# EUR-Lex - 52011PC0625 - EN

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# 52011PC0625

**Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy /* COM/2011/0625 final - 2011/0280 (COD) */**

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EXPLANATORY
MEMORANDUM

1.           CONTEXT
OF THE PROPOSAL

The Commission proposal for the Multiannual
Financial Framework (MFF) for 2014-2020 (the MFF proposal)[1]
sets the budgetary framework and main orientations for the Common Agricultural
Policy (CAP). On this basis, the Commission presents a set of regulations
laying down the legislative framework for the CAP in the period 2014-2020,
together with an impact assessment of alternative scenarios for the evolution
of the policy.

The current reform proposals are based on
the Communication on the CAP towards 2020[2] that outlined
broad policy options in order to respond to the future challenges for
agriculture and rural areas and to meet the objectives set for the CAP, namely
1) viable food production; 2) sustainable management of natural resources and
climate action; and 3) balanced territorial development. The reform
orientations in the Communication have since been broadly supported both in the
inter-institutional debate[3] and in the stakeholder
consultation that took place in the framework of the impact assessment.

A common theme that has emerged throughout
this process is the need to promote resource efficiency with a view to smart,
sustainable and inclusive growth for EU agriculture and rural areas in line
with the Europe 2020 strategy, keeping the structure of the CAP around two
pillars that use complementary instruments in pursuit of the same objectives.
Pillar I covers direct payments and market measures providing a basic annual
income support to EU farmers and support in case of specific market
disturbances, while Pillar II covers rural development where Member States draw
up and co-finance multiannual programmes under a common framework.[4]

Through successive reforms the CAP has
increased market orientation for agriculture while providing income support to
producers, improved the integration of environmental requirements and
reinforced support for rural development as an integrated policy for the
development of rural areas across the EU. However, the same reform process has
raised demands for a better distribution of support among and within Member
States, as well as calls for a better targeting of measures aiming at
addressing environmental challenges and better addressing increased market
volatility.

In the past, reforms mainly responded to
endogenous challenges, from huge surpluses to food safety crises; they have
served the EU well both on the domestic and the international front. However,
most of today's challenges are driven by factors that are external to agriculture
and would thus require a broader policy response.

The pressure on agricultural income is
expected to continue as farmers are facing more risks, a slowdown in
productivity and a margin squeeze due to rising input prices; there is
therefore a need to maintain income support and to reinforce instruments to
better manage risks and respond to crisis situations. A strong agriculture is
vital for the EU food industry and global food security.

At the same time, agriculture and rural
areas are being called upon to step up their efforts to meet the ambitious
climate and energy targets and biodiversity strategy that are part of the
Europe 2020 agenda. Farmers, who are together with foresters the main land
managers, will need to be supported in adopting and maintaining farming systems
and practices that are particularly favourable to environmental and climate
objectives because market prices do not reflect the provision of such public
goods. It will also be essential to best harness the diverse potential of rural
areas and thus contribute to inclusive growth and cohesion.

This reform accelerates the process of
integration of environmental requirements. It introduces a strong greening
component into the first pillar of the CAP for the first time thus ensuring that
all EU farmers in receipt of support go beyond the requirements of cross
compliance and deliver environmental and climate benefits as part of their
everyday activities. Thirty percent of direct payments will now be tied to
greening, and these payments will ensure that all farms deliver environmental
and climate benefits through the retention of soil carbon and grassland
habitats associated with permanent pasture, the delivery of water and habitat
protection by the establishment of ecological focus areas and improvement of
the resilience of soil and ecosystems through crop diversification. They will
reinforce the ability of land and natural ecosystems to contribute to address
major EU biodiversity and climate change adaptation objectives. Cross
compliance will still underpin direct payments and it will be further focused
to provide protection for wetlands and carbon rich soils while at the same time
being streamlined to reduce administrative burdens. The Commission is committed
to the introduction of the Water Framework Directives within the remit of cross
compliance when all Member States will have fully implemented them in
particular with clear obligations for farmers. Within rural development also,
the objectives of the sustainable management of natural resources and climate
action are prioritised through the restoration, preservation and enhancement of
ecosystems as well as the promotion of resource efficiency, low carbon and
climate resilient agriculture. Rural development will allow to significantly contribute
towards the completion of the implementation of both the Natura 2000 and Water
Framework Directives and to the achievement of the EU's 2020 biodiversity
strategy.

The future CAP will not, therefore, be a
policy that caters only for a small, albeit essential, part of the EU economy,
but also a policy of strategic importance for food security, the environment
and territorial balance. Therein lies the EU added value of a truly common
policy that makes the most efficient use of limited budgetary resources in
maintaining a sustainable agriculture throughout the EU, addressing important
cross-border issues such as climate change and reinforcing solidarity among
Member States, while also allowing flexibility in implementation to cater for
local needs.

The framework set out in the MFF proposal
foresees that the CAP should maintain its two-pillar structure with the budget
for each pillar maintained in nominal terms at its 2013 level and with a clear
focus on delivering results on the key EU priorities. Direct payments should
promote sustainable production by assigning 30 % of their budgetary
envelope to mandatory measures that are beneficial to climate and the
environment. Payment levels should progressively converge and payments to large
beneficiaries be subject to progressive capping. Rural development should be
included in a Common Strategic Framework with other EU shared management funds
with a reinforced outcome-orientated approach and subject to clearer, improved
ex-ante conditionalities. Finally, on market measures the financing of the CAP
should be reinforced with two instruments outside the MFF: 1) an emergency
reserve to react to crisis situations; and 2) the extension of the scope of the
European Globalization Adjustment Fund.

On this basis, the main elements of the
legislative framework for the CAP during the period 2014-2020 are set out in
the following regulations:

–
Proposal for a Regulation of the European
Parliament and of the Council establishing rules for
direct payments to farmers under support schemes within the framework of the
common agricultural policy ('the
direct payments regulation');

–
Proposal for a Regulation of the European
Parliament and of the Council establishing a common organisation of the markets
in agricultural products (Single CMO Regulation) ('the Single CMO regulation');

–
Proposal for a Regulation of the European
Parliament and of the Council on support for rural development by the European
Agricultural Fund for Rural Development (EAFRD) ('the rural development
regulation');

–
Proposal for a Regulation of the European
Parliament and of the Council on the financing, management and monitoring of
the common agricultural policy ('the horizontal regulation');

–
Proposal for a Council regulation determining
measures on fixing certain aids and refunds related to the common organisation
of the markets in agricultural products;

–
Proposal for a Regulation of the European
Parliament and of the Council amending Council Regulation (EC) No 73/2009 as
regards the application of direct payments to farmers in respect of the year
2013;

–
Proposal for a Regulation of the European
Parliament and of the Council amending Council Regulation (EC) No 1234/2007 as
regards the regime of the single payment scheme and support to vine-growers.

The rural development regulation builds on
the proposal presented by the Commission on 6 October 2011 that sets out
common rules for all funds operating under a Common Strategic Framework[5].
A regulation will follow on the scheme for most deprived persons, for which
funding is now placed under a different heading of the MFF.

In addition, new rules on the publication
of information on beneficiaries taking account of the objections expressed by
the Court of Justice of the European Union are also under preparation with a
view to finding the most appropriate way to reconcile beneficiaries' right to
protection of personal data with the principle of transparency.

2.           RESULTS
OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENT

On the basis of the evaluation of the
current policy framework and an analysis of future challenges and needs, the
impact assessment assesses and compares the impact of three alternative
scenarios. This is the result of a long process started in April 2010 and
steered by an inter-service group that brought together extensive quantitative
and qualitative analysis, including setting a baseline in the form of
medium-term projections for agricultural markets and income up to 2020 and
modelling the impact of the different policy scenarios on the economics of the
sector.

The three scenarios elaborated in the
impact assessment are: 1) an adjustment scenario that continues with the
current policy framework while addressing its most important shortcomings, such
as the distribution of direct payments; 2) an integration scenario that entails
major policy changes in the form of enhanced targeting and greening of direct
payments and reinforced strategic targeting for rural development policy in
better coordination with other EU policies, as well as extending the legal base
for a broader scope of producer cooperation; and 3) a refocus scenario that
reorients the policy exclusively towards the environment with a progressive
phasing out of direct payments, assuming that productive capacity can be
maintained without support and that the socio-economic needs of rural areas can
be served by other policies.

Against the background of the economic
crisis and the pressure on public finances, to which the EU has responded with
the Europe 2020 strategy and the MFF proposal, all three scenarios attach
different weight to each of the three policy objectives of the future CAP which
aims at a more competitive and sustainable agriculture in vibrant rural areas.
With a view to a better alignment with the Europe 2020 strategy, notably in terms
of resource efficiency, it will be increasingly essential to improve
agricultural productivity through research, knowledge transfer and promoting
cooperation and innovation (including through the European Innovation
Partnership on agricultural productivity and sustainability). Whereas EU
agricultural policy does not any more operate within a trade distorting policy
environment, additional pressure on the sector is expected from further
liberalization, notably in the framework of the DDA or the FTA with Mercosur.

The three policy scenarios were drawn up
taking into account the preferences expressed in the consultation which was
conducted in the context of the impact assessment. Interested parties were
invited to submit contributions between 23.11.2010 and 25.1.2011 and an
advisory committee was organised on 12.1.2011. The main points are summarized
below:[6]

–
There is broad agreement among stakeholders on
the need for a strong CAP based on a two-pillar-structure in order to address
the challenges of food security, sustainable management of natural resources
and territorial development.

–
Most respondents find that the CAP should play a
role in stabilizing markets and prices.

–
Stakeholders have diverse opinions concerning
the targeting of support (especially redistribution of direct aid and capping
payments).

–
There is agreement that both pillars can play an
important role in stepping up climate action and increasing environmental
performance for the benefit of EU society. Whereas many farmers believe that
this already takes place today, the wider public argues that Pillar I payments
can be more efficiently used.

–
The respondents want all parts of the EU,
including less favoured areas, to be part of future growth and development.

–
The integration of the CAP with other policies,
such as environmental, health, trade, development, was emphasised by many
respondents.

–
Innovation, development of competitive
businesses and provision of public goods to EU citizens are seen as ways to
align the CAP with the Europe 2020 strategy.

The impact assessment thus compared the
three alternative policy scenarios:

The refocus scenario would accelerate
structural adjustment in the agricultural sector, shifting production to the
most cost efficient areas and profitable sectors. While significantly
increasing funding for the environment, it would also expose the sector to
greater risks due to limited scope for market intervention. Furthermore, it
would come at a significant social and environmental cost as the less
competitive areas would face a considerable income loss and environmental
degradation, since the policy would lose the leverage of direct payments
coupled with the cross compliance requirements.

At the other end of the spectrum, the
adjustment scenario would best allow for policy continuity with limited but
tangible improvements both in agricultural competitiveness and environmental
performance. There are however serious doubts as to whether this scenario could
adequately address the important climate and environmental challenges of the
future, which also underpin the long-term sustainability of agriculture.

The integration scenario breaks new ground
with enhanced targeting and greening of direct payments. The analysis shows
that greening is possible at a reasonable cost to farmers although some
administrative burden cannot be avoided. Similarly, a new impetus in rural
development is possible provided that the new possibilities are efficiently
used by Member States and regions and that the common strategic framework with
the other EU funds does not remove synergies with Pillar I or weaken rural
development's distinctive strengths. If the right balance is struck, this
scenario would best address the long term sustainability of agriculture and
rural areas.

On this basis the impact assessment
concludes that the integration scenario is the most balanced in progressively
aligning the CAP with the EU's strategic objectives and this balance is also
found in the implementation of the different elements in the legislative
proposals. It will also be essential to develop an evaluation framework to
measure the performance of the CAP with a common set of indicators linked to
policy objectives.

Simplification has been an important
consideration throughout the process and should be enhanced in a variety of
ways, for instance in the streamlining of cross compliance and market
instruments, or the design of the small farmers scheme. In addition, the
greening of direct payments should be designed in such a way as to minimize
administrative burden including the costs of controls.

3.           LEGAL
ELEMENTS OF THE PROPOSAL

It is proposed to maintain the current
structure of the CAP in two pillars with annual mandatory measures of general
application in Pillar I complemented by voluntary measures better tailored to
national and regional specificities under a multi-annual programming approach
in Pillar II. However, the new design of direct payments seeks to better
exploit synergies with Pillar II, which is in turn placed under a Common
Strategic Framework to better coordinate with other EU shared management funds.

On this basis, the current structure of
four basic legal instruments is also maintained, albeit with the scope of the
financing regulation enlarged to bring together common provisions into what is
now called the horizontal regulation.

The proposals comply with the principle of
subsidiarity. The CAP is a truly common policy: it is an area of shared
competence between the EU and the Member States that is being handled at EU
level with a view to maintaining a sustainable and diverse agriculture
throughout the EU, addressing important cross-border issues such as climate
change and reinforcing solidarity among Member States. In the light of the
importance of future challenges for food security, the environment and
territorial balance, the CAP remains a policy of strategic importance to ensure
the most effective response to the policy challenges and the most efficient use
of budgetary resources. In addition, it is proposed to maintain the current
structure of instruments in two pillars where Member States have more leeway to
tailor solutions to their local specificities and also co-finance Pillar II.
The new European Innovation Partnership and risk management toolkit are also
placed within Pillar II. At the same time the policy will be better aligned
with the Europe 2020 strategy (including a common framework with other EU
funds) and a number of improvements and simplification elements introduced.
Finally, the analysis carried out in the framework of the impact assessment
clearly shows the cost of no action in terms of negative economic,
environmental and social consequences.

The direct payments regulation lays down
common rules for the basic payment scheme and related payments. Building on the
reform of 2003 and the Health Check of 2008 that decoupled direct payments from
production while subjecting them to cross compliance requirements, the
regulation now seeks to better target support to certain actions, areas or
beneficiaries as well as to pave the way for convergence of the level of
support within and across Member States. The regulation also includes a section
on coupled support.

A single scheme across the EU, the basic
payment scheme, replaces the Single Payment Scheme and the Single Area Payment
Scheme as from 2014. The scheme will operate on the basis of payment
entitlements allocated at national or regional level to all farmers according
to their eligible hectares in the first year of application. Thus the use of
the regional model that was optional in the current period is generalized, also
effectively bringing all agricultural land into the system. The rules on the
management of entitlements and the national reserve largely follow current
rules.

With a view to a more equitable
distribution of support, the value of entitlements should converge at national
or regional level towards a uniform value. This is done progressively to avoid
major disruptions.

An important element is to enhance the
overall environmental performance of the CAP through the greening of direct
payments by means of certain agricultural practices beneficial for the climate
and the environment that all farmers will have to follow, which go beyond cross
compliance and are in turn the basis for pillar II measures.

The definition of active farmer further
enhances targeting on farmers genuinely engaged in agricultural activities, and
thus legitimizes support. In addition, the progressive reduction and capping of
support for large beneficiaries is foreseen while taking due account of
employment.

The following payments are also provided:

–
an payment (30% of annual national ceiling) for
farmers following agricultural practices beneficial for the climate and the
environment: crop diversification, maintenance of permanent pastures and
ecological focus areas. Organic farming automatically benefits from this
payment, while farmers in Natura 2000 areas will have to comply with the
relevant requirements to the extent that they are consistent with the Natura
2000 legislation;

–
a voluntary payment (up to 5% of annual national
ceiling) for farmers in areas facing specific natural constraints (areas
delimited in the same manner as for rural development purposes); this payment
recognizes the need for income support to maintain presence in areas facing
specific natural constraints and complements existing support under rural
development;

–
a payment (up to 2% of annual national ceiling)
for young farmers in their installation, which may be complemented by setting
up aid under rural development; and

At the same time, the regulation lays down a
simplified scheme for small farmers (up to 10% of annual national ceiling), who
may thus receive a lump sum payment replacing all direct payments and producing
administrative simplification with an easing of such farmers' obligations
related to greening, cross compliance and controls.

A voluntary coupled support scheme is
provided for specific types of farming or specific agricultural systems which
are experiencing certain difficulties and which are particularly important for
economic and/or social reasons; support is provided to the extent necessary to
maintain current levels of production (up to 5% of annual national ceiling with
the possibility to go beyond this in particular cases).

