be expressed in gross grant equivalent. Where aid is granted by means of tax advantages, aid tranches should be discounted on the basis of the discount rates applicable on the various dates when the tax advantages become effective. The use of aid in the form of repayable advances should be promoted, since such risk-sharing instruments are conducive to a strengthened incentive effect of the aid. It is therefore appropriate to establish that where aid is granted in the form of repayable advances the applicable aid intensities laid down in this Regulation may be increased.
(29) In the case of tax advantages on future taxes, the applicable discount rate and the exact amount of the aid tranches may not be known in advance. In such a case, Member States should set in advance a cap on the discounted value of the aid respecting the applicable aid intensity. Subsequently, when the amount of the aid tranche at a given date becomes known, discounting can take place on the basis of the discount rate applicable at that time. The discounted value of each aid tranche should be deducted from the overall amount of the cap (‘capped amount’).
(30) To determine whether the individual notification thresholds and the maximum aid intensities or the maximum aid amounts laid down in this Regulation are respected, the total amount of the State aid for the aided activity or project should be taken into account. Moreover, this Regulation should specify the circumstances under which different categories of aid may be cumulated. Aid exempted from notification by this Regulation and any other compatible aid exempted under other Regulation or approved by the Commission may be cumulated as long as those measures concern different identifiable eligible costs. Where different sources of aid are related to the same — partly or fully overlapping — identifiable eligible costs, cumulation should be allowed up to the highest aid intensity or aid amount applicable to that aid under this Regulation. This Regulation should also set out special rules for cumulation of aid with and without identifiable eligible costs, and for cumulation with de minimis aid. De minimis aid is often not granted for or attributable to specific identifiable eligible costs. In such a case it should be possible to freely cumulate de minimis aid with State aid exempted under this Regulation. Where, however, de minimis aid is granted for the same identifiable eligible costs as State aid exempted under this Regulation, cumulation should only be allowed up to the maximum aid intensity as set out in Chapter III of this Regulation.
(31) Union funding centrally managed by the institutions, agencies, joint undertakings or other bodies of the Union, that is not directly or indirectly under the control of Member States, does not constitute State aid. Where such Union funding is combined with State aid, only the latter should be considered for determining whether notification thresholds and maximum aid intensities or maximum aid amounts are respected, provided the total amount of public funding granted in relation to the same eligible costs does not exceed the most favourable funding rate laid down in the applicable rules of Union law.
(32) Given that State aid within the meaning of Article 107(1) of the Treaty is, in principle, prohibited, it is important that for all parties to be able to check whether an aid is granted in compliance with the applicable rules. Transparency of State aid is, therefore, essential for the correct application of Treaty rules and leads to better compliance, greater accountability, peer review and ultimately more effective public spending. To ensure transparency, Member States should be required to establish comprehensive State aid websites, at regional or national level, setting out summary information about each aid measure exempted under this Regulation That obligation should be a condition for the compatibility of the individual aid with the internal market. Following the standard practice regarding publication of information in Directive 2013/37/EU of the European Parliament and of the Council(13), a standard format should be used which allows the information to be searched, downloaded and easily published on the internet. The links to the State aid websites of all the Member States should be published on the Commission's website. In accordance with Article 3(2) of Regulation (EC) No 994/98, as amended by Regulation (EU) No 733/2013, summary information on each aid measure exempted under this Regulation should be published on the website of the Commission.
(33) As regards the publication of information on individual aid awards it is appropriate to set thresholds above which that publication may be considered proportionate taking into account the importance of the aid. Based on the assessment of investment aid schemes in the primary agricultural sector with the highest annual expenditure reported in the framework of the Annual Report exercise 2013 which can be considered to be more distortive than the other categories of aid the Commission has established an average aid amount per beneficiary of EUR 59 596. In order to limit the administrative burden on Member States, it is therefore appropriate to set the threshold for publication of information on individual aid awards to primary agricultural producers at the level of EUR 60 000. Taking into account that the processing of agricultural products and the marketing of agricultural products is similar to that of industrial products, it is appropriate to align the threshold for the publication of information on individual aid awards to beneficiaries in those sub-sectors, as well as in the forestry sector and for activities falling outside the scope of Article 42 of the Treaty, to that set in Commission Regulation (EU) No 651/2014(14).
