Community, Voluntary and not for profit organisations may well still be subject to State Aid rules. State aid refers to public assistance given to an undertaking on a discretionary basis which has the potential to distort competition and trade. There is no strict definition of an ‘undertaking’ in EU law but it is generally taken to be any entity engaged in economic activity. An economic activity means offering goods and services in the market. This could encompass both private and public bodies, and it does not matter if the body has a charitable status.
The Commission or European Courts have previously stated that non-economic activities can include, regulatory, supervisory tasks, activities based on solidarity or with no potential to make profit. However, a ‘social’ aim does not necessarily exclude a body from the State Aid rules, and consideration must therefore also be given to State aid when aid is going to charities and not-for-profit organisations. A key factor is the organisation’s activities and whether they are likely to distort competition.
Whether an undertaking is a charity, a commercial business or a social enterprise – and irrespective of the undertaking’s income – aid to that organisation will be a State aid if it meets the five State aid test questions. In some circumstances, however, local charities or not-for-profit organisations may be deemed to be serving a purely local market, and thus State Aid is not involved.