In addition, the regulation maintains the possibility
for Complementary National Direct Payments for Bulgaria and Romania and
includes a specific payment for cotton.

In terms of simplification, the new direct
payments system will be based on a single type of payment entitlements and
streamline transfer rules, thereby simplifying its management; a harmonisation
of provisions for coupled payments under one heading renders the legal
framework more user-friendly and the scheme for small farmers with its
simplified requirements and procedures will reduce the red tape on small
farmers and enhance their competitiveness.

4.           BUDGETARY
IMPLICATION

The MFF proposal provides that a
significant part of the EU budget should continue to be dedicated to
agriculture, which is a common policy of strategic importance. Thus, in current
prices, it is proposed that the CAP should focus on its core activities with
EUR 317.2 billion allocated to Pillar I and EUR 101.2 billion to Pillar II over
the 2014-2020 period.

The Pillar I and Pillar II funding is
complemented by additional funding of EUR 17.1 billion consisting of EUR 5.1
billion for research and innovation, EUR 2.5 billion for food safety and EUR
2.8 billion for food support for the most deprived persons in other headings of
the MFF, as well as of EUR 3.9 billion in a new reserve for crises in the
agricultural sector and up to EUR 2.8 billion in the European Globalization Adjustment
Fund outside the MFF, thus bringing the total budget to EUR 435.6 billion over
the 2014-2020 period.

As regards distribution of support among
Member States, it is proposed that all Member States with direct payments below
90% of the EU average will see one third of this gap closed. The national
ceilings in the direct payments regulation are calculated on this basis.

The distribution of rural development
support is based on objective criteria linked to the policy objectives taking
into account the current distribution. As is the case today, less developed
regions should continue to benefit from higher co-financing rates, which will
also apply to certain measures such as knowledge transfer, producer groups,
cooperation and Leader.

Some flexibility for transfers between
pillars is introduced (up to 5% of direct payments): from Pillar I to Pillar II
to allow Member States to reinforce their rural development policy, and from
Pillar II to Pillar I for those Member States where the level of direct
payments remains below 90% of the EU average.

Details on the financial impact of the CAP
reform proposals are set out in the financial statement accompanying the
proposals.

2011/0280 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

establishing rules for direct payments to
farmers under support schemes within the framework of the common agricultural
policy

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 42 and Article
43(2) thereof,

Having regard to the 1979 Act of Accession,
and in particular paragraph 6 of Protocol No 4 on cotton attached thereto,

Having regard to the proposal from the
European Commission[7],

After transmission of the draft legislative
act to the national Parliaments,

Having regard to the opinion of the
European Economic and Social Committee[8],

Having regard to the opinion of the
Committee of the Regions[9],

Having consulted the European Data
Protection Supervisor[10],

Acting in accordance with the ordinary
legislative procedure,

Whereas:

(1)
The Communication from the Commission to the
European Parliament, the Council, the European Economic and Social Committee
and the Committee of the Regions on "The CAP towards 2020: Meeting the
food, natural resources and territorial challenges of the future"[11] sets out
potential challenges, objectives and orientations for the Common Agricultural
Policy (CAP) after 2013. In the light of the debate on that Communication, the
CAP should be reformed with effect from 1 January 2014. That reform should
cover all the main instruments of the CAP, including Council Regulation (EC) No
73/2009 of 19 January 2009 establishing common rules
for direct support schemes for farmers under the common agricultural policy and establishing certain support schemes for farmers, amending
Regulations (EC) No 1290/2005, (EC) No 247/2006, (EC) No 378/2007 and
repealing Regulation (EC) No 1782/2003[12]. In view of the scope of the reform, it is appropriate to repeal
Regulation (EC) No 73/2009 and to replace it with a new text. The reform should
also, as far as possible, streamline and simplify provisions.

(2)
This Regulation should contain all the basic
elements pertaining to the payment of Union support to farmers and fix criteria
and conditions of access to those payments which are inextricably linked to
those basic elements.

(3)
It should be clarified that Regulation (EU)
No [...] of the European Parliament and of Council of... on the financing,
management and monitoring of the common agricultural policy[13] [horizontal CAP
Regulation: HZR] and the provisions adopted pursuant to it should apply in
relation to the measures set out in this Regulation. For the sake of
consistency with other legal instruments relating to the CAP, some rules
currently provided for in Regulation (EC) No 73/2009, are now laid down in Regulation
(EU) No [...][HZR], in particular rules to guarantee compliance with the
obligations laid down by direct payment provisions, including checks and the
application of administrative measures and administrative penalties in case of
non-compliance, rules related to cross-compliance such as the statutory
management requirements, the good agricultural and environmental condition, the
monitoring and evaluation of relevant measures and rules related to the
recovery of undue payments.

(4)
In order to supplement or amend certain
non-essential elements of this Regulation, the power to adopt delegated acts in
accordance with Article 290 of the Treaty should be delegated to the
Commission. It is of particular importance that the Commission carry out
appropriate consultations during its preparatory work, including at expert level.
The Commission, when preparing and drawing-up delegated acts, should ensure a
simultaneous, timely and appropriate transmission of relevant documents to the
European Parliament and Council.

(5)
In order to ensure uniform conditions for the
implementation of this Regulation and to avoid unfair competition or
discrimination between farmers, implementing powers should be conferred on the
Commission in respect of: the fixation of the annual national ceiling for the
basic payment scheme; the adoption of rules on applications for allocation of
payment entitlements; the adoption of measures regarding the reversion of
non-activated payment entitlements to the national reserve; the adoption of requirements related to the notification of transfer of payment
entitlements to the national authorities and the deadlines within which such
notification are to take place;  the setting out of the
annual ceiling for the payment for agricultural practises beneficial for the
climate and the environment; the setting out of the annual ceiling for the
payment for areas with natural constraints; the setting out of the annual
ceiling for the payment for young farmers; the setting out of the annual
ceilings for the voluntary coupled support; the adoption of rules on the
procedure for the assessment and approval of decisions in the framework of the
voluntary coupled support; the adoption of rules on the procedure of the
authorisation and the notifications to the producers related to the
authorisation of land and varieties for the purposes of the crop specific
payment for cotton; the provision for rules on the calculation of the reduction
of the amount of the crop specific payment for cotton; the adoption of rules
concerning general notification requirements. Those powers should be exercised
in accordance with Regulation (EU) No 182/2011 of the European Parliament and of
the Council of 16 February 2011 laying down the rules and general principles
concerning mechanisms for control by Member States of the Commission's exercise
of implementing powers[14].

(6)
The Commission should adopt immediately
applicable implementing acts where, in duly justified cases relating to
exceptional management measures, intended to solve urgent and unforeseen
problems occurring in one or more Member States, imperative grounds of urgency
so require.

(7)
The objectives of this Regulation can be
achieved more efficiently at Union level through the multiannual guarantee of Union
financing and by concentrating on clearly identified priorities, given the
links between this Regulation and the other instruments of the CAP, the
disparities between the various rural areas and the limited financial resources
of the Member States in an enlarged Union. The present Regulation is therefore
in line with the principle of subsidiarity as set out in Article 5(3) of the
Treaty on European Union. Since the scope of this Regulation is limited to what
is necessary in order to achieve its objectives, it also respects the principle
of proportionality as set out in Article 5(4) of that Treaty.

(8)
In order to take into account new legislation on
support schemes that may be adopted after the entry into force of this
Regulation, the power to adopt acts in accordance with Article 290 of the
Treaty should be delegated to the Commission for the
purpose of amending the list of support schemes covered by this Regulation.

(9)
In order to take into account specific new
elements and to guarantee the protection of the rights of beneficiaries, the
power to adopt acts in accordance with Article 290 of the Treaty should be
delegated to the Commission for the purpose of laying
down further definitions regarding the access to support under this Regulation,
establishing the framework within which Member States shall define the minimum
activities to be carried out on areas naturally kept in a state suitable for
grazing or cultivation as well as the criteria to be met by farmers in order to
be deemed to have respected the obligation of maintaining the agricultural area
in the state suitable for production and the criteria to determine the
predominance of grasses and other herbaceous forage as
regards permanent grassland.

(10)
In order to guarantee the protection of the
rights of beneficiaries the power to adopt acts in accordance with Article 290
of the Treaty should be delegated to the Commission for
the purpose of adopting of rules on the basis for
calculation of reductions to be applied by Member States to farmers pursuant to
the application of the financial discipline.

(11)
With a view to ensuring that the amounts for the
financing of the CAP comply with the annual ceilings referred to in Article 16(1)
of Regulation (EU) No [...] [HZR], an adjustment of the level of direct support
in any calendar year should be maintained. The adjustment of the direct
payments should only be applied to payments to be granted to farmers in excess
of EUR 5 000 in the corresponding calendar year. Taking into account the levels
of direct payments for farmers in Bulgaria and Romania in the framework of the
application of the phasing-in mechanism to all direct payments granted in those
Member States, this instrument of financial discipline should only apply in
those Member States as from 1 January 2016.

(12)
In order to take account of the developments
relating to the total maximum amounts of direct payments that may be granted,
including those resulting from the decisions to be taken by the Member States regarding
transfers between the first and second pillars, the power to adopt acts in
accordance with Article 290 of the Treaty should be delegated to the Commission
for the purpose of reviewing
the national and net ceilings set out in this Regulation.

(13)
Experience from the application of the various support
schemes for farmers has shown that support was in a number of cases granted to
beneficiaries whose business purpose was not or only marginally targeted at an
agricultural activity, such as airports, railway companies, real estate
companies and companies managing sport grounds. To ensure the better targeting
of support, Member States should refrain from granting direct payments to such
natural and legal persons. Smaller part-time farmers contribute directly to the
vitality of rural areas, for that reason they should not be prevented from
being granted direct payments.

(14)
To avoid an excessive administrative burden
caused by the managing of payments of small amounts, Member States should in
general refrain from granting direct payments where the payment would be lower
than EUR 100 or the eligible area of the holding for which support is claimed
would be less than one hectare. However, as the structures of the Member
States' agricultural economies vary considerably and may differ significantly
from the average farm structure in the Union, Member States should be allowed to
apply minimum thresholds that reflect their particular situation. Due to the
very specific farming structure in the outermost regions and the smaller Aegean
Islands, Member States should be able to decide whether any minimum threshold
should apply in those regions. Moreover, Member States should have the
possibility to opt for the implementation of one of the two types of minimum
threshold taking account of the particularities of the structures of their
farming sectors. As payment could be granted to farmers with so-called
‘landless’ holdings, the application of the hectare-based threshold would be
ineffective. The support-related minimum amount should therefore apply to such
farmers. To ensure equal treatment of farmers whose direct payments are subject
to phasing-in in Bulgaria and Romania, the minimum threshold should be based on
the final amounts to be granted at the end of the phasing-in process.

(15)
The distribution of direct income support among
farmers is characterised by the allocation of disproportionate amounts of
payments to a rather small number of large beneficiaries. Due to economies of
size, larger beneficiaries do not require the same level of unitary support for
the objective of income support to be efficiently achieved. Moreover, the
potential to adapt makes it easier for larger beneficiaries to operate with
lower levels of unitary support. It is therefore fair to introduce a system for
large beneficiaries where the support level is gradually reduced and ultimately
capped to improve the distribution of payments between farmers. Such system
should however take into account salaried labour intensity to avoid
disproportionate effects on large farms with high employment numbers. Those
maximum levels should not apply to payments granted to agricultural practices
beneficial for the climate and the environment since the beneficial objectives
they pursue could be diminished as a result. In order to make capping
effective, Member States should establish some criteria in order to avoid abusive
operations by farmers seeking to evade its effects. The proceeds of the reduction
and capping of payments to large beneficiaries should remain in the Member States where they were generated and should
be used for financing projects with a significant contribution to innovation under
Regulation (EU) No [...] of the European Parliament and of the Council
of....on support for rural development by the European Agricultural Fund for
Rural Development (EAFRD)[15] [RDR].

(16)
In order to facilitate the implementation of
capping, notably with regard to the procedures for granting direct payments to
farmers and the corresponding transfers to rural development, net ceilings
should be determined for each Member State to limit the payments to be made to
farmers following the application of capping. To take into account the
specificities of CAP support granted in accordance with Council Regulation (EC)
No 247/2006 of 30 January 2006 laying down specific measures for
agriculture in the outermost regions of the Union[16] and Council Regulation (EC) No 1405/2006 of 18 September 2006
laying down specific measures for agriculture in favour of the smaller Aegean
islands and amending Regulation (EC) No 1782/2003[17], and the fact that these direct payments are not subject to
capping, the net ceiling for the Member States concerned should not include
those direct payments.

(17)
It should be specified that the provisions of
this Regulation which could give rise to behaviour of a Member State possibly
constitutive of State aid are excluded from the application of the State aid
rules given that the provisions concerned include appropriate conditions for
the granting of support, or envisage the adoption of such conditions by the
Commission, in order to prevent undue distortion of competition.

(18)
In order to achieve the objectives of the CAP,
the support schemes may need to be adapted to changing developments, if
necessary within short time-limits. Therefore, it is necessary to provide for a
possible review of the schemes, in particular in the light of economic
developments or the budgetary situation, implying that beneficiaries cannot rely
on support conditions remaining unchanged.

(19)
Farmers in Member States which acceded to the European Union on or after 1 May 2004 received direct
payments following a phasing-in mechanism provided for in the respective Acts
of Accession. For Bulgaria and Romania, such mechanism will be still in force
in 2014 and 2015. Furthermore, those Member States were
allowed to grant complementary national direct payments. The possibility for
granting such payments should be maintained for Bulgaria and Romania until they
are fully phased-in.

(20)
In order to ensure a better distribution of
support amongst agricultural land in the Union, including in those Member
States which applied the single area payment scheme established under
Regulation (EC) No 73/2009, a new basic payment scheme should replace the
single payment scheme established under Council Regulation (EC) No 1782/2003 of
29 September 2003 establishing common rules for direct support schemes under
the common agricultural policy and establishing certain support schemes for
farmers[18], and continued under Regulation (EC) No 73/2009, which combined
previously existing support mechanisms into a single scheme of decoupled direct
payments. Such a move should entail the expiry of payment entitlements obtained
under those Regulations and the allocation of new ones, although still based on
the number of eligible hectares at the disposal of farmers in the first year of
implementation of the scheme.

(21)
Due to the successive integration of various sectors
into the single payment scheme and the ensuing period of adjustment granted to
farmers, it has become increasingly difficult to justify the presence of
significant individual differences in the level of support per hectare resulting
from use of historical references. Therefore direct income support should be more
equitably distributed between Member States, by reducing the link to historical
references and having regard to the overall context of the Union budget. To
ensure a more equal distribution of direct support, while taking account of the
differences that still exist in wage levels and input costs, the levels of
direct support per hectare should be progressively adjusted. Member States with
direct payments below the level of 90 % of the average should close one third
of the gap between their current level and this level. This convergence should be
financed proportionally by all Member States with direct payments above the Union
average. In addition, all payment entitlements activated in 2019 in a Member
State or in a region should have a uniform unit value following a convergence
towards this value that should take place during the transition period in linear
steps. However, in order to avoid disruptive financial consequences for
farmers, Member States having used the single payment scheme, and in particular
the historical model, should be allowed to partially take historical factors
into account when calculating the value of payment entitlements in the first
year of application of the new scheme. The debate on the next Multiannual Financial Framework for the
period starting in 2021 should also focus on the objective of complete
convergence through the equal distribution of direct support across the
European Union during that period.

(22)
The experience gained with the application of
the single payment scheme shows that some of its main elements should be kept,
including the determination of national ceilings to ensure that the total level
of support does not exceed current budgetary constraints. Member States should
also continue to operate a national reserve that should be used to facilitate
the participation of young new farmers in the scheme or may be used to take
account of specific needs in certain regions. Rules on the transfer and use of
payment entitlements should be kept but, where possible, simplified.