(34) To ensure effective monitoring, it is appropriate in accordance with Article 3(2) of Regulation (EC) No 994/98, to establish a standard format in which Member States should provide the Commission with summary information whenever, in accordance with this Regulation, an aid scheme is implemented or an individual aid is granted outside any aid scheme. Moreover, it is appropriate in accordance with Article 5 of Commission Regulation (EC) No 794/2004(15) and Article 3(4) of Regulation (EC) No 994/98 to establish rules concerning annual reporting on aid exempted from the notification requirement of Article 108(3) of the Treaty in accordance with the conditions laid down in this Regulation, including specific requirements for certain categories of aid, to be submitted to the Commission by Member States.
(35) In view of the wide availability of the necessary technology, the summary information and the annual report should be in computerised format and transmitted to the Commission via the Commission electronic systems.
(36) Moreover, it is appropriate in accordance with Article 3(3) of Regulation (EC) No 994/98 to establish rules concerning the records that Member States should keep regarding the aid exempted from the notification requirement of Article 108(3) of the Treaty by this Regulation, in the light of the limitation period established by Article 15 of Council Regulation (EC) No 659/1999(16).
(37) To reinforce the effectiveness of compatibility conditions set out in this Regulation, it should be possible for the Commission to withdraw the benefit of the block exemption for the future aid measures in the event of failure to comply with these requirements. The Commission should be able to restrict the withdrawal of the benefit of the block exemption to certain types of aid, certain beneficiaries or aid measures adopted by certain authorities, where non-compliance with this Regulation affects only a limited group of measures or certain authorities. Such a targeted withdrawal should provide a proportionate remedy directly linked to the identified non-compliance with this Regulation. In case of failure to meet compatibility conditions set out in Chapters I and III, aid granted is not covered by this Regulation and, as a consequence, constitutes unlawful aid, which the Commission will examine in the framework of the relevant procedure as set out in Regulation No (EC) No 659/1999. In case of failure to fulfil the requirements of Chapter II, the withdrawal of the benefit of the block exemption in respect of the future aid measures does not affect the fact that the past measures complying with this Regulation were block exempted.
(38) Having regard to Article 107(3)(c) of the Treaty, aid should not have the sole effect of continuously or periodically reducing the operating costs which the beneficiary would normally have to bear, and should be proportionate to the handicaps that have to be overcome in order to secure the socioeconomic benefits deemed to be in the Union interest. Unilateral State aid which simply seeks to improve the financial situation of producers but which in no way contributes to the development of the sector, and in particular aid which is granted solely on the basis of price, quantity, unit of production or unit of means of production should be considered to constitute operating aid which is incompatible with the internal market. Furthermore, if granted in the agricultural sector, such aid is also likely to interfere with the mechanisms of the common organisations of the markets. It is therefore appropriate to limit the scope of this Regulation to certain types of aid.
(39) SMEs play a decisive role in job creation and, more generally, act as a factor of social stability and drive the economy. However, their development may be limited by market failures, leading to SMEs suffering from typical handicaps. SMEs often have difficulty in obtaining capital or loans, given the risk-averse nature of certain financial markets and the limited collateral that they may be able to offer. Their limited resources may also restrict their access to information, notably as regards new technology and potential markets. To facilitate the development of the economic activities of SMEs, this Regulation should therefore exempt certain categories of aid in favour of SMEs from the notification requirement of Article 108(3) of the Treaty.
(40) To eliminate differences that might give rise to distortions of competition and to facilitate coordination between different Union and national initiatives concerning SMEs as well as for reasons of administrative clarity and legal certainty, the definition of SME used for the purpose of this Regulation should be based on the definitions laid down in Commission Recommendation 2003/361/EC(17).
