Not all public subsidies to industry necessarily meet the legal definition for State Aid. To assess for State Aid the following five key questions need to be asked, if the answer to ALL is yes then State Aid is present.
Article 107(1) of the TFEU sets out criteria, all of which must be met for a State Aid to be present.
Is the beneficiary an “Undertaking”?
An Undertaking is an entity, performing economic activity by placing goods or service on the market regardless of their legal status and the way in which they are financed.
Is the aid granted by the state or through state resources?
As well as government departments, this includes bodies that use resources that belong to the state or are controlled by the state. State resources can include grants, interest and tax relief, guarantees, government holdings of all or part of a company, or the provision of goods and services on preferential terms. The majority of time the answer to this question will be yes.
Does the aid confer an advantage?
An advantage is an economic benefit, whether direct or indirect, that could not be obtained in the absence of State intervention. However, whenever the financial situation of an undertaking is improved as a result of State intervention on terms differing from normal market conditions, an advantage is present. To assess this, the financial situation of the undertaking following the measure should be compared with its financial situation if the measure had not been taken. Since only the effect of the measure on the undertaking matters, it is irrelevant whether the advantage is compulsory for the undertaking in that it could not avoid or refuse it.
Is the aid selective, favouring certain undertakings?
Aid that targets particular businesses, locations, types of firm, for example, SMEs or sectors is considered selective. A general measure affecting the whole of the state's economy, for example, nation-wide fiscal measures is not considered a State Aid.
Does the aid have the potential to distort trade or affect competition?
The potential to distort competition does not have to be substantial or significant, and this criterion may apply to small amounts of aid and firms with little market share. Most interventions have the potential to distort competition.
It is sufficient that a product or service is subject to trade between member states, even if the aid beneficiary itself does not export to the EU to have an effect on trade.
All of these criteria must be met cumulatively to meet the definition of State Aid. If one or more than one of these conditions is not met, then the matter is not State Aid, and does not fall within the State Aid legal framework.
For more information on the notion of State Aid, visit EUR-Lex - 52016XC0719(05) - EN - EUR-Lex (europa.eu).
If you are a public body and you consider that your spending measure may involve State Aid, please consult the De Minimis or GBER guidelines for more information and contact the State Aid Unit at email@example.com.