(23)
In order to guarantee the protection of the
rights of beneficiaries and in order to clarify the specific situations that
may arise in the application of the basic payment scheme, the power to adopt
acts in accordance with Article 290 of the Treaty should be delegated to the
Commission for the purpose of adopting rules on eligibility and the access in respect of the basic payment
scheme of farmers in case of inheritance and anticipated inheritance,
inheritance under a lease, change of legal status or denomination and in the
case of merger or scission of the holding; adopting rules on the calculation of the value and number or on the increase
in the value of payment entitlements in relation to the allocation of payment
entitlements, including rules on the possibility of a provisional value and
number or of a provisional increase of payment entitlements allocated on the
basis of the application from the farmer, on the conditions for establishing
the provisional and definitive value and number of the payment entitlements and
on the cases where a sale or lease contract could affect the allocation of
payment entitlements; adopting rules
on the establishment and calculation of the value and number of payment
entitlements received from the national reserve; adopting
rules on the modification of the unit value of payment
entitlements in the case of fractions of payment entitlements and criteria for
the allocation of payment entitlements pursuant to the use of the national
reserve and to farmers who did not apply for support in 2011.

(24)
            In order to ensure the proper
management of payment entitlements, the power to adopt acts in accordance with
Article 290 of the Treaty should be delegated to the Commission for the purpose of adopting rules on the
declaration and activation of payment entitlements.

(25)
As regards hemp, specific measures should be
kept to ensure that illegal crops cannot be hidden among the crops eligible for
the basic payment, thereby adversely affecting the common market organisation
for hemp. Hence, payments should continue to be granted only for areas sown to
varieties of hemp offering certain guarantees with regard to the psychotropic
substance content. In order to preserve public health,
the power to adopt acts in accordance with Article 290 of the Treaty should be
delegated to the Commission for the purpose of adopting
rules making the granting of payments conditional upon
the use of certified seeds of certain hemp varieties and defining the procedure
for the determination of hemp varieties and the verification of their
tetrahydrocannabinol content.

(26)
One of the objectives of the new CAP is the
enhancement of environmental performance through a mandatory
"greening" component of direct payments which will support agricultural
practices beneficial for the climate and the environment applicable throughout
the Union. For that purpose, Member States should use part of their national
ceilings for direct payments to grant an annual payment, on top of the basic
payment, for compulsory practices to be followed by farmers addressing, as a
priority, both climate and environment policy goals. Those practises should
take the form of simple, generalised, non-contractual and annual actions that
go beyond cross-compliance and are linked to agriculture such as crop
diversification, maintenance of permanent grassland and ecological focus areas.
The compulsory nature of those practises should also concern farmers whose
holdings are fully or partly situated in "Natura 2000" areas covered
by Council Directive 92/43/EEC of 21 May 1992 on the
conservation of natural habitats and of wild fauna and flora[19] and by Directive
2009/147/EC of the European Parliament and of the Council of 30 November 2009 on
the conservation of wild birds[20], as long as these practises
are compatible with the objectives of those Directives. Farmers who fulfil the
conditions laid down in Council Regulation (EC) No 834/2007 of 28 June 2007 on
organic production and labelling of organic products and repealing Regulation
(EEC) No 2092/91[21] should benefit from the "greening" component without fulfilling
any further obligation, given the recognised environmental benefits of the
organic farming systems. Non-respect of the "greening" component should
lead to penalties on the basis of Article 65 of Regulation
(EU) No [...] [HZR].

(27)
In order to ensure that the obligations referred
to the crop diversification measure are applied in a proportionate and
non-discriminatory way and lead to an enhanced environmental protection, the
power to adopt acts in accordance with Article 290 of the Treaty should be
delegated to the Commission for the purpose of the adoption of the definition of 'crop' and of rules concerning the
application of the measure.

(28)
In order to ensure that the land under permanent
grassland is maintained as such by the farmers, the power to adopt acts in
accordance with Article 290 of the Treaty should be delegated to the Commission
for the purpose of the adoption of rules concerning the application
of the measure.

(29)
In order to ensure the implementation of the
ecological focus area measure in an efficient and coherent way, while taking into account Member States' specificities, the power to adopt acts in accordance with Article 290 of the
Treaty should be delegated to the Commission for the
purpose of the further definition of the types of
ecological focus areas mentioned under that measure and
the addition and definition of other types of ecological focus areas that can be taken into account for the respect of the percentage
referred to in that measure.

(30)
In order to promote the sustainable development
of agriculture in areas with specific natural constraints, Member States should
be able to use part of their national ceilings for direct payments to grant an
annual area-based payment, on top of the basic payment, to all farmers
operating in such areas. That payment should not replace the support given
under rural development programs and should not be granted to farmers in areas
which were designated in accordance with Council Regulation (EC) No 1698/2005 of
20 September 2005 on support for rural development by the European Agricultural
Fund for Rural Development (EAFRD)[22] but have not been designated in accordance with Article 46(1) of
Regulation (EU) No [...] of the European Parliament and of the Council of .... on
support for rural development by the European Agricultural Fund for Rural
Development  (EAFRD)[23] [RDR].

(31)
The creation and development of new economic
activity in the agricultural sector by young farmers is
financially challenging and constitutes an element that should be considered in
the allocation and targeting of direct payments. This development is essential for the competitiveness of the agricultural sector in
the Union and, for that reason, an income support to young farmers commencing their agricultural activities should
be established in order to facilitate the initial establishment of young
farmers and the structural adjustment of their holdings after the initial
setting up. Member States should be able to use part of their national ceilings
for direct payments to grant an annual area-based payment, on top of the basic
payment, to young farmers. That payment should only be granted during a period
of maximum five years, since it should only cover the initial period of the
life of the business and should not become an operating aid.

(32)
In order to guarantee the protection of the
rights of beneficiaries and to avoid discrimination among them, the power to adopt acts in accordance with
Article 290 of the Treaty should be delegated to the Commission for the purpose of defining the conditions
under which a legal person may be considered eligible for receiving the payment
for young farmers, in particular the application of the age-limit to one ore
more natural persons participating in the legal person.

(33)
Member States should be allowed to use part of
their national ceilings for direct payments for coupled support in certain
sectors in clearly defined cases. The resources that may be used for any
coupled support should be limited to an appropriate level, while allowing such
support to be granted in Member States or in their specific regions facing
particular situations where specific types of farming or specific agricultural
sectors are particularly important for economic, environmental and/or social
reasons. Member States should be allowed to use up to 5 % of their national
ceilings for this support, or 10 % in case their level of coupled support in at
least one of the years of the period 2010-2013 exceeded 5 %. However, in duly
justified cases where certain sensitive needs in a region are demonstrated, and
upon approval by the Commission, Member States should be allowed to use more
than 10 % of their national ceiling. Coupled support should only be granted to
the extent necessary to create an incentive to maintain current levels of
production in those regions. This support should also be available to farmers
holding, on 31 December 2013, special payment entitlements allocated under
Regulation (EC) No 1782/2003 and Regulation (EC) No 73/2009 and who do not
have eligible hectares for the activation of payment entitlements. As regards
the approval of voluntary coupled support exceeding 10 % of the annual national
ceiling fixed per Member State, the Commission should further be empowered to
adopt implementing acts without applying Regulation (EU) No 182/2011.

(34)
In order to ensure efficient and targeted use of
Union funds and to avoid double funding under other similar support instruments, the power to adopt acts in accordance with
Article 290 of the Treaty should be delegated to the Commission for the purpose of defining the adoption of rules concerning the conditions for granting voluntary coupled support and of rules
on its consistency with other Union measures and on the cumulation of support.

(35)
As regards support to the cotton sector,
Regulation (EC) No 73/2009 considered necessary that part of it continued to be
linked to the cultivation of cotton through a crop specific payment per
eligible hectare to ensure against any risk of disruption to production in the
cotton producing regions, taking into account all factors that influence this
choice. This choice should be maintained in accordance with the objectives set
out in Protocol No 4 on cotton attached to the 1979 Act of Accession.

(36)
In order to enable the efficient application of
the crop-specific payment for cotton, the power to adopt acts in accordance
with Article 290 of the Treaty should be delegated to the Commission for the purpose of the adoption of rules and conditions for the
authorisation of land and varieties as regards the crop specific payment for
cotton and of rules on the conditions for the granting of that specific
payment, on the eligibility requirements and the agronomic practices, on
criteria for the approval of inter-branch organisations, on obligations for producers
and on the situation where the approved inter-branch organisation does not
respect those criteria.

(37)
Chapter 2 of Council Regulation (EC) No 637/2008
of 23 June 2008 amending Regulation (EC) No 1782/2003 and establishing national
restructuring programmes for the cotton sector[24] provided that each cotton producing Member State has, either every
four years and for the first time by 1 January 2009, to submit to the
Commission a draft four-year restructuring programme or submit to the
Commission, by 31 December 2009, a single draft modified restructuring
programme for a duration of eight years. Experience has shown that the
restructuring of the cotton sector would be better served through other
measures, including those under rural development programming financed under
Regulation (EU) No [...] [RDR], which would also allow for a greater
co-ordination with measures in other sectors. However, the acquired rights and
legitimate expectations of undertakings already involved in restructuring
programmes should be respected. Therefore the ongoing programmes of four or
eight years should be allowed to continue to their end. At the end of that
period, however, the programmes should end. The funds available from the
four-year programmes could then be integrated into the available Union funds
for measures under rural development from 2014. The funds available after the
end of the eight year programmes would not be useful in rural development
programmes in 2018 given the programming period and could therefore be more usefully
transferred to support schemes under this Regulation, as already provided for
in the second sub-paragraph of Article 5(2) of Regulation (EC) No 637/2008.
Regulation (EC) No 637/2008 will therefore become obsolete from 1 January 2014
or 1 January 2018 as regards Member States which have, respectively, four or
eight-year programmes. Regulation (EC) No 637/2008 should therefore be
repealed.

(38)
A simple and specific scheme for small farmers
should be put in place in order to reduce the administrative costs linked to
the management and control of direct support. For that purpose, a lump-sum
payment replacing all direct payments should be established. Rules seeking
simplification of formalities should be introduced by reducing, amongst others,
the obligations imposed on small farmers such as those related to the
application for support, to agricultural practices beneficial for the climate
and the environment, to cross-compliance and to controls as laid down in
Regulation (EU) No [...] [HZR] without endangering the achievement of the overall
objectives of the reform, it being understood that Union legislation as
referred to in Annex II to Regulation (EU) No [...] [HZR] applies to small
farmers. The objective of that scheme should be to support the existing
agricultural structure of small farms in the Union without countering the
development towards more competitive structures. For that reason, access to the
scheme should be limited to existing holdings.

(39)
In order to protect the rights of the farmers,
the power to adopt acts in accordance with Article 290 of the Treaty should be
delegated to the Commission for the purpose of the adoption of rules concerning participation in the small
farmers scheme where the situation of the participating
farmer changes.

(40)
In the interest of simplification and to take
into account the specific situation of the outermost regions, direct
payments in those regions should be managed within the support programmes
established by Regulation (EC) No 247/2006. As a consequence, provisions in this Regulation relating to the
basic payment scheme and related payments and to coupled support should not
apply to those regions.

(41)
Notifications are needed from Member States for
the purpose of applying this Regulation, and for the purpose of monitoring,
analysing and managing direct payments.  In order to ensure the good application of the rules contained in
this Regulation, the power to adopt acts in accordance with Article 290 of the
Treaty should be delegated to the Commission for the
purpose of the adoption of the necessary measures regarding notifications to be made by Member
States or for the purpose of checking, controlling, monitoring, evaluating and
auditing direct payments, implementing international agreements, including
notification requirements under those agreements and of rules laying down the nature and type of the
information to be notified, on the methods of notification and on the access
rights to the information or information systems and the conditions and means
of publication of the information

(42)
Union legislation concerning the protection of
individuals with regard to the processing of personal data and on the free
movement of such data, in particular Directive 95/46/EC of the European
Parliament and of the Council of 24 October 1995 on the protection of
individuals with regard to the processing of personal data and on the free
movement of such data[25] and Regulation (EC) No
45/2001 of the European Parliament and of the Council of 18 December 2000 on
the protection of individuals with regard to the processing of personal data by
the Community institutions and bodies and on the free movement of such data[26]
are applicable.

(43)
With a view to strengthening their rural
development policy, Member States should be given the possibility to transfer
funds from their direct payments ceiling to their support assigned for rural
development. At the same time, Member States where the level of direct support
remains lower than 90 % of the Union average level of support should be given
the possibility to transfer funds from their support assigned for rural
development to their direct payments ceiling. Such choices should be made,
within certain limits, once and for the whole period of application of this
Regulation.

(44)
In order to ensure a smooth transition from the
arrangements provided for in Regulation (EC) No 73/2009 to those laid down
in this Regulation, the power to adopt acts in accordance with Article 290 of
the Treaty should be delegated to the Commission for
the purpose of adopting the necessary measures to
protect the acquired rights and legitimate expectations of farmers,

HAVE ADOPTED THIS REGULATION:

TABLE OF CONTENTS

EXPLANATORY MEMORANDUM......................................................................................... 2

1........... CONTEXT OF THE PROPOSAL................................................................................ 2

2........... RESULTS OF CONSULTATIONS WITH
THE INTERESTED PARTIES AND IMPACT ASSESSMENT...................................................................................................................................... 4

3........... LEGAL ELEMENTS OF THE PROPOSAL................................................................. 4

4........... BUDGETARY IMPLICATION.................................................................................... 4

REGULATION OF THE EUROPEAN PARLIAMENT AND OF
THE COUNCIL establishing rules for direct payments to farmers under support
schemes within the framework of the common agricultural policy............ 10

TITLE I  SCOPE AND DEFINITIONS...................................................................................... 4

TITLE II  GENERAL PROVISIONS ON DIRECT
PAYMENTS............................................... 4

CHAPTER 1  Common rules on direct payments.......................................................................... 4

CHAPTER 2  Provisions applying to Bulgaria
and Romania........................................................... 4

TITLE III  BASIC PAYMENT SCHEME AND RELATED
PAYMENTS.................................. 4

CHAPTER 1  Basic payment scheme............................................................................................ 4

Section 1  Setting up of the basic payment
scheme......................................................................... 4

Section 2  National reserve........................................................................................................... 4

Section 3  Implementation of the basic
payment scheme................................................................. 4

CHAPTER 2  Payment for agricultural practises
beneficial for the climate and the environment........ 4

CHAPTER 3  Payment for areas with natural
constraints............................................................... 4

CHAPTER 4  Payment for young farmers..................................................................................... 4

TITLE IV  COUPLED SUPPORT............................................................................................... 4

CHAPTER 1  Voluntary coupled support...................................................................................... 4

CHAPTER 2  Crop specific payment for cotton............................................................................ 4

TITLE V  Small farmers scheme.................................................................................................... 4

TITLE VI  national restructuring programmes
for the cotton sector................................................. 4

TITLE VII  FINAL PROVISIONS.............................................................................................. 4

CHAPTER 1  Notifications and emergency................................................................................... 4

CHAPTER 2  Delegations of powers and
implementing provisions................................................. 4

CHAPTER 3  Transitional and final provisions............................................................................... 4

ANNEX I  List of support schemes............................................................................................... 4

ANNEX II  National ceilings referred to in
Article 6...................................................................... 4

ANNEX III  Net ceilings referred to in
Article 7............................................................................ 4

ANNEX IV  Coefficients to be applied under
Article 10(1)........................................................... 4

ANNEX V  Financial provisions applying to
Bulgaria and Romania referred to in Articles 16 and 17 4

ANNEX VI  Average size of agricultural
holding to be applied under Article 36(5)......................... 4

ANNEX VII  CORRELATION TABLE...................................................................................... 4

LEGISLATIVE FINANCIAL STATEMENT.............................................................................. 4

TITLE I
SCOPE AND DEFINITIONS

Article 1

Scope

This Regulation establishes:

(a)          common rules on payments granted
directly to farmers under the support schemes listed in Annex I (hereinafter
referred to as "direct payments");

(b)          specific rules concerning:

(i)      a basic payment for farmers
(hereinafter referred to as the ‘basic payment scheme’);

(ii)     a payment for farmers observing agricultural
practises beneficial for the climate and the environment;

(iii)     a voluntary payment for farmers in
areas under natural constraints;

(iv)    a payment for young farmers who commence
their agricultural activity;

(v)     a voluntary coupled support scheme;

(vi)    a crop specific payment for cotton;

(vii)    a simplified scheme for small
farmers;

(viii)   a framework to enable Bulgaria and
Romania to complement direct payments.