(41) To ensure coherence with the rural development policy and to achieve simplification of the rules based on the experience already gained by the Commission in the light of the application of Regulation (EU) No 1857/2006 and Regulation (EU) No 800/2008, it is appropriate to exempt from the notification requirement of Article 108(3) of the Treaty, different categories of aid in favour of SMEs active in primary agricultural production, the processing of agricultural products and the marketing of agricultural products.
(42) Those categories of aid should in particular encompass investment aid such as investments in tangible assets or intangible assets or for the relocation of farm buildings, aid for business start-ups and business opportunities such as aid for young farmers and small farms, aid for producer groups, as well as aid for participation in quality schemes, aid to facilitate business development, such as aid for knowledge transfer and information actions, aid for advisory services, aid for promotion activities, aid for farm replacement services, risk and crisis management aid such as aid to compensate for losses caused by adverse climatic events which can be assimilated to a natural disaster, aid for the costs of the prevention and eradication of animal diseases and plant pests and aid for insurance premiums, as well as aid for the livestock sector pursuing common public objectives such as the preservation of the genetic quality and the protection of animal and public health. That aid should be especially aimed at enhancing the competitiveness and the viability of the whole agricultural sector.
(43) Moreover, aids granted in favour of SMEs active in rural areas should also be exempted from the notification requirement of Article 108(3) of the Treaty under this Regulation. In this regard, and in order to ensure coherence between rural development measures co-financed under the EAFRD and measures financed from additional national resources the rules laid down in this Regulation should be consistent as far as possible with the rules laid down in Regulation (EU) No 1305/2013 and in the delegated and implementing acts adopted pursuant to that Regulation.
(44) Other categories of aid such as aid for research and development in the agricultural and forestry sectors, aid to make good the damage caused by natural disaster in the agricultural sector, aid for investments in favour of the conservation of cultural and natural heritage located on agricultural holdings and aid in favour of forestry granted to both, SMEs and large enterprises should be exempted from the notification requirement of Article 108(3) of the Treaty. In particular, as regard aid in favour of forestry and in order to ensure coherence between rural development measures co-financed under the EAFRD and measures financed from additional national resources or measures financed purely through State aid, the rules laid down in this Regulation should be consistent as far as possible with the rules laid down in Regulation (EU) No 1305/2013 and in the delegated and implementing acts.
(45) Aid granted to SMEs active in the primary agricultural production, in the processing of agricultural products and in the marketing of agricultural products, aid for research and development, aid in favour of the forestry sector or aid in favour of SMEs in the rural areas for activities falling outside the scope of Article 42 of the Treaty may also be exempted from the notification requirements of Article 108(3) of the Treaty in accordance with the conditions laid down in Regulation (EU) No 651/2014. Where Member States deem it more appropriate, they may alternatively choose to grant aid falling under the above mentioned categories in accordance with the conditions laid down in Regulation (EU) No 651/2014. In particular, Member State may choose to grant to SMEs active in the primary agricultural production regional operating aid to compensate additional costs other than transport costs in outermost regions, aid for consultancy in favour of SMEs risk finance aid, aid for research and development, innovation aid for SMEs, environmental aid, training aid and aid for disadvantaged workers in accordance with the conditions laid down in Regulation (EU) No 651/2014. In that context and in order to clarify the relation between the scope of application of this Regulation and Regulation (EU) No 651/2014, it should be noted that the objectives, the categories of aid and the aid conditions laid down in the two Regulations are different although they may target the same type of beneficiaries.
(46) To improve the economic and environmental performance and efficiency of the SMEs active in the agricultural sector and to provide the infrastructure needed for the development of agriculture and to support non-remunerative investments necessary to achieve environmental aims, aid should be provided for investments in tangible or intangible assets contributing to those objectives. Those investments should comply with Union legislation and with the national laws of the Member States concerned on the environmental protection. Furthermore, for investments requiring an environmental impact assessment under Directive 2011/92/EU of the European Parliament and of the Council(18) the aid should be subject to the condition that such assessment shall have been carried out and the development consent should have been granted for the investment project concerned, before the date of granting the individual aid.