Article 2

Amendment
of Annex I

The Commission shall be empowered to adopt delegated
acts in accordance with Article 55 for the purpose of amending the list of
support schemes set out in Annex I.

Article 3

Application
to the outermost regions and the smaller Aegean islands

Article 11 shall not apply to the regions
of the Union referred to in Article 349 of the Treaty, hereinafter referred to
as "outermost regions" and to the direct payments granted in the smaller Aegean islands in
accordance with Regulation (EC) No 1405/2006.

Titles III, IV and V shall not apply to the outermost
regions.

Article 4

Definitions

1.           For the purposes of this
Regulation, the following definitions shall apply:

(a)          "farmer" means a
natural or legal person, or a group of natural or legal persons, whatever legal
status is granted to the group and its members by national law, whose holding
is situated within the Union territory, as defined in Article 52 of the
Treaty on European Union in conjunction with Articles 349 and 355 of the Treaty
on the Functioning of the European Union, and who exercises an agricultural
activity;

(b)          "holding" means all the
units used for agricultural activities and managed by a farmer situated within
the territory of the same Member State;

(c)          "agricultural activity"
means:

–
rearing or growing of agricultural products
including harvesting, milking, breeding animals and keeping animals for farming
purposes,

–
maintaining the agricultural area in a state
which makes it suitable for grazing or cultivation without any particular
preparatory action going beyond traditional agricultural methods and
machineries, or

–
carrying out a minimum activity to be
established by Member States on agricultural areas naturally kept in a state
suitable for grazing or cultivation;

(d)          "agricultural products"
means the products listed in Annex I to the Treaty, with the exception of
fishery products, as well as cotton;

(e)          "agricultural area"
means any area taken up by arable land, permanent grassland or permanent crops;

(f)           "arable land" means
land cultivated for crop production or areas available for crop production but
laying fallow, including areas set aside in accordance with Articles 22, 23 and
24 of Regulation (EC) No 1257/1999, with Article 39 of Regulation
(EC) No 1698/2005 and with Article 29 of Regulation
(EU) No [...] [RDR], irrespective of whether or not that land is under greenhouses
or under fixed or mobile cover;

(g)          "permanent crops" means
non-rotational crops other than permanent grassland that occupy the land for
five years or longer and yield repeated harvests, including nurseries, and
short rotation coppice;

(h)          "permanent grassland"
means land used to grow grasses or other herbaceous forage naturally
(self-seeded) or through cultivation (sown) and that has not been included in
the crop rotation of the holding for five years or longer; it may include other
species suitable for grazing provided that the grasses and other herbaceous
forage remain predominant;

(i)           "grasses or other
herbaceous forage" means all herbaceous plants traditionally found in
natural pastures or normally included in mixtures of seeds for pastures or
meadows in the Member State (whether or not used for grazing animals);

(j)           "nurseries" means the
following areas of young ligneous (woody) plants grown
in the open air for subsequent transplantation:

–
vine and root-stock nurseries;

–
fruit tree and berries nurseries;

–
ornamental nurseries;

–
commercial nurseries of forest trees (excluding those for the holding's own requirements grown within
woodland);

–
trees and bushes for planting in gardens, parks,
at the roadside and on embankments (e.g. hedgerow plants, rose trees and other ornamental bushes, ornamental
conifers), including in all cases
their stocks and young seedlings.

(k)          "short rotation coppice"
means areas planted with tree species of CN code 06029041 to be defined by
Member States, that consist of woody, perennial crops, the rootstock or stools
remaining in the ground after harvesting, with new shoots emerging in the
following season and with a maximum harvest cycle to be determined by the
Member States.

2.           The Commission shall be empowered to adopt delegated acts in
accordance with Article 55 for the purposes of:

(a)     laying down
further definitions regarding the access to support under this Regulation;

(b)     establishing the framework within which
Member States shall define the minimum activities to be carried out on areas
naturally kept in a state suitable for grazing or cultivation;

(c)     establishing the criteria to be met by
farmers in order to be deemed to have respected the obligation of maintaining
the agricultural area in a state suitable for grazing or
cultivation as referred to in point (c) of paragraph 1;

(d)     establishing the criteria to determine
the predominance of grasses and other herbaceous forage for the purpose of point (h) of paragraph 1.

TITLE
II
GENERAL PROVISIONS ON DIRECT PAYMENTS

CHAPTER 1
Common rules on direct payments

Article 5

Financing
of direct payments

The support schemes listed in Annex I to
this Regulation shall be financed in accordance with Article 4(1)(b) of
Regulation (EU) No [...] [HZR].

Article 6

National
ceilings

1.           For each Member State and
each year, the national ceiling comprising the total value of all allocated
entitlements, of the national reserve and of the ceilings fixed in accordance
with Articles 33, 35, 37 and 39 shall be as set out in Annex II.

2.           In order to take account
of the developments relating to the total maximum amounts of direct payments
that may be granted, including those resulting from the decisions to be taken
by the Member States in accordance with Article 14, the Commission shall be empowered to adopt delegated acts in accordance with Article 55
for the purpose of reviewing the national ceilings set
out in Annex II.

Article 7

Net
ceilings

1.           Without prejudice to
Article 8, the total amount of direct payments which may be granted in a Member
State pursuant to Titles III, IV and V in respect of a calendar year, after
application of Article 11, shall not be higher than the ceilings set out in Annex
III to this Regulation.

In order to avoid that the total amount of
direct payments is higher than the ceilings set out in Annex III, Member States
shall make a linear reduction in the amounts of all direct payments with the
exception of direct payments granted under Regulations (EC) No 247/2006 and
(EC) No 1405/2006.

2.           For each Member State and
each year, the estimated product of capping as referred to in Article 11, which
is reflected by the difference between the national ceilings set out in Annex
II, to which is added the amount available in accordance with Article 44, and
the net ceilings set out in Annex III, is made available as Union support for
measures under rural development programming financed under the EAFRD as
specified in Regulation (EU) No [...] [RDR].

3.           The Commission shall be empowered to adopt delegated acts in accordance with Article 55
for the purpose of reviewing the ceilings set out in Annex
III.

Article 8

Financial
discipline

1.           The
adjustment rate determined in accordance with Article 25 of Regulation (EU) No [...] [HZR] shall only apply to direct
payments in excess of EUR 5 000 to be granted to farmers in the corresponding
calendar year.

2.           In the framework of the gradual
introduction of direct payments as provided for in Article 16,
paragraph 1 of this Article shall apply to Bulgaria and Romania as
from 1 January 2016.

3.           The
Commission shall be empowered to adopt delegated acts in accordance with
Article 55 concerning rules on the basis for
calculation of reductions to be applied by Member States to farmers pursuant to
paragraphs 1 and 2 of this Article.

Article 9

Active
farmer

1.         No direct payments shall be granted to natural or legal
persons, or to groups of natural or legal persons, where one of the following
applies:

(a)        the
annual amount of direct payments is less than 5 % of the total receipts they
obtained from non-agricultural activities in the most recent fiscal year; or

(b)        their
agricultural areas are mainly areas naturally kept in a state suitable for
grazing or cultivation and they do not carry out on those areas the minimum
activity established by Member States in accordance with Article 4(1)(c).

2.         Paragraph 1 shall not apply to farmers who received less
than EUR 5 000 of direct payments for the previous year.

3.         The Commission shall be empowered to adopt delegated acts
in accordance with Article 55 for the purposes of laying down:

(a)        criteria
to establish the amount of direct payments relevant for the purpose of
paragraphs 1 and 2, in particular in the first year of allocation of payment
entitlements where the value of the payment entitlements is not yet
definitively established as well as for new farmers;

(b)       
exceptions from the rule that the receipts during the most recent fiscal year
are to be taken into account where those figures are not available; and

(c)        criteria
to establish when a farmer's agricultural area is to be considered as mainly
areas naturally kept in a state suitable for grazing or cultivation.

Article 10

Minimum
requirements for receiving direct payments

1.           Member States shall decide
not to grant direct payments to a farmer in one of the following cases:

(a)     where the total amount of direct
payments claimed or due to be granted before the reductions and exclusions
provided for in Article 65 of Regulation (EU) No [...] [HZR] in a given
calendar year is less than EUR 100;

(b)     where the eligible area of the holding
for which direct payments are claimed or due to be granted before the
reductions and exclusions provided for in Article 65 of Regulation (EU) No
[...] [HZR] is less than one hectare.

In order to take account of the structure of
their agricultural economies, Member States may adjust the thresholds referred
to in points (a) and (b) within the limits set out in Annex IV.

2.           Where farmers receiving
the animal-related coupled support referred to in Title IV hold fewer hectares
than the threshold selected by a Member State for the purposes of point (b) of
paragraph 1, that Member State shall apply point (a) of paragraph 1.

3.           The Member States
concerned may decide not to apply paragraph 1 in the outermost regions and in the smaller Aegean Islands.

4.           In Bulgaria and Romania,
for the years 2014 and 2015, the amount claimed or due to be granted as referred
to in paragraph 1 shall be calculated on the basis of the amount set out in Annex
V.A for the corresponding year.

Article 11

Progressive
reduction and capping of the payment

1.           The
amount of direct payments to be granted to a farmer under this Regulation in a given calendar
year shall be reduced as
follows:

–
by 20 % for the tranche of more than EUR 150 000 and up to EUR 200 000;

–
by 40 % for the tranche of more than EUR 200 000
and up to EUR 250 000;

–
by 70 % for the tranche of more than EUR 250 000
and up to EUR 300 000;

–
by 100 % for the tranche of more than EUR 300
000.

2.           The amount referred to in
paragraph 1 shall be calculated by subtracting the salaries effectively paid
and declared by the farmer in the previous year, including taxes and social
contributions related to employment, from the total amount of direct payments initially due to the farmer without taking into account
the payments to be granted pursuant to Chapter 2 of Title III of this
Regulation.

3.           Member States shall ensure
that no payment is made to farmers for whom it is established that, as from the date of publication of the Commission proposal for this Regulation,
they artificially created the conditions to avoid the
effects of this Article.

Article 12

Multiple
claims

The area corresponding to the number of
eligible hectares in respect of which an application for a basic payment has
been submitted by a farmer pursuant to Chapter 1 of Title III may be the
subject of an application for any other direct payment
as well as for any other aid not covered by this Regulation, save as explicitly provided otherwise in this Regulation.

Article 13

State
aid

By way of derogation from Article 146(1) of
Regulation [sCMO], Articles 107, 108 and 109 of the Treaty shall not apply to
payments made by Member States pursuant to and in conformity with this
Regulation.

Article 14

Flexibility
between pillars

1.         Before
1 August 2013, Member States may decide to make available as additional support
for measures under rural development programming financed under the EAFRD as
specified under Regulation (EU) No [...] [RDR], up to 10 % of their annual
national ceilings for calendar years 2014 to 2019 as set out in Annex II to
this Regulation. As a result, the corresponding amount shall no longer be
available for granting direct payments.

The decision referred to in the first subparagraph shall be notified
to the Commission by the date referred to in that subparagraph.

The percentage notified in accordance with the second subparagraph
shall be the same for the years referred to in the first subparagraph.

2.         Before
1 August 2013, Bulgaria, Estonia, Finland, Latvia, Lithuania, Poland, Portugal,
Romania, Slovakia, Spain, Sweden and the United-Kingdom may decide to make
available as direct payments under this Regulation up to 5 % of the amount
allocated to support for measures under rural development programming financed
under the EAFRD in the period 2015-2020 as specified under Regulation (EU) No
[...] [RDR]. As a result, the corresponding amount shall no longer be available
for support measures under rural development programming.

The decision referred to in the first subparagraph shall be notified
to the Commission by the date referred to in that subparagraph.

The percentage notified in accordance with the second subparagraph
shall be the same for the years referred to in the first subparagraph of paragraph
1.

Article 15

Review

Support schemes listed in Annex I shall
apply without prejudice to a possible review at any time in the light of
economic developments and the budgetary situation.

CHAPTER 2
Provisions applying to Bulgaria and Romania

Article 16

Gradual
introduction of direct payments

In Bulgaria and Romania, the national ceilings for payments referred
to in Articles 33, 35, 37, 39 and 51 shall in 2014 and 2015 be established on
the basis of the amounts set out in Annex V.A.

Article 17

Complementary
national direct payments and direct payments

1.           In 2014 and 2015, Bulgaria
and Romania may use national direct payments in order to complement payments
granted under the basic payment scheme referred to in Chapter 1 of Title III
and, in the case of Bulgaria, also to complement payments granted under the crop
specific payment for cotton referred to in Chapter 2 of Title IV.

2.           The total amount of
complementary national direct payments to the basic payment scheme which may be
granted in respect of 2014 and 2015 shall not exceed the amounts set out in Annex
V.B for each of those years.

3.           For Bulgaria, the total
amount of complementary national direct payments to the crop specific payment
for cotton shall not exceed the amounts set out in Annex V.C for each of the
years referred to in that Annex.

4.           Complementary national
direct payments shall be granted in accordance with objective criteria and in
such a way as to ensure equal treatment between farmers and to avoid market and
competition distortions.

TITLE III
BASIC PAYMENT SCHEME AND RELATEDPAYMENTS

CHAPTER 1
Basic payment scheme

Section 1
Setting up of the basic payment scheme

Article 18

Payment
entitlements

1.           Support under the basic
payment scheme shall be available to farmers if they obtain payment
entitlements under this Regulation through first allocation pursuant to Article
21, from the national reserve pursuant to Article 23 or by transfer pursuant to
Article 27.

2.           Payment entitlements
obtained under the single payment scheme in accordance with Regulation (EC) No
1782/2003 and with Regulation (EC) No 73/2009 shall expire on 31 December 2013.

Article 19

Basic
payment scheme ceiling

1.           The Commission shall, by
means of implementing acts, set the annual national ceiling for the basic
payment scheme by deducting from the annual national ceiling established in Annex
II the annual amounts to be set in accordance with Articles 33, 35, 37 and 39. Those
implementing acts shall be adopted in accordance with the examination procedure
referred to in Article 56(2).

2.           For each Member State and
each year, the total value of all allocated payment entitlements and the
national reserve shall equal the respective national ceiling adopted by the
Commission pursuant to paragraph 1.

3.           In case of modification of
the ceiling adopted by the Commission pursuant to paragraph 1 as compared to
the previous year, a Member State shall linearly reduce or increase the value
of all payment entitlements in order to ensure compliance with paragraph 2.

Article 20

Regional
allocation of the national ceilings

1.           Member States may decide,
before 1 August 2013, to apply the basic payment scheme at regional level. In
that case they shall define the regions in accordance with objective and
non-discriminatory criteria such as their agronomic and economic
characteristics and their regional agricultural potential, or their institutional
or administrative structure.

2.           Member States shall divide
the national ceiling referred to in Article 19(1) between the
regions in accordance with objective and non-discriminatory criteria.

3.           Member States may decide that
the regional ceilings shall be subject to annual progressive modifications in
accordance with pre-established annual steps and objective and
non-discriminatory criteria such as the agricultural potential or environmental
criteria.

4.           To the extent necessary to
respect the applicable regional ceilings determined in accordance with
paragraph 2 or 3, Member States shall make a linear reduction or increase in
the value of the payment entitlements in each of their regions.

5.           The Member States shall
notify the Commission by 1 August 2013 of the decision
referred to in paragraph 1, together with the measures taken for the
application of paragraphs 2 and 3.

Article 21

First
allocation of payment entitlements

1.           Subject to paragraph 2, payment
entitlements shall be allocated to farmers if they apply for allocation of
payment entitlements under the basic payment scheme by 15 May 2014 except in
case of force majeure and exceptional circumstances.

2.           Farmers who, in 2011, activated at least one payment entitlement under the single payment scheme or claimed support
under the single area payment scheme, both in
accordance with Regulation (EC) No 73/2009, shall receive payment entitlements
the first year of application of the basic payment scheme provided they are
entitled to be granted direct payments in accordance with Article 9.

By way of derogation
from the first subparagraph, farmers shall receive payment entitlements the
first year of application of the basic payment scheme, provided
they are entitled to be granted direct payments in accordance with Article 9
and that in 2011:

(a)      under
the single payment scheme, they did not activate any entitlement  but produced
exclusively fruits, vegetables and/or cultivate exclusively vineyard;

(b)     under the single area payment scheme, they did not claim any
support and had only agricultural land that was not in good agricultural
conditions on 30 June 2003 as provided for in Article 124(1) of Regulation (EC) No 73/2009,

Except in the case of force majeure or exceptional circumstances,
the number of payment entitlements allocated per farmer shall be equal to the
number of eligible hectares, within the meaning of Article 25(2), the farmer
declares in accordance with Article 26(1) for 2014.

3.           In case of sale or lease
of their holding or part of it, natural or legal persons complying with
paragraph 2 may, by contract signed before 15 May 2014, transfer the right to receive
payment entitlements as referred to in paragraph 1 to only one farmer provided that
the latter complies with the conditions laid down in Article 9.

4.           The Commission shall, by
means of implementing acts, adopt rules on applications for allocation of
payment entitlements submitted in the year of allocation of payment
entitlements where those payment entitlements may not be definitively
established yet and where that allocation is affected by specific
circumstances. Those implementing acts shall be adopted in accordance with the
examination procedure referred to in Article 56(2).

Article 22

Value
of payment entitlements and convergence

1.           For each relevant year,
the unit value of payment entitlements shall be calculated by dividing the
national or regional ceiling established under Articles 19 or 20, after
application of the linear reduction provided for in Article 23(1), by the
number of payment entitlements allocated at national or regional level
according to Article 21(2) for 2014.

2.           Member States which
applied the single payment scheme as provided for in Regulation (EC) No 73/2009,
may limit the calculation of the unit value of payment entitlements provided
for in paragraph 1 to an amount corresponding to no less than 40 % of the
national or regional ceiling established under Articles 19 or 20, after
application of the linear reduction provided for in Article 23(1).

3.           Member States making use
of the possibility provided for in paragraph 2 shall use the part of the
ceiling which remains after the application of that paragraph to
increase the value of payment entitlements in cases where the total value of
payment entitlements held by a farmers under the basic payment
scheme calculated according to paragraph 2 is lower than the total value of
payment entitlements, including special entitlements, he held on 31 December
2013 under the single payment scheme in accordance with Regulation (EC) No
73/2009. To this end, the national or regional unit value of each of the payment
entitlement of the farmer concerned shall be increased by a share of the
difference between the total value of the payment entitlements under the basic
payment scheme calculated according to paragraph 2 and the total value of
payment entitlements, including special entitlements, which the farmer held on
31 December 2013 under
the single payment scheme in accordance with Regulation
(EC) No 73/2009.

For the calculation of the increase, a Member
State may also take into account the support granted in calendar year 2013
pursuant to Articles 52, 53(1), and 68(1)(b), of Regulation (EC) No 73/2009
provided that the Member State has decided not to apply the voluntary coupled
support pursuant to Title IV of this Regulation to the relevant sectors.

For the purpose of the first subparagraph,
a farmer is considered to hold payment entitlements on 31 December 2013 where
payment entitlements were allocated or definitively transferred to him by that
date.

4.           For the purposes of paragraph 3,
a Member State may, on the basis of objective criteria, provide that, in cases
of sale or grant or expiry of all or part of a lease of agricultural areas
after the date fixed pursuant to Article 35 of Regulation (EC) No 73/2009 and
before the date fixed pursuant to Article 26 of this Regulation, the increase,
or part of the increase, in the value of payment entitlements that would be
allocated to the farmer concerned shall revert to the national reserve where
the increase would lead to a windfall profit for the farmer concerned.

Those objective criteria shall be established
in such a way as to ensure equal treatment between farmers and to avoid market
and competition distortions and shall include, at least, the following:

(a)     a minimum duration for the lease;

(b)     the proportion of the payment received
which shall revert to the national reserve.

5.           As of claim year 2019 at
the latest, all payment entitlements in a Member State or, in case of
application of Article 20, in a region, shall have a uniform unit value.

6.           When applying paragraphs 2
and 3, Member States, acting in compliance with the general principles of Union
law, shall move towards approximating the value of the payment entitlements at
national or regional level. To this end, Member States shall fix the steps to
be taken by 1 August 2013. Those steps shall include annual progressive
modifications of the payment entitlements in accordance with objective and
non-discriminatory criteria.

The steps referred to in the first subparagraph
shall be notified to the Commission by the date referred to in that
subparagraph.

Section 2
National reserve

Article 23

Establishment
and use of the national reserve

1.           Each Member State shall
establish a national reserve. For that purpose, in the first year of
application of the basic payment scheme, Member States shall proceed to a
linear percentage reduction of the basic payment scheme ceiling at national
level in order to constitute the national reserve. This reduction shall not be
higher than 3 % except, if required, to cover the allocation needs laid down in
paragraph 4 for the year 2014.

2.           Member States may
administer the national reserve at regional level.

3.           Member States shall
establish payment entitlements from the national reserve in accordance with
objective criteria and in such a way as to ensure equal treatment between
farmers and to avoid market and competition distortions.

4.           Member States shall use
the national reserve to allocate payment entitlements, as a matter of priority,
to young farmers who commence their agricultural activity.

For the
purposes of the first subparagraph, ‘young farmers who commence their
agricultural activity’ means farmers fulfilling the conditions laid down in
Article 36(2) that did not have any agricultural activity in their own name and
at their own risk or did not have the control of a legal person exercising an
agricultural activity in the 5 years preceding the start of the new
agricultural activity. In case of a legal person, the natural person(s) who has
the control of the legal person must not have had any agricultural activity in
his own name and at his own risk or must not have had the control of a legal
person exercising an agricultural activity in the 5 years preceding the start
of the agricultural activity by the legal person.

5.           Member States may use the
national reserve to:

(a)     allocate payment entitlements to
farmers in areas subject to restructuring and/or development programmes
relating to a form of public intervention in order to prevent land from being
abandoned and/or to compensate farmers for specific disadvantages in those
areas;

(b)     linearly increase the value of payment
entitlements under the basic payment scheme at national or regional level if
the national reserve exceeds 3 % in any given year, provided that sufficient
amounts remain available for allocations under paragraph 4, under point (a) of
this paragraph and under paragraph 7.

6.           When applying paragraphs 4
and 5(a), Member States shall establish the value of payment entitlements
allocated to farmers on the basis of the national or regional average value of
payment entitlements in the year of allocation.

7.           Where a farmer is entitled
to receive payment entitlements or increase the value of the existing ones by
virtue of a definitive court’s ruling or by virtue of a definitive
administrative act of the competent authority of a Member State, the farmer
shall receive the number and value of payment entitlements established in that
ruling or act at a date to be fixed by the Member State. However, this date
shall not be later than the latest date for lodging an application under the
basic payment scheme following the date of the court’s ruling or the administrative
act, taking into account the application of Articles 25 and 26.

Article 24

Replenishment
of the national reserve

1.           The national reserve is
replenished by amounts resulting from:

(a)     payment entitlements not giving right
to payments during two consecutive years due to the application of:

(i)      Article 9;

(ii)      Article 10(1).

(b)     any payment entitlement which has not
been activated in accordance with Article 25 for a period of two years,
except in the case of force majeure or exceptional circumstances;

(c)     payment entitlements voluntarily
reverted by farmers;

(d)     the application of Article 22(4).

2.           The Commission shall, by
means of implementing acts, adopt necessary measures regarding the reversion of
non-activated payment entitlements to the national reserve. Those implementing
acts shall be adopted in accordance with the examination procedure referred to
in Article 56(2).

Section 3
Implementation of the basic payment scheme

Article 25

Activation
of payment entitlements

1.           Support under the basic
payment scheme shall be granted to farmers upon activation, by means of
declaration in accordance with Article 26(1), of a payment entitlement per
eligible hectare in the Member State where it has been allocated. Activated
payment entitlements shall give a right to the annual payment of the amounts
fixed therein, without prejudice to the application of financial discipline,
progressive reduction and capping, linear reductions in accordance with Article
7, 37(2) and 51(1), and any reductions and exclusions imposed pursuant to
Regulation (EU) No [...] [HZR].

2.           For the purposes of this
Title, ‘eligible hectare’ shall mean:

(a)     any agricultural area of the holding
that is used for an agricultural activity or, where the area is used as well
for non-agricultural activities, predominantly used for agricultural
activities; or

(b)     any area which gave a right to
payments in 2008 under the single payment scheme or the single area
payment scheme laid down, respectively, in Titles III and in Chapter 2 of Title
V of Regulation No (EC) 73/2009, and which:

(i)      no longer complies with the definition of 'eligible' under
point (a) as a result of the implementation of Directive 92/43/EEC, Directive
2000/60/EC of the European Parliament and of the Council of 23 October
2000 establishing a framework for Community action in the field of water policy[27]
and Directive 2009/147/EC; or

(ii)      for the
duration of the relevant commitment by the individual farmer, is afforested
pursuant to Article 31 of Regulation (EC) No 1257/1999 or to Article 43 of
Regulation (EC) No 1698/2005 or under a national scheme the conditions of which
comply with Article 43(1), (2) and (3) of Regulation (EC) No 1698/2005 and
Article 23 of Regulation (EU) No [...] [RDR]; or

(iii)     for the duration of the relevant
commitment of the individual farmer, is set aside pursuant to Articles 22, 23
and 24 of Regulation (EC) No 1257/1999 or to Article 39 of Regulation
(EC) No 1698/2005 and Article 29 of Regulation (EU) No [...] [RDR].

For the purposes of point (a) of the first
subparagraph, where an agricultural area of a holding is also used for
non-agricultural activities, that area shall be considered to be used
predominantly for agricultural activities provided that those agricultural
activities can be exercised without being significantly hampered by the intensity,
nature, duration and timing of the non-agricultural activities. Member States
shall establish criteria for the implementation of this subparagraph on their
territory.

In order to be eligible, areas must comply with
the definition of eligible hectare throughout the calendar year, except in the
case of force majeure or exceptional circumstances.

3.           Areas used for the
production of hemp shall only be eligible hectares if the varieties used have a
tetrahydrocannabinol content not exceeding 0.2 %.

Article 26

Declaration
of eligible hectares

1.           For the purposes of
Article 25(1), the farmer shall declare the parcels corresponding to the
eligible hectares accompanying any payment entitlement. Except in the case of force
majeure or exceptional circumstances, those parcels shall be at the
farmer's disposal on a date fixed by the Member State which shall be no later
than the date fixed in that Member State for amending the aid application as
referred to in Article 73(1) of Regulation (EU) No [...] [HZR].

2.           Member States may, in duly
justified circumstances, authorise the farmer to modify his declaration
provided that he maintains at least the number of hectares corresponding to his
payment entitlements and respects the conditions for granting the basic payment
for the area concerned.

Article 27

Transfer
of payment entitlements

1.           Payment entitlements may
be transferred only to a farmer established within the same Member State,
except in the case of transfer by actual or anticipated inheritance.

However, even in the case of actual or
anticipated inheritance, payment entitlements may be used only in the Member
State where the payment entitlements were established.

2.           Payment entitlements may be transferred only
within the same region or between regions of a Member State where the value of
payment entitlements per hectare resulting from the application of either
Article 22(1) or Article 22(2) are the same.

3.           The Commission shall, by
means of implementing acts, adopt necessary requirements
related to the notification of transfer of payment entitlements to the national
authorities and the deadlines within which such notification is to take place. Those implementing acts shall be adopted in accordance with the
examination procedure referred to in Article 56(2).

Article 28

Delegated
powers

The Commission shall be empowered to adopt delegated acts in
accordance with Article 55 concerning:

(a)     rules on eligibility and the access in
respect of the basic payment scheme of farmers, in case of inheritance and
anticipated inheritance, inheritance under a lease, change of legal status or
denomination and in the case of merger or scission of the holding;

(b)     rules on the calculation of the value
and number or on the increase or reduction in the value of payment entitlements
in relation to the allocation of payment entitlements under any provision of
this Title, including rules:

(i)      on the possibility of a provisional
value and number or of a provisional increase of payment entitlements allocated
on the basis of the application from the farmer,

(ii)      on the conditions for establishing
the provisional and definitive value and number of the payment entitlements,

(iii)     on the cases where a sale or lease
contract could affect the allocation of payment entitlements.

(c)     rules on the establishment and
calculation of the value and number of payment entitlements received from the
national reserve;

(d)     rules on the modification of the unit
value of payment entitlements in the case of fractions of payment entitlements;

(e)     criteria to be
applied by Member States to allocate payment entitlements to farmers who did
not activate any entitlement in 2011 or did not claim support under the single
area payment scheme in 2011 as provided for in Article 21(2) and to allocate
payment entitlements in case of application of the contract clause referred to
in Article 21(3);

(f)      criteria for the allocation of
payment entitlements pursuant to in Article 23(4) and (5);

(g)     rules on the declaration and
activation of payment entitlements;

(h)     rules making the granting of payments
conditional upon the use of certified seeds of certain hemp varieties and
laying down the procedure for the determination of hemp varieties and the
verification of their tetrahydrocannabinol content referred to in
Article 25(3).

CHAPTER 2
Payment for agricultural practises beneficial for the climate and the
environment

Article 29

General
rules

1.           Farmers entitled to a
payment under the basic payment scheme referred to in Chapter 1 shall observe
on their eligible hectares as defined in Article 25(2) the following agricultural
practises beneficial for the climate and the environment:

(a)      to
have three different crops on their arable land where the arable land of the
farmer covers more than 3 hectares and is not entirely used for grass production
(sown or natural), entirely left fallow or entirely cultivated with crops under
water for a significant part of the year;

(b)     to
maintain existing permanent grassland on their holding; and

(c)      to
have ecological focus area on their agricultural area.

2.           Without
prejudice to paragraphs 3 and 4 and to the application of financial discipline,
linear reductions in accordance with Article 7, and any reductions and penalties
imposed pursuant to Regulation (EU) No [...] [HZR], Member States shall grant the
payment referred to in this Chapter to farmers observing those of the three
practises referred to in paragraph 1 that are relevant for them, and in
function of their compliance with Articles 30, 31 and 32..

3.           Farmers whose holdings are
fully or partly situated in areas covered by Directives 92/43/EEC or
2009/147/EC shall be entitled to the payment referred to in this Chapter
provided that they observe the practises referred to in this Chapter to the
extent that those practises are compatible in the holding concerned with the
objectives of those Directives.

4.           Farmers complying with the
requirements laid down in Article 29(1) of Regulation (EC) No 834/2007 as
regards organic farming shall be entitled ipso facto to the payment
referred to in this Chapter.

The first subparagraph
shall apply only to the units of a holding that are used for organic production in accordance with Article
11 of Regulation (EC) No 834/2007.

5.           The payment referred to in
paragraph 1 shall take the form of an annual payment per eligible hectare
declared according to Article 26(1), the amount of which shall be calculated
annually by dividing the amount resulting from the application of Article 33(1)
by the total number of eligible hectares declared in the Member State concerned
according to Article 26.

Article 30

Crop
diversification

1.           Where the arable land of
the farmer covers more than 3 hectares and is not entirely used for grass
production (sown or natural), entirely left fallow or entirely cultivated with
crops under water for a significant part of the year, cultivation on the arable
land shall consist of at least three different crops. None of those three crops
shall cover less than 5 % of the arable land and the main one shall not exceed
70 % of the arable land.

2.           The Commission shall be
empowered to adopt delegated acts in accordance with Article 55 laying down the
definition of 'crop' and the rules concerning the application of the precise
calculation of shares of different crops.

Article 31

Permanent
grassland

1.           Farmers shall maintain as
permanent grassland the areas of their holdings declared as such in the
application made pursuant to Article 74(1) of Regulation (EU) No XXX (HZ) for
claim year 2014, hereinafter referred to as “reference areas under permanent
grassland”.

The reference areas under permanent grassland
shall be increased in cases where the farmer has an obligation to reconvert
areas into permanent grassland in 2014 and/or in 2015 as referred to in Article
93 of Regulation (EU) No [...] HZR.

2.           Farmers shall be allowed to
convert a maximum of 5 % of their reference areas under permanent grassland.
That limit shall not apply in the case of force majeure or exceptional
circumstances.