(47) Because of the risk of distortions of competition resulting from targeted investment aid in the sector of primary agricultural production, investment aid exempted from the notification requirement of Article 108(3) of the Treaty under this Regulation should not be limited to a specific agricultural product. This condition should not prevent a Member State from excluding certain agricultural products from the scope of a particular aid, notably where no normal market outlets can be found. Moreover, aid to certain types of investment should per se not qualify for exemption from the notification requirement of Article 108(3) of the Treaty under this Regulation.
(48) To ensure the appropriate balance between minimising distortions of competition and promoting energy and resource efficiency, in case of investments on agricultural holdings linked to primary agricultural production this Regulation should provide that aid should be granted only for investment linked to the production on farm-level of biofuels or energy from renewable sources and only where that production does not exceed the average annual consumption of fuel or energy of the farm. In such case aid to biofuels should only be covered in so far as it is granted for sustainable biofuels in line with the Directive 2009/28/EC of the European Parliament and the Council(19).
(49) In order to incentivise the shift towards the production of more advanced forms of biofuels, as foreseen by the horizontal environmental and energy State aid rules, aid for food based biofuels should be excluded from this Regulation in case of aid for investments in connection with the processing of agricultural products.
(50) To encourage and to facilitate the initial establishment of young farmers and the development of small farms which are potentially economically viable, it is appropriate to exempt from the notification requirement of Article 108(3) of the Treaty start-up aid. In order to ensure the viability of the newly established agricultural activities, the aid should be made conditional on the submission of a business plan. The start-up aid should cover only the initial period of the existence of a business and not become operating aid.
(51) To help the agricultural sector to face the challenges posed by increased competition and consolidation of downstream markets in relation to the marketing of the agricultural products, including in local markets, the setting up of producer groups and organisations should be encouraged. It is therefore appropriate to exempt from the notification requirement of Article 108(3) of the Treaty start up aid to producer groups and organisations. Only producer groups and organisations that qualify as SMEs should benefit from the aid. In order to ensure that the producer group and organisation becomes a viable entity, a business plan should be submitted to the competent authority as a condition for the official recognition of a producer group by Member States. To avoid providing operating aid and maintain the incentive effect, the maximum aid duration should be limited to five years.
(52) To enhance market opportunities and to achieve added value for the agricultural products concerned it is appropriate to encourage SMEs to participate in Union or national quality schemes and therefore aid for participation in quality schemes should be exempted from the notification requirement of Article 108(3) of the Treaty. Given that it is at the moment of entering such quality schemes and in the early years of their participation that additional costs and obligations imposed on the SMEs as a result of their participation are not fully remunerated by the market, the direct aid to the beneficiary should be limited to new participation and cover a period of not more than five years. In addition, aid in the form of subsidised services should be granted towards the costs for compulsory control measures in relation to the quality schemes or towards the costs for market research activities or for preparation of application for recognition of Union quality scheme.
(53) To enhance competitiveness and resource efficiency and to improve the environmental performance, the sustainable management and overall performance of the SMEs it is appropriate to exempt from the notification requirement of Article 108(3) of the Treaty aid for knowledge transfer, information actions and farm advisory services as well as promotion measures.
(54) Good risk and crisis management is a key tool for a sustainable and competitive agricultural sector. Primary agricultural production is exposed to particular natural, climatic and health risks and crises. Therefore, risk and crisis management aid and the aid for the livestock sector should be limited to SMEs active in primary agricultural production. State aid for making good losses caused by adverse climatic events that can be assimilated to natural disasters, aid for combating animal diseases and plant pests and aid for paying insurance premiums should be limited to helping beneficiaries facing particular difficulties despite having undertaken reasonable efforts to minimise such risks. State aid should not have as its effect to entice beneficiaries into taking unnecessary risks. SMEs active in primary agricultural production should themselves bear the consequences of imprudent choices of production methods or products.