3.           The Commission shall be
empowered to adopt delegated acts in accordance with Article 55 laying down
rules concerning the increase of reference areas under permanent grassland as
laid down in the second subparagraph of paragraph 1, the renewal of permanent
grassland, the reconversion of agricultural area into permanent grassland in
case the authorised decrease referred to in paragraph 2 is exceeded, as well as
the modification of the reference areas under permanent grassland in case of
transfer of land.

Article 32

Ecological
focus area

1.           Farmers shall ensure that at
least 7 % of their eligible hectares as defined in Article 25(2), excluding
areas under permanent grassland, is ecological focus area such as land left
fallow, terraces, landscape features, buffer strips and afforested areas as
referred to in article 25(2)(b)(ii).

2.           The Commission shall be
empowered to adopt delegated acts in accordance with Article 55 to further
define the types of ecological focus areas referred to in
paragraph 1 of this Article and to add and define other types of ecological
focus areas that can be taken into account for the
respect of the percentage referred to in that paragraph.

Article 33

Financial
provisions

1.           In order to finance the
payment referred to in this Chapter, Member States shall use 30 % of the annual
national ceiling set out in Annex II.

2.           Member States shall apply
the payment referred to in this Chapter at national or, when applying Article 20,
at regional level. In case of application at regional level, Member States
shall use in each region a share of the ceiling set pursuant to paragraph 3.
For each region, this share shall be calculated by dividing the respective
regional ceiling as established in accordance with Article 20(2) by the ceiling
determined according to Article 19(1).

3.           The Commission shall, by
means of implementing acts, set out the corresponding ceiling for the payment
referred to in this Chapter on a yearly basis. Those implementing acts shall be
adopted in accordance with the examination procedure referred to in Article 56(2).

CHAPTER 3
Payment for areas with natural constraints

Article 34

General
rules

1.           Member States may grant a
payment to farmers entitled to a payment under the basic payment scheme
referred to in Chapter 1 and whose holdings are fully or partly situated in
areas with natural constraints designated by Member States in accordance with
Article 33(1) of Regulation (EU) No [...] [RDR].

2.           Member States may decide
to grant the payment referred to in paragraph 1 to all areas falling within the
scope of that paragraph or, alternatively, and on the basis of objective and
non-discriminatory criteria, to restrict the payment to some of the areas
referred to in Article 33(1) of Regulation (EU) No [...] [RDR].

3.           Without prejudice to
paragraph 2 and to the application of financial discipline, progressive
reduction and capping, linear reduction as referred in Article 7, and any
reductions and exclusions imposed pursuant to Article 65 of Regulation (EU) No [...]
[HZR], the payment referred to in paragraph 1 shall be granted annually per
eligible hectare situated in the areas to which Member States decided to grant a
payment in accordance with paragraph 2 of this Article and shall be paid upon
activation of payment entitlements on those hectares held by the farmer
concerned.

4.           The payment per hectare
referred to in paragraph 1 shall be calculated by dividing the amount resulting
from the application of Article 35 by the number of eligible hectares
declared according to Article 26(1) which are situated in the areas to which
Member States decided to grant a payment in accordance with paragraph 2 of this
Article.

5.           Member States may apply
the payment referred to in this Chapter at regional level under the conditions
laid down in this paragraph.

In that case, Member States shall define the
regions in accordance with objective and non-discriminatory criteria such as
their natural constraint characteristics and agronomic conditions.

Member State shall divide the national ceiling
referred to in Article 35(1) between the regions in accordance with
objective and non-discriminatory criteria.

The payment at regional level shall be
calculated by dividing the regional ceiling calculated in accordance with the third
subparagraph by the number of eligible hectares declared according to Article 26(1)
which are situated in the areas to which Member States decided to grant a payment
in accordance with paragraph 2 of this Article.

Article 35

Financial
provisions

1.           In order to finance the
payment referred to in Article 34, Member States may decide, by 1 August 2013,
to use up to 5 % of their annual national ceiling set out in Annex II.

The decision referred to in the first subparagraph
shall be notified to the Commission by the date referred to in that
subparagraph.

Member States may, by 1 August 2016, review
their decision with effect from 1 January 2017.

2.           According to the percentage
of the national ceiling to be used by Member States pursuant to paragraph 1,
the Commission shall, by means of implementing acts, fix the corresponding
ceiling for that payment on a yearly basis. Those implementing acts shall be
adopted in accordance with the examination procedure referred to in Article 56(2).

CHAPTER 4
Payment for young farmers

Article 36

General
rules

1.           Member States shall grant
an annual payment to young farmers who are entitled to a payment under the
basic payment scheme referred to in Chapter 1.

2.           For the purposes of this
Chapter, 'young farmers', shall mean:

(a)     natural persons who are setting up for
the first time an agricultural holding as head of the holding, or who have
already set up such a holding during the five years preceding the first
submission of an application to the basic payment scheme as referred in Article
73(1) of Regulation (EU) No [...] [HZR], and

(b)     who are less than 40 years of age at the moment of
submitting the application referred to in point (a).

3.           Without prejudice to the
application of financial discipline, progressive reduction and capping, linear
reductions as referred in Article 7, and any reductions and exclusions imposed
pursuant to Article 65 of Regulation (EU) No [...] [HZR], the payment referred to
in paragraph 1 of this Article shall be granted annually upon activation of
payment entitlements by the farmer.

4.           The payment referred to in
paragraph 1 shall be granted per farmer for a period of maximum five years.
That period shall be reduced by the number of years elapsed between the setting
up and the first submission of the application referred to in point (a) of paragraph
2.

5.           Member States shall
calculate each year the amount of the payment referred to in paragraph 1 by
multiplying a figure corresponding to  25 % of the average value of the payment
entitlements held by the farmer by the number of entitlements he has activated
in accordance with Article 26(1).

When applying the first subparagraph, Member
States shall respect the following maximum limits in the number of activated
payment entitlements that are to be taken into account:

(a)     in Member States where the average
size of agricultural holdings as set out in Annex VI is lower than, or equal to,
25 hectares, a maximum of 25;

(b)     in Member States where the average
size of agricultural holdings as set out in Annex VI is higher than 25
hectares, a maximum that shall be no less that 25 and no greater than that average
size.

6.           The Commission shall be
empowered to adopt delegated acts in accordance with Article 55 concerning the
conditions under which a legal person may be considered eligible for receiving
the payment referred to in paragraph 1, in particular the application of the
age-limit set out in paragraph 2(b) to one ore more natural persons participating
in the legal person.

Article 37

Financial
provisions

1.           In
order to finance the payment referred to in Article 36, Member States shall use
a percentage of the annual national ceiling set out in Annex II which shall not
be higher than 2 %. They shall notify the Commission, by 1 August 2013, of the
estimated percentage necessary to finance that payment.

Member States
may, by 1 August 2016, review their estimated percentage with effect from
1 January 2017. They shall notify the Commission of the reviewed
percentage by 1 August 2016.

2.           Without prejudice to the maximum of 2 % set under
paragraph 1, where the total amount of the payment applied for in a
Member State in a particular year exceeds the ceiling set pursuant to paragraph
4, and where that ceiling is lower than 2 % of the annual national ceiling set
out in Annex II, Member States shall apply a linear reduction to all payments
to be granted to all farmers in accordance with Article 25.

3.           Where
the total amount of the payment applied for in a Member State in a particular
year exceeds the ceiling set pursuant to paragraph 4, and where that ceiling
amounts to 2 % of the annual national ceiling set out in Annex II, Member
States shall apply a linear reduction to the amounts to be paid in accordance
with Article 36 in order to comply with that ceiling.

4.           On the basis of the
estimated percentage notified by Member States pursuant to paragraph 1, the
Commission shall, by means of implementing acts, set the corresponding ceiling
for the payment referred to in Article 36 on a yearly basis. Those implementing
acts shall be adopted in accordance with the examination procedure referred to
in Article 56(2).

TITLE
IV
COUPLED SUPPORT

CHAPTER 1
Voluntary coupled support

Article 38

General
rules

1.           Member States may grant
coupled support to farmers under the conditions laid down in this Chapter.

Coupled support may be granted to the following
sectors and productions: cereals, oilseeds, protein
crops, grain legumes, flax, hemp,  rice, nuts, starch
potato, milk and milk products, seeds, sheepmeat and goatmeat, beef and veal,
olive oil, silk worms, dried fodder, hops, sugar beet, cane and chicory, fruit
and vegetables and short
rotation coppice.

2.           Coupled
support may only be granted to sectors or to regions of a Member State where
specific types of farming or specific agricultural sectors undergo certain
difficulties and are particularly important for economic and/or social and/or
environmental reasons.

3.           By way of derogation from
paragraph 2, coupled support may also be granted to farmers who held, on 31
December 2013, payment entitlements granted in accordance with Section 2 of
Chapter 3 of Title III and Article 71m of Regulation (EC) No 1782/2003 and in
accordance with Article 60 and the fourth subparagraph of Article 65 of
Regulation (EC) No 73/2009; and who are without eligible hectares for the
activation of payment entitlements under the basic payment scheme as referred
to in Chapter 1 of Title III of this Regulation.

4.           Coupled support may only
be granted to the extent necessary to create an incentive to maintain current
levels of production in the regions concerned.

5.           Coupled support shall take
the form of an annual payment and shall be granted within defined quantitative
limits and based on fixed areas and yields or on a fixed number of animals.

6.           Any coupled support
granted under this Article shall be consistent with other Union measures and
policies.

7.           The
Commission shall be empowered to adopt delegated acts in accordance with
Article 55 concerning:

(a)     the conditions for granting the
support referred to in this Chapter,

(b)     rules on consistency with other Union
measures and on the cumulation of support.

Article 39

Financial provisions

1.           In order to finance the
voluntary coupled support, Member States may decide, by 1 August of the year
preceding the first year of implementation of such support, to use up to 5 % of
their annual national ceiling set out in Annex II.

2.           By way of derogation from
paragraph 1, Member States may decide to use up to 10 % of the annual
national ceiling set out in Annex II provided that:

(a)      they applied, until 31 December 2013, the single area
payment scheme as laid down in Title V of Regulation (EC) No 73/2009, or
financed measures under Article 111 of that Regulation, or are concerned by the
derogation provided for in Article 69(5), or, in the case of Malta, in Article
69(1) of that Regulation; and/or

(b)     they allocated, during at least one year in the period
2010-2013, more than 5 % of their amount available for
granting the direct payments provided for in Titles III, IV and V of Regulation
(EC) No 73/2009, with the exception of Section 6 of
Chapter 1 of Title IV, for financing the measures laid
down in Section 2 of Chapter 2 of Title III of Regulation (EC) No 73/2009, the
support provided for in points (i) to (iv) of paragraph 1(a) and paragraphs
1(b) and (e) of Article 68 of that Regulation, or the measures under Chapter 1, with the exception of Section 6, of Title IV of that Regulation.

3.           By way of derogation from
paragraph 2, Member States having allocated during at least one year in the
period 2010-2013 more than 10 % of their amount
available for granting the direct payments provided for in Titles III, IV and V
of Regulation (EC) No 73/2009, with the exception of
Section 6 of Chapter 1 of Title IV, for financing the
measures laid down in Section 2 of Chapter 2 of Title III of Regulation (EC) No
73/2009, the support provided for in points (i) to (iv) of paragraph 1(a) and
paragraphs 1(b) and (e) of Article 68 of that Regulation, or the measures under
Chapter 1, with the exception of Section 6, of Title IV
of that Regulation may decide to use more than 10 % of
the annual national ceiling set out in Annex II upon approval by the Commission
in accordance with Article 41.

4.           Member States may, by 1
August 2016, review their decision pursuant to paragraphs 1, 2 and 3 and
decide, with effect from 2017:

(a)     to increase the percentage fixed
pursuant to paragraphs 1 and 2, within the limits laid down therein where
applicable, and, where appropriate, modify the conditions for granting the
support;

(b)     to reduce the percentage used for the
funding of coupled support and, where appropriate, modify the conditions for
granting that support;

(c)     to cease granting the support under
this Chapter.

5.           On the basis of the
decision taken by each Member State pursuant to paragraphs 1 to 4 on the
proportion of the national ceiling to be used, the Commission shall, by means
of implementing acts, fix the corresponding ceiling for the support on a yearly
basis. Those implementing acts shall be adopted in accordance with the
examination procedure referred to in Article 56(2).

Article 40

Notification

1.           The decisions referred to
in Article 39 shall be notified to the Commission by the date referred to in
that Article and, except for the decision referred to in Article 39(4)(c), the
notification shall include information on the regions targeted, the selected
types of farming or sectors and the level of support to be granted.

2.           The decisions referred to
in Article 39(2) and (3), or, where appropriate, in Article 39(4)(a),
shall also include a detailed description of the
particular situation in the region targeted and of the
particular characteristics of the types of farming, or specific agricultural
sectors, which make the percentage referred to in Article 39(1) insufficient to
address the difficulties referred to in Article 38(2) and which justify an increased level of support.

Article 41

Approval
by the Commission

1.           The Commission shall, by means of an implementing act, approve the decision referred to in
Article 39(3), or, where appropriate, in Article 39(4)(a),
where one of the following needs in the region or
sector concerned is demonstrated:

(a)     the necessity to
sustain a certain level of specific production due to the lack of alternatives
and to reduce the risk of production abandonment and the resulting social
and/or environmental problems,

(b)     the necessity to
provide stable supply to the local processing industry, thus avoiding the
negative social and economic consequence of any ensuing restructuring,

(c)     the necessity to compensate
disadvantages affecting farmers in a particular sector which are the
consequence of continuing disturbances on the related market;

(d)     the necessity to intervene where the
existence of any other support available under this
Regulation, Regulation (EU) No [...] [RDR] or any approved State aid scheme is
deemed insufficient to meet the needs referred to in points (a), (b) and (c).

2.           The
Commission shall, by means of implementing acts, adopt rules on the procedure
for the assessment and approval of decisions referred to in paragraph 1. Those
implementing acts shall be adopted in accordance with the examination procedure
referred to in Article 56(2).

CHAPTER 2
Crop specific payment for cotton

Article 42

Scope

Aid shall be granted to
farmers producing cotton falling within CN code 5201 00 under the conditions
laid down in this Chapter ("crop specific payment for cotton").

Article 43

Eligibility

1.           The crop specific payment
for cotton shall be granted per hectare of eligible area of cotton. In order to
be eligible, the area shall be located on agricultural land authorised by the
Member State for cotton production, sown under authorised varieties and
actually harvested under normal growing conditions.

The crop specific payment for cotton shall be
paid for cotton of sound, fair and marketable quality.

2.           Member States shall
authorise the land and the varieties referred to in paragraph 1 in accordance
with the rules and conditions to be adopted pursuant to paragraph 3.

3.           To ensure an efficient
management of the crop-specific payment for cotton, the
Commission shall be empowered to adopt delegated acts in accordance with
Article 55 concerning rules and conditions for the
authorisation of land and varieties for the purposes of the crop specific
payment for cotton.

4.           The Commission shall, by
means of implementing acts, adopt rules on the procedure of the authorisation
and the notifications to the producers related to this authorisation. Those
implementing acts shall be adopted in accordance with the examination procedure
referred to in Article 56(2).

Article 44

Base areas, fixed yields and reference amounts

1.           The following national
base areas are established:

–
Bulgaria: 3 342 ha,

–
Greece: 250 000 ha,

–
Spain: 48 000 ha,

–
Portugal: 360 ha.

2.           The following fixed yields
in the reference period are established:

–
Bulgaria: 1,2 tonne/ha,

–
Greece: 3,2 tonne/ha,

–
Spain: 3,5 tonne/ha,

–
Portugal: 2,2 tonne/ha.

3.           The amount of the crop
specific payment per hectare of eligible area shall be established by
multiplying the yields established in paragraph 2 with the following reference
amounts:

–
Bulgaria: EUR 523,02 in 2014; EUR 588,06 in
2015; and EUR 661,79 for 2016 and onwards

–
Greece: EUR 238,86

–
Spain: EUR 369,33

–
Portugal: EUR 232,57

4.           If the eligible area of
cotton in a given Member State and in a given year exceeds the base area
established in paragraph 1, the amount referred to in paragraph 3 for that
Member State shall be reduced proportionately to the overrun of the base area.

5.           In order to enable the
application of the crop-specific payment for cotton, the
Commission shall be empowered to adopt delegated acts in accordance with
Article 55 concerning rules on the conditions for the
granting of the crop specific payment for cotton, on the eligibility
requirements and the agronomic practices.

6.           The Commission may, by
means of implementing acts, provide for rules on the calculation of the
reduction provided for in paragraph 4. Those implementing acts shall be adopted
in accordance with the examination procedure referred to in Article 56(2).

Article 45

Approved inter-branch organisations

1.           For the purpose of this
Chapter, an ‘approved inter-branch organisation’ shall mean a legal entity made
up of farmers producing cotton and at least one ginner, carrying out activities
such as:

(a)     helping to coordinate better the way
cotton is placed on the market, particularly through research studies and
market surveys;

(b)     drawing up standard forms of contract
compatible with Union rules;

(c)     orienting production towards products
that are better adapted to market needs and consumer demand, particularly in
terms of quality and consumer protection;

(d)     updating methods and means to improve
product quality;

(e)     developing marketing strategies to
promote cotton via quality certification schemes.

2.           The Member State where the
ginners are established shall approve interbranch organisations that satisfy
the criteria to be laid down pursuant to paragraph 3.

3.           The
Commission shall be empowered to adopt delegated acts in accordance with
Article 55 concerning:

(a)     criteria for
the approval of inter-branch organisations;

(b)     obligations for producers;

(c)     rules for the situation where the approved
inter-branch organisation does not respect those criteria.

Article 46

Granting of the payment

1.           Farmers shall be granted
the crop specific payment for cotton per eligible hectare as established in
Article 44.

2.           Farmers who are members of
an approved inter-branch organisation shall be granted the crop specific
payment for cotton per eligible hectare within the base area laid down in
Article 44(1), increased by an amount of EUR 2.

TITLE V
Small farmers scheme

Article 47

General
rules

1.           Farmers holding payment
entitlements allocated in 2014 pursuant to Article 21 and fulfilling the
minimum requirements provided for in Article 10(1) may opt for participation in
a simplified scheme under the conditions laid down in this Title, hereinafter
referred to as 'small farmers scheme'

2.           Payments under the small
farmers scheme shall replace the payments to be granted pursuant to Titles III
and IV.

3.           Farmers participating in
the small farmers scheme shall be exempted from the agricultural practises
provided for in Chapter 2 of Title III.

4.           Member
States shall ensure that no payment is made to farmers for whom it is
established that, as from the date of publication of
the Commission proposal for this Regulation, they divide
their holding with the sole purpose of benefiting from the small farmers
scheme. This shall also apply to farmers whose holdings result from that
division.

Article 48

Participation

Farmers
wishing to participate in the small farmers scheme shall submit an application
by 15 October 2014.

Farmers
not having applied for participation in the small farmers scheme by 15 October
2014 or deciding to withdraw from it after that date or selected for support under Article 20(1)(c) of Regulation (EU) No
[...] [RDR] shall no longer have the right to participate
in that scheme.

Article 49

Amount of the payment

1.
Member States shall set the amount of the annual
payment for the small farmers scheme at one of the following levels, subject to
paragraphs 2 and 3:

(a)     an amount not exceeding 15 % of
the national average payment per beneficiary;

(b)     an amount corresponding to the
national average payment per hectare multiplied by a figure corresponding to
the number of hectares with a maximum of three.

The national average referred to in point (a)
of the first subparagraph shall be established by the Member States on the
basis of the national ceiling set in Annex II for calendar year 2019 and the
number of farmers having obtained payment entitlements pursuant to
Article 21(1).

The national average referred to in point (b)
of the first subparagraph shall be established by the Member States on the
basis of the national ceiling set in Annex II for calendar year 2019 and the
number of eligible hectares declared in accordance with Article 26 in 2014.

2.
The amount referred to in paragraph 1 shall not
be lower than EUR 500 and not be higher than EUR 1 000. Without prejudice
to Article 51(1), where the application of paragraph 1 results in an amount
lower than EUR 500 or higher than EUR 1 000, the amount shall be rounded
up or down, respectively, to the minimum or maximum amount.

3.
By way of derogation from paragraph 2, in Cyprus
and Malta the amount referred to in paragraph 1 may be set at a value lower
than EUR 500, but not less than EUR 200.

Article 50

Special
conditions

1.
During the participation in the small farmers
scheme, farmers shall:

(a)     keep at least a number of hectares corresponding to the
number of entitlements held;

(b)     fulfil the minimum requirement provided for in Article
10(1)(b).

2.
Payment entitlements activated in 2014 pursuant
to Articles 25 and 26 by a farmer participating in the small farmers scheme
shall be considered as activated entitlements for the duration of the
participation of the farmer in that scheme.

The payment entitlements held by the farmer
during the participation in that scheme shall not be considered as unused
payment entitlements reversible to the national reserve within the meaning of
Article 24(1)(b).

3.
By way of derogation from Article 27, payment
entitlements held by farmers participating in the small farmers scheme shall
not be transferable, except in case of inheritance or anticipated inheritance

Farmers who by way of inheritance or
anticipated inheritance receive payment entitlements from a farmer
participating in the small farmers scheme shall be eligible for participation
in that scheme provided they meet the requirements to benefit from the basic
payment scheme and that they inherit all the payment entitlements held by the farmer
from whom they receive the payment entitlements.

4.
The Commission shall be empowered to adopt
delegated acts in accordance with Article 55 concerning the conditions for participation
in the scheme where the situation of the participating farmer changes.

Article 51

Financial
provisions

1.
In order to finance the payment referred to in
this Title, Member States shall deduct the amounts corresponding to the amounts
to which the small farmers would be entitled as a basic payment referred to in
Chapter 1 of Title III, as a payment for agricultural practises beneficial for
the climate and the environment referred to in Chapter 2 of Title III and,
where applicable, as a payment for areas with natural constraints referred to
in Chapter 3 of Title III, as a payment for young farmers referred to in
Chapter 4 of Title III and as coupled support referred to in Title IV from the
total amounts available for the respective payments.

The difference between the sum of all payments
due under the small farmers scheme and the total amount financed in accordance
with the first sub-paragraph shall be financed by applying a linear reduction
to all payments to be granted in accordance with Article 25.

The elements on
the basis of which the amounts referred to in the first subparagraph are
established shall remain the same for the entire duration of the participation
of the farmer in the scheme.

2.
If the total amount of payments due under the
small farmers scheme exceeds 10 % of the annual national ceiling set out in
Annex II, Member States shall apply a linear reduction to the amounts to be paid
in accordance with this Title in order to respect that percentage.

TITLE
VI
national restructuring programmes for the cotton sector

Article 52

Use
of the annual budget for the restructuring programmes

1.           For Member States which
have applied the first subparagraph of Article 4(1) of Regulation (EC) No
637/2008, the relevant annual budget available pursuant to Article 5(1) of that
Regulation shall be transferred with effect from 1 January 2014 as additional
Union funds for measures under rural development programming financed under
Regulation (EU) No [...] [RDR].

2.           For Member States which
have applied the second subparagraph of Article 4(1) of Regulation (EC) No
637/2008, their annual budget as referred to in Article 5(1) of that Regulation is included
with effect from 1 January 2017 in their national ceiling as set out in Annex II to this Regulation.

TITLE
VII
FINAL PROVISIONS

CHAPTER 1
Notifications and emergency

Article 53

Notification
requirements

1.           The Commission shall be
empowered to adopt delegated acts in accordance with
Article 55, on the necessary measures regarding
notifications to be made by Member States for the purposes of this Regulation
or for the purpose of checking, controlling, monitoring, evaluating and
auditing direct payments, implementing international agreements, including
notification requirements under those agreements. In so
doing it shall take into account the data needs and synergies between potential
data sources.

The information obtained may, where
appropriate, be transmitted or made available to international organisations,
the competent authorities of third countries and may be made public, subject to
the protection of personal data and the legitimate interest of undertakings in
the protection of their business secrets.

2.           Taking into account the
need to make notifications referred to in paragraph 1 fast, efficient,
accurate, and cost effective, the Commission shall be
empowered to adopt delegated acts in accordance with Article 55 for the purpose
of laying down:

(a)     the nature and type of the information
to be notified;

(b)     the methods of notification;

(c)     the rules related to the access rights
to the information or information systems made available;

(d)     the conditions and means of
publication of the information.

3.           The Commission shall, by
means of implementing acts, adopt:

(a)     rules on providing the information as
necessary for the application of this Article;

(b)     arrangements for the management of the
information to be notified, as well as rules on content, form, timing, frequency
and deadlines of the notifications;

(c)     arrangements for transmitting or
making information and documents available to the Member States, international
organisations, the competent authorities in third countries, or the public,
subject to the protection of personal data and the legitimate interest of
farmers and undertakings in the protection of their business secrets.

Those implementing acts shall be adopted in
accordance with the examination procedure referred to in Article 56(2).

Article 54

Measures
to resolve specific problems

1.           The Commission shall, by
means of implementing acts, adopt the measures which are both necessary and
justifiable in an emergency, in order to resolve specific problems. Such
measures may derogate from provisions of this Regulation, but only to the
extent that, and for such a period, as is strictly necessary. Those
implementing acts shall be adopted in accordance with the examination procedure
referred to in Article 56(2).

2.           On duly justified
imperative grounds of urgency relating to the measures referred to in paragraph
1, the Commission shall adopt immediately applicable implementing acts in
accordance with the procedure referred to in Article 56(3).

CHAPTER 2
Delegations of powers and implementing provisions

Article 55

Exercise of the delegation

1.           The power to adopt the
delegated acts is conferred on the Commission subject to the conditions laid
down in this Article.

2.           The delegation of power
referred to in this Regulation shall be conferred on the Commission for
an indeterminate period of time from the entry into force of this Regulation.

3.           The delegation of powers
referred to in this Regulation may be revoked at any time by the European
Parliament or by the Council. A decision of revocation shall put an end to the
delegation of the power specified in that decision. It shall take effect the
day following the publication of the decision in the Official Journal of the
European Union or at a later date specified therein. It shall not affect
the validity of any delegated acts already in force.

4.           As soon as it adopts a
delegated act, the Commission shall notify it simultaneously to the European
Parliament and to the Council.

5.           A delegated act adopted
pursuant to this Regulation shall enter into force only if no objection has been
expressed either by the European Parliament or the Council within a period of 2
months of notification of that act to the European Parliament and the Council
or if, before the expiry of that period, the European Parliament and the Council have both informed the
Commission that they will not object. That period shall be extended by 2
months at the initiative of the European Parliament or the Council.

Article 56

Committee
procedure

1.           The Commission shall be
assisted by a Committee called "Committee for Direct Payments". That
Committee shall be a committee within the meaning of Regulation (EU) No 182/2011.

2.           Where reference is made to
this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

3.           Where reference is made to
this paragraph, Article 8 of Regulation (EU) No 182/2011, in conjunction
with Article 5 thereof, shall apply.

CHAPTER 3
Transitional and final provisions

Article 57

Repeals

1.           Regulation
(EC) No 637/2008 is repealed.

However, it continues to apply until 31
December 2017 in respect of Member States which have exercised the option laid
down in the second sub-paragraph of Article 4(1) of that Regulation.

2.           Regulation
(EC) No 73/2009 is repealed.

Without prejudice to paragraph 3, references to
the repealed Regulation shall be construed as references to this Regulation and
shall be read in accordance with the correlation table set out in Annex VII.

3.           The references made in this Regulation to
Regulations (EC) No 73/2009 and (EC) No 1782/2003 shall be understood as
referring to those Regulations such as they were in force before their repeal.

Article 58

Transitional
rules

In order to ensure a
smooth transition from the arrangements provided for in Regulation (EC) No 73/2009
to those laid down in this Regulation, the
Commission shall be empowered to adopt delegated acts in accordance with
Article 55 concerning the
necessary measures to protect the acquired rights and legitimate expectations
of farmers.

Article 59

Entry
into force and application

This Regulation shall enter into force on
the [seventh] day following that of its publication in the Official Journal
of the European Union.

It shall apply from 1 January 2014.

However, Articles 14, 20(5), 22(6), 35(1),
37(1) and 39 shall apply from the date of entry into force of this Regulation.

This Regulation shall be binding
in its entirety and directly applicable in all Member States.

Done at Brussels,

For the European Parliament                       For
the Council

The President                                                 The
President

ANNEX I
List of support
schemes

Sector || Legal base || Notes

Basic payment || Title III, Chapter 1 of this Regulation || Decoupled payment

Payment for farmers following agricultural practices beneficial for the climate and the environment || Title III, Chapter 2 of this Regulation || Decoupled payment

Payment for farmers in areas with specific natural constraints || Title III, Chapter 3 of this Regulation || Decoupled payment

Payment for young farmers || Title III, Chapter 4 of this Regulation || Decoupled payment

Voluntary coupled support || Title IV, Chapter 1 of this Regulation ||

Cotton || Title IV, Chapter 2 of this Regulation || Area payment

Payment for small farmers || Title V of this Regulation || Decoupled payment

Posei || Title III of Regulation (EC) No 247/2006 || Direct payments under measures established in the programmes

Aegean islands || Chapter III of Regulation (EC) No 1405/2006 || Direct payments under measures established in the programmes

ANNEX II
National ceilings referred to in Article 6

|| || || || || || (In thousands EUR)

Calendar year || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 and subsequent years

Belgium || 553 521 || 544 065 || 534 632 || 525 205 || 525 205 || 525 205

Bulgaria || 655 661 || 737 164 || 810 525 || 812 106 || 812 106 || 812 106

Czech Republic || 892 698 || 891 875 || 891 059 || 890 229 || 890 229 || 890 229

Denmark || 942 931 || 931 719 || 920 534 || 909 353 || 909 353 || 909 353

Germany || 5 275 876 || 5 236 176 || 5 196 585 || 5 156 970 || 5 156 970 || 5 156 970

Estonia || 108 781 || 117 453 || 126 110 || 134 749 || 134 749 || 134 749

Ireland || 1 240 652 || 1 239 027 || 1 237 413 || 1 235 779 || 1 235 779 || 1 235 779

Greece || 2 099 920 || 2 071 481 || 2 043 111 || 2 014 751 || 2 014 751 || 2 014 751

Spain || 4 934 910 || 4 950 726 || 4 966 546 || 4 988 380 || 4 988 380 || 4 988 380

France || 7 732 611 || 7 694 854 || 7 657 219 || 7 619 511 || 7 619 511 || 7 619 511

Italy || 4 023 865 || 3 963 007 || 3 902 289 || 3 841 609 || 3 841 609 || 3 841 609

Cyprus || 52 273 || 51 611 || 50 950 || 50 290 || 50 290 || 50 290

Latvia || 163 261 || 181 594 || 199 895 || 218 159 || 218 159 || 218 159

Lithuania || 396 499 || 417 127 || 437 720 || 458 267 || 458 267 || 458 267

Luxembourg || 34 313 || 34 250 || 34 187 || 34 123 || 34 123 || 34 123

Hungary || 1 298 104 || 1 296 907 || 1 295 721 || 1 294 513 || 1 294 513 || 1 294 513

Malta || 5 316 || 5 183 || 5 050 || 4 917 || 4 917 || 4 917

Netherlands || 806 975 || 792 131 || 777 320 || 762 521 || 762 521 || 762 521

Austria || 707 503 || 706 850 || 706 204 || 705 546 || 705 546 || 705 546

Poland || 3 038 969 || 3 066 519 || 3 094 039 || 3 121 451 || 3 121 451 || 3 121 451

Portugal || 573 046 || 585 655 || 598 245 || 610 800 || 610 800 || 610 800

Romania || 1 472 005 || 1 692 450 || 1 895 075 || 1 939 357 || 1 939 357 || 1 939 357

Slovenia || 141 585 || 140 420 || 139 258 || 138 096 || 138 096 || 138 096

Slovakia || 386 744 || 391 862 || 396 973 || 402 067 || 402 067 || 402 067

Finland || 533 932 || 534 315 || 534 700 || 535 075 || 535 075 || 535 075

Sweden || 710 853 || 711 798 || 712 747 || 713 681 || 713 681 || 713 681

United-Kingdom || 3 624 384 || 3 637 210 || 3 650 038 || 3 662 774 || 3 662 774 || 3 662 774