(55) The Commission has applied Articles 107 and 108 of the Treaty to aid in favour of the conservation of natural and cultural heritage in numerous cases, in particular in the framework of the Community Guidelines for State aid in the agriculture and forestry sector 2007 to 2013 and Regulation (EC) No 1857/2006. In the period from 2007 to 2013, investment aid for the conservation of traditional landscapes and buildings in favour of SMEs has been exempted from the notification requirement under Regulation (EC) No 1857/2006, while investment aid for the conservation of traditional landscapes and buildings in favour of large enterprise has been subject to the notification requirement and approved by the Commission in accordance with the Community Guidelines for State aid in the agriculture and forestry sector 2007 to 2013. During that period the Commission has assessed more than 87 investment aids concerning the conservation of traditional landscapes and buildings located on agricultural holdings. Heritage conservation projects, even carried out by large enterprises, do not typically give rise to any significant distortion of competition. It is therefore appropriate that the Commission should make use of the powers conferred on it by Regulation (EC) No 994/98, as regards aids in favour of the conservation of natural and cultural heritage.
(56) For aid in favour of the conservation of cultural and natural heritage to be exempted from the notification requirement under this Regulation, it should be granted for investments in tangible assets or capital works aimed at the conservation of the cultural or natural heritage. The cultural or natural heritage should be located on the agricultural holding of the beneficiary and should be officially recognised as such by the competent public authority in the Member State. Given the notification threshold for this aid of EUR 500 000 per investment project provided for by this Regulation which is considered a small scale infrastructure under the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020, it is appropriate, under this Regulation, to set the aid intensity at up to 100 % of the eligible costs.
(57) Emergency situations caused by natural disasters require urgent action by the granting authorities. It is therefore important to ensure a swift implementation of the envisaged aid. The Commission has applied Articles 107 and 108 of the Treaty in a considerable number of decisions concerning compensation for damage caused to the agricultural sector by natural disasters. The Community Guidelines for State aid in the agriculture and forestry sector 2007 to 2013 already covered the possibility to authorise aid schemes to compensate for damages caused by natural disasters. In the period from 2007 to 2012 and in application of the Community Guidelines on State aid in the agriculture and forestry sector 2007 to 2013, the Commission approved more than 25 aids regarding compensation for damages caused by natural disasters to the agricultural sector. The Commission's experience has shown that such measures need to be implemented swiftly in order to be effective. Accordingly, it is necessary to simplify the notification procedure for such aids. Moreover, they do not give raise to a significant distortion of competition in the internal market due to their compensatory nature and the existence of clear criteria for compatibility with the internal market. It is therefore appropriate that the Commission should also make use of the powers conferred on it by Regulation (EC) No 994/98 as regards aids for compensation for damage caused by natural disasters in the agricultural sector.
(58) Aid to make good damage caused by natural disasters should therefore be available to undertakings in the whole agricultural sector and be granted to both SMEs and large enterprises. The conditions to exempt aid to make good damage caused by natural disasters follow the already established practice and relate to the formal recognition by the Member States' authorities of the character of the event as a natural disaster, to the existence of a direct causal link between the natural disaster and the damage suffered by the beneficiary and should ensure that overcompensation is avoided. In particular, Member States should avoid overcompensation as a result of the combination of such aid with other compensations received by the beneficiaries including payments received under an insurance scheme.
(59) Aid for research and development can contribute to sustainable economic growth and strengthen competitiveness. Based on the Commission's experience in applying the Community Guidelines for State aid in the agriculture and forestry sector 2007 to 2013, the Community Framework for State aid for research and development and innovation(20) and Regulation (EC) No 800/2008 to aid for research and development in the agricultural and forestry sectors, it is appropriate to exempt from the notification requirement of Article 108(3) of the Treaty aid for research and development which fulfils the conditions laid down in this Regulation. Since the promotion of research and development is an important objective in the common interest, this Regulation should require that the research project is of interest of all undertakings active in a particular agricultural or forestry sector or sub-sector. The information on the research project and the results of it should be made publicly available on internet. Moreover, the results of the research should be available to interested undertakings at no costs.
(60) Forestry is an integral part of rural development. The Commission has applied Articles 107 and 108 of the Treaty to undertakings active in the forestry sector in numerous decisions, in particular in the framework of the Community Guidelines on State aid in the agriculture and forestry sector 2007 to 2013. In the period from 2007 to 2012 the Commission approved 140 aids in favour of the forestry sector in accordance with those Guidelines. In the light of the considerable experience gained by the Commission in the context of applying those Guidelines to undertakings active in the forestry sector, it is appropriate, with a view to simplifying procedures but at the same time ensuring efficient supervision and Commission monitoring, that the Commission should also make use of the powers conferred on it by Regulation (EC) No 994/98 as regards aid in favour of the forestry sector. According to the Commission's experience aid granted in the forestry sector for measures that are part of the rural development programmes and which is either co-financed by the EAFRD or granted as an additional national financing to such co-financed measures does not significantly distort competition in the internal market. Moreover, aid for knowledge transfer in the forestry sector and aid for advisory services in the forestry sector do not significantly distort competition in the internal market even though they are granted outside the rural development programmes. Clear conditions for the compatibility of such measures with the internal market should be defined in this Regulation. Those conditions should be consistent as far as possible with the rules laid down in Regulation (EU) No 1305/2013 and in the delegated and implementing acts adopted pursuant to that Regulation.
(61) Those categories of aid should, in particular, encompass aid for afforestation and the creation of woodland, aid for agroforestry systems, aid for the prevention and restoration of forests damaged by fire, natural disasters, adverse climatic events, plant pests or catastrophic events, aid for investments improving the resilience and environmental value of forest ecosystems, aid for disadvantages related to Natura 2000 forest areas as defined in Article 3 of Council Directive 92/43/EEC(21) and in Article 3 of Directive 2009/147/EC of the European Parliament and of the Council(22), aid for forest-environmental and climate services and for forest conservation, aid for knowledge transfer and information actions, aid for advisory services, aid for infrastructure investments and aid for investments in forestry technologies and in the processing mobilising and marketing of forestry products. The aid to the forestry sector should avoid distorting competition and be market neutral.
(62) In order to ensure coherence with Regulation (EU) No 1305/2013 and to achieve simplification of the rules to obtain State aid clearance for the co-financed part and the additional financing of the national rural development programmes, the aid in favour of the forestry sector exempted from the notification requirement of Article 108(3) of the Treaty under this Regulation should be identical to the underlying rural development measures and the exempted aid should only be granted pursuant to and in conformity with the rural development programme of the Member State concerned. However, the aid intensities and the eligible costs should also be in line with the general Union State aid principles and the State aid rules applicable to the agricultural sector. Therefore, costs such as working capital that is ancillary to, and linked to new investment should not be eligible for aid under this Regulation. In line with the respective rural development programmes as approved by the Commission, the investment operations included in the forestry measures could also encompass one-off forestry treatments needed to prepare the investment where the objective of the relevant rural development provision so permits. It should be possible for aid for knowledge transfer, aid for advisory services and aid for forestry land consolidation to be granted irrespective of whether such aid is integrated in the national rural development programme.
(63) Economic diversification and the creation of new economic activities are essential for the development and competitiveness of rural areas and in particular for the SMEs which are the backbone of the Union rural economy. Regulation (EU) No 1305/2013 provides for measures to support non-agricultural business development in rural areas aimed at employment promotion, the setting up of quality jobs in rural areas, the maintenance of already existing jobs, a reduction of seasonality fluctuations in employment, development of non-agricultural sectors outside agriculture and food processing while fostering at the same time business integration and local inter-sectoral links.
(64) To ensure coherence with Regulation (EU) No 1305/2013 and to achieve simplification of the rules to obtain State aid clearance for the co-financed part and the additional national financing of the rural development programmes, this Regulation should exempt from the notification requirement of Article 108(3) of the Treaty different categories of aid in favour of SMEs active in rural areas. Those categories of aid should, in particular, encompass aid for investments concerning the processing of agricultural products into non-agricultural products or the production of cotton, aid for business start-ups for non-agricultural activities, aid for advisory services, aid for knowledge transfer and information actions and aid for the new participation of farmers in quality schemes for cotton and foodstuff and promotion measures in favour of foodstuffs. The aid to be exempted from the notification requirement of Article 108(3) of the Treaty under this Regulation should be identical to the underlying rural development measures and the exempted aid should only be granted pursuant to and in conformity with the rural development programme of the Member State concerned. However, the aid intensities and the eligible costs should also be in line with the general Union State aid principles and the horizontal State aid rules. Therefore, costs such as working capital that is ancillary to, and linked to new investment should not be eligible for aid under this Regulation.
(65) As regards aid for investments concerning the processing of agricultural products into non-agricultural products, it should be specified that investments linked to the production of biofuel or energy from renewable sources should not be eligible for aid under this Regulation. In principle, the horizontal environmental and energy State aid rules should apply to such investments.
(66) In the case of several categories of aid such as: (a) aid towards the costs of market research activities, product conception and design and for the preparation of applications for recognition of quality schemes; (b) aid towards the costs for compulsory control measures in relation to the quality schemes; (c) aid for knowledge transfer and information actions; (d) aid for advisory services; (e) aid for farm replacements services; (f) aid for promotion measures; (g) aid to compensate for the costs of the prevention and eradication of animal diseases and plant pests and (h) aid for the livestock sector the aid is granted to the final aid beneficiaries indirectly, in kind, by means of subsidised services. In such cases the aid should be paid to the provider of the service or activity in question. When selecting the provider due regard should be given to the respective applicable public procurement rules and to the principles of transparency, openness and non- discrimination in the selection procedure.
(67) In the light of the Commission's experience in this area, it is in principle necessary to periodically revise State aid policy. That is why the period of application of this Regulation should be limited. It is therefore appropriate to lay down transitional provisions, including the rules on an adjustment period at the end of validity of this Regulation for exempted aid schemes. Such rules should give Member States time to adapt to the possibly new regime,
HAS ADOPTED THIS REGULATION:
Commission Regulation (EC) No 1857/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to State aid to small and medium-sized enterprises active in the production of agricultural products and amending Regulation (EC) No 70/2001 (OJ L 358, 16.12.2006, p. 3), as amended by Commission Regulation (EU) No 1114/2013 of 7 November 2013 amending Regulation (EC) No 1857/2006 as regards its period of application (OJ L 298, 8.11.2013, p. 34).
Council Regulation (EU) No 733/2013 of 22 July 2013 amending Regulation (EC) No 994/98 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid (OJ L 204, 31.7.2013, p. 11).
Regulation (EU) No 1308/2013 of the European Parliament and of the Council of 17 December 2013 establishing a common organisation of the markets in agricultural products and repealing Council Regulation (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007 (OJ L 347, 20.12.2013, p. 671).
Regulation (EU) No 1305/2013 of the European Parliament and of the Council of 17 December 2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and repealing Council Regulation (EC) No 1698/2005 (OJ L 347, 20.12.2013, p. 487).
COM(2012) 209 final.
Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General block exemption Regulation) (OJ L 214, 9.8.2008, p. 3).
Directive 2013/37/EU of the European Parliament and of the Council of 26 June 2013 amending Directive 2003/98/EC on the re-use of public sector information (OJ L 175, 27.6.2013, p. 1).
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 (OJ L 187, 26.6.2014, p. 1).
Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ L 140, 30.4.2004, p. 1).
Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ L 83, 27.3.1999, p. 1).
Commission Recommendation 2003/361/EC concerning the definition of micro, small and medium-sized enterprises (OJ L 124, 20.5.2003, p. 36).
Directive 2011/92/EU of the European Parliament and of the Council of 13 December 2011 on the assessment of the effects of certain public and private projects on the environment (OJ L 26, 28.1.2012, p. 1).
Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC (OJ L 140, 5.6.2009, p. 16).
Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora (OJ L 206, 22.7.1992, p. 7).
Directive 2009/147/EC of the European Parliament and of the Council of 30 November 2009 on the conservation of wild birds (OJ L 20, 26.1.2010, p. 7).
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