ANNEX III
Net ceilings referred to in Article 7

|| || || || || || (In million EUR)

Calendar year || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 and subsequent years

Belgium || 553.5 || 544.1 || 534.6 || 525.2 || 525.2 || 525.2

Bulgaria || 656.2 || 733.6 || 799.7 || 801.2 || 801.2 || 801.2

Czech Republic || 892.5 || 891.7 || 890.9 || 890.0 || 890.0 || 890.0

Denmark || 942.8 || 931.6 || 920.4 || 909.3 || 909.3 || 909.3

Germany || 5 275.3 || 5 235.6 || 5 196.1 || 5 156.5 || 5 156.5 || 5 156.5

Estonia || 108.8 || 117.5 || 126.1 || 134.7 || 134.7 || 134.7

Ireland || 1 240.7 || 1 239.0 || 1 237.4 || 1 235.8 || 1 235.8 || 1 235.8

Greece || 2 253.2 || 2 226.5 || 2 199.8 || 2 173.1 || 2 173.1 || 2 173.1

Spain || 4 978.9 || 4 994.4 || 5 010.0 || 5 031.4 || 5 031.4 || 5 031.4

France || 7 732.6 || 7 694.9 || 7 657.2 || 7 619.5 || 7 619.5 || 7 619.5

Italy || 4 023.6 || 3 962.8 || 3 902.1 || 3 841.4 || 3 841.4 || 3 841.4

Cyprus || 52.3 || 51.6 || 51.0 || 50.3 || 50.3 || 50.3

Latvia || 163.3 || 181.6 || 199.9 || 218.2 || 218.2 || 218.2

Lithuania || 396.5 || 417.0 || 437.6 || 458.1 || 458.1 || 458.1

Luxembourg || 34.3 || 34.2 || 34.2 || 34.1 || 34.1 || 34.1

Hungary || 1 289.2 || 1 288.0 || 1 286.8 || 1 285.7 || 1 285.7 || 1 285.7

Malta || 5.3 || 5.2 || 5.0 || 4.9 || 4.9 || 4.9

Netherlands || 807.0 || 792.1 || 777.3 || 762.5 || 762.5 || 762.5

Austria || 707.5 || 706.9 || 706.2 || 705.5 || 705.5 || 705.5

Poland || 3 038.9 || 3 066.4 || 3 093.9 || 3 121.4 || 3 121.4 || 3 121.4

Portugal || 573.2 || 585.8 || 598.4 || 611.0 || 611.0 || 611.0

Romania || 1 468.0 || 1 684.0 || 1 880.9 || 1 924.0 || 1 924.0 || 1 924.0

Slovenia || 141.6 || 140.4 || 139.3 || 138.1 || 138.1 || 138.1

Slovakia || 384.4 || 389.5 || 394.5 || 399.4 || 399.4 || 399.4

Finland || 533.9 || 534.3 || 534.7 || 535.1 || 535.1 || 535.1

Sweden || 710.9 || 711.8 || 712.7 || 713.7 || 713.7 || 713.7

United-Kingdom || 3 534.9 || 3 547.1 || 3 559.2 || 3 571.3 || 3 571.3 || 3 571.3

ANNEX IV
Coefficients to be
applied under Article 10(1)

Member State || Limit for the EUR threshold (Article 10(1)(a)) || Limit for the hectare threshold (Article 10(1)(b))

Belgium || 400 ||                                 2

Bulgaria || 200 ||                                 0,5

Czech Republic || 200 ||                                 5

Denmark || 300 ||                                 5

Germany || 300 ||                                 4

Estonia || 100 ||                                 3

Ireland || 200 ||                                 3

Greece || 400 ||                                 0,4

Spain || 300 ||                                 2

France || 300 ||                                 4

Italy || 400 ||                                 0,5

Cyprus || 300 ||                                 0,3

Latvia || 100 ||                                 1

Lithuania || 100 ||                                 1

Luxemburg || 300 ||                                 4

Hungary || 200 ||                                 0,3

Malta || 500 ||                                 0,1

Netherlands || 500 ||                                 2

Austria || 200 ||                                 2

Poland || 200 ||                                 0,5

Portugal || 200 ||                                 0,3

Romania || 200 ||                                 0,3

Slovenia || 300 ||                                 0,3

Slovakia || 200 ||                                 2

Finland || 200 ||                                 3

Sweden || 200 ||                                 4

United Kingdom || 200 ||                                 5

ANNEX V
Financial provisions
applying to Bulgaria and Romania referred to in Articles 16 and 17

A.        Amounts for calculating the
national ceilings for payments referred to in Article 16:

(in
thousands EUR)

|| 2014 || 2015

Bulgaria || 805 847 || 808 188

Romania || 1 802 977 || 1 849 068

B.         Total amount of complementary
national direct payments to the basic payment scheme referred to in Article 17(2):

(in
thousands EUR)

|| 2014 || 2015

Bulgaria || 150 186 || 71 024

Romania || 330 971 || 156 618

C.        Total amount of complementary
national direct payments to the crop specific payment for cotton referred to in
Article 17(3):

(in EUR)

|| 2014 || 2015

Bulgaria || 556 523 || 295 687

ANNEX VI
Average size of
agricultural holding to be applied under Article 36(5)

Member State || Average size of agricultural holding (in hectares)

Belgium || 29

Bulgaria || 6

Czech Republic || 89

Denmark || 60

Germany || 46

Estonia || 39

Ireland || 32

Greece || 5

Spain || 24

France || 52

Italy || 8

Cyprus || 4

Latvia || 16

Lithuania || 12

Luxemburg || 57

Hungary || 7

Malta || 1

Netherlands || 25

Austria || 19

Poland || 6

Portugal || 13

Romania || 3

Slovenia || 6

Slovakia || 28

Finland || 34

Sweden || 43

United Kingdom || 54

ANNEX VII
CORRELATION TABLE

Regulation (EC) No 73/2009 || This Regulation || Regulation (EU) No [...] [HZR]

Article 1 || Article 1 || -

- || Article 2 || -

Article 2 || Article 4 || -

- || Article 5(2) || -

Article 3 || Article 5 || -

Article 4(1) || - || Article 91

Article 4(2) || - || Article 95

Article 5 || - || Article 93

Article 6(1) || - || Article 94

Article 6(2) || - || -

Article 7 || - || -

Article 8(1) and (2) || Article 7(1) and (3) || -

- || Article 7(2) || -

Article 9 || - || -

Article 10 || - || -

Article 11(1) and (2) || - || Article 25(1) and (2)

- || Article 8 || -

Article 12(1) and (2) || - || Article 12

Article 12(3) || - || Article 14

Article 12(4) || - || -

Article 13 || - || Article 13(2)

Article 14 || - || Article 68

Article 15 || - || Article 69

Article 16 || - || Article 70

Article 17 || - || Article 71

Article 18 || - || Article 72

Article 19 || - || Article 73

Article 20 || - || Article 75

Article 21 || - || Article 75(4)

Article 22 || - || Article 96

Article 23 || - || Article 97

Article 24 || - || Article 99

Article 25 || - || Article 100

Article 26 || - || Article 63

Article 27(1) || - || Article 102(3)

Article 27(2) || - || Article 49

Article 27(3) || - || Article 69(3)

- || Article 9 || -

Article 28(1) and (2) || Article 10(1), (3) and (4) || -

- || Article 10(2) || -

Article 28(3) || Article 23(1)(a)(ii) || -

- || Article 23(1)(a)(i), (c) and (d) || -

- || Article 11 || -

Article 29 || - || Article 76

Article 30 || - || Article 62

Article 31 || - || Article 2(2)

Article 32 || Article 15 || -

Article 33(1) || Article 18(1) || -

- || Article 18(2) || -

Article 34(1) and (2) || Article 25(1) and (2) || -

Article 35 || Article 26 || -

Article 36 || - || -

Article 37 || Article 12 || -

- || Article 14 || -

Article 38 || - || -

Article 39(1) || Article 25(3) || -

Article 40(1) || Article 6(1) || -

Article 40(2) || Article 19(3) || -

Article 41(1) || Article 23(1) || -

Article 41(2) || Article 23(3) and (4) || -

Article 41(3) || Article 23(5)(a) || -

Article 41(5) || Article 23(5)(b) || -

- || Article 23(2), (6) and (7) || -

Article 41(6) || Article 22(4) || -

Article 42 || Article 24(1)(b) || -

Article 43(1) and (2) || Article 25(1) and (2) || -

Article 43(3) || - || -

Article 44 || - || -

Article 45 || - || -

- || - || -

- || Article 19(1) and (2) || -

Article 46(1) to (4) || Article 20(1) to (4) || -

Article 46(5) || - || -

- || Article 21 ||

Article 47(1) || - || -

Article 47(2) || Article 22(1) regional application || -

- || Article 22(1) national application || -

- || Article 22(2),(3), (5), (6) and (7) || -

Article 48 || - || -

Article 49 || - || -

Article 50 || - || -

Article 51 || - || -

Article 52 || - || -

Article 53 || - || -

Article 54 || - || -

Article 55 || - || -

Article 56 || - || -

Article 57 || - || -

Article 58 || - || -

Article 59 || - || -

Article 60 || - || -

Article 61 || - || -

Article 62 || - || -

Article 63 || - || -

Article 64 || - || -

Article 65 || - || -

Article 66 || - || -

Article 67 || - || -

Article 68 || - || -

Article 69 || - || -

Article 70 || - || -

Article 71 || - || -

Article 72 || - || -

Article 73 || - || -

Article 74 || - || -

Article 75 || - || -

Article 76 || - || -

Article 77 || - || -

Article 78 || - || -

Article 79 || - || -

Article 80 || - || -

Article 81 || - || -

Article 82 || - || -

Article 83 || - || -

Article 84 || - || -

Article 85 || - || -

Article 86 || - || -

Article 87 || - || -

Article 88 || Article 42 || -

Article 89 || Article 43 || -

Article 90 || Article 44 || -

Article 91 || Article 45 || -

Article 92 || Article 46 || -

Article 93 || - || -

Article 94 || - || -

Article 95 || - || -

Article 96 || - || -

Article 97 || - || -

Article 98 || - || -

Article 99 || - || -

Article 100 || - || -

Article 101 || - || -

Article 102 || - || -

Article 103 || - || -

Article 104 || - || -

Article 105 || - || -

Article 106 || - || -

Article 107 || - || -

Article 108 || - || -

Article 109 || - || -

Article 110 || - || -

Article 111 || - || -

Article 112 || - || -

Article 113 || - || -

Article 114 || - || -

Article 115 || - || -

Article 116 || - || -

Article 117 || - || -

Article 118 || - || -

Article 119 || - || -

Article 120 || - || -

Article 121 || Article 16 || -

Article 122 || - || -

Article 123 || - || -

Article 124 || - || -

Article 124(6) || - || Article 98

Article 125 || - || -

Article 126 || - || -

Article 127 || - || -

Article 128 || - || -

Article 129 || - || -

Article 130 || - || -

Article 131 || - || -

Article 132 || Article 17 || -

Article 133 || - || -

- || Article 28 || -

- || Article 29 || -

- || Article 20 || -

- || Article 31 || -

- || Article 32 || -

- || Article 33 || -

- || Article 34 || -

- || Article 35 || -

- || Article 36 || -

- || Article 37 || -

- || Article 47 || -

- || Article 48 || -

- || Article 49 || -

- || Article 50 || -

- || Article 51 || -

Article 134 || - || -

Article 135 || - || -

Article 136 || - || -

- || Article 52 || -

Article 137 || - || -

Article 138 || Article 3 || -

Article 139 || Article 13 || -

Article 140 || Article 53 || -

Article 141 || Article 56 || -

Article 142 || Article 55 || -

Article 142(r) || Article 54 || -

Article 143 || - || -

Article 144 || - || -

Article 145 || - || -

Article 146 || Article 55 || -

Article 146a || - || -

Article 147 || Article 56 || -

Article 148 || - || -

Article 149 || Article 57 || -

LEGISLATIVE
FINANCIAL STATEMENT

1.
FRAMEWORK OF THE PROPOSAL/INITIATIVE
1.1.
Title of the proposal/initiative

-        Proposal for a Regulation of the European Parliament and of
the Council establishing rules for direct payments to farmers under support
schemes within the framework of the common agricultural policy;

-        Proposal for a Regulation of the European Parliament and of
the Council establishing a common organisation of the markets in agricultural
products (Single CMO Regulation);

-        Proposal for a Regulation of the European Parliament and of
the Council on support for rural development by the European Agricultural Fund
for Rural Development (EAFRD);

-        Proposal for a Regulation of the European Parliament and of
the Council on the financing, management and monitoring of the common
agricultural policy;

-        Proposal for a Regulation of the European Parliament and of
the Council amending Council Regulation (EC) No 73/2009 as regards the
application of direct payments to farmers in respect of the year 2013;

-        Proposal for a Council Regulation determining measures on
fixing certain aids and refunds related to the common organisation of the
markets in agricultural products;

-        Proposal for a Regulation of the European Parliament and of
the Council amending Council Regulation (EC) No 1234/2007 as regards the regime
of the single payment scheme and support to vine-growers.

1.2.
Policy area(s) concerned in the ABM/ABB
structure[28]

Policy Area Title 05 of Heading 2

1.3.
Nature of the proposal/initiative (Legislative
framework for the CAP post 2013)

x The proposal/initiative relates to a new action

 ̈ The
proposal/initiative relates to a new action following a pilot
project/preparatory action[29]

x The proposal/initiative relates to the extension of
an existing action

x The proposal/initiative relates to an action
redirected towards a new action

1.4.
Objectives
1.4.1.
The Commission's multiannual strategic
objective(s) targeted by the proposal/initiative

In order to promote resource efficiency with a view to smart,
sustainable and inclusive growth for EU agriculture and rural development in
line with the Europe 2020 Strategy, the objectives of the CAP are:

- Viable food production;

- Sustainable management of natural resources and climate action;

- Balanced territorial development.

1.4.2.
Specific objective(s) and ABM/ABB activity(ies)
concerned

Specific objectives for Policy area 05:

Specific objective No 1:

To provide environmental public goods

Specific objective No 2:

To compensate for production difficulties in areas with specific
natural constraints

Specific objective No 3:

To pursue climate change mitigation and adaptation actions

Specific objective No 4:

To manage the EU budget (CAP) in accordance with high standards of
financial management

Specific objective for ABB 05 02 - Interventions in agricultural markets:

Specific objective No 5:

To improve the competitiveness of the agricultural sector and
enhance its value share in the food chain

Specific objective for ABB 05 03 - Direct aids:

Specific objective No 6:

To contribute to farm incomes and limit farm income variability

Specific objectives for ABB 05 04 – Rural development:

Specific objective No 7

To foster green growth through innovation

Specific objective No 8:

To support rural employment and maintain the social fabric of rural
areas

Specific objective No 9

To improve the rural economy and promote diversification

Specific objective No 10

To allow for structural diversity in farming systems

1.4.3.
Expected result(s) and impact

It is not possible to set quantitative targets for impact indicators
at this stage. Although the policy can steer in a certain direction, the broad
economic, environmental and social outcomes measured by such indicators would
ultimately also depend on the impact from a range of external factors, which
recent experience indicates have become significant and unpredictable. Further
analysis is on-going, to be ready for the period post-2013.

As regards the direct payments, Member States will have the
possibility to decide, to a limited degree, on the implementation of certain
components of the direct payment schemes.

For rural development, the expected results and impact will depend
on the rural development programmes that Member States will submit to the
Commission. Member States will be asked to set targets in their programmes.

1.4.4.
Indicators of results and impact

The proposals provide for the establishment of a common monitoring
and evaluation framework with a view to measuring the performance of the Common
Agricultural Policy. That framework shall include all instruments related to
the monitoring and evaluation of CAP measures and in particular of the direct
payments, market measures, rural development measures and of the application of
cross compliance.

The impact of these CAP measures shall be measured in relation to
the following objectives:

(a)      viable food production, with a focus on
agricultural income, agricultural productivity and price stability;

(b)     sustainable management of natural
resources and climate action, with a focus on greenhouse gas emissions,
biodiversity, soil and water;

(c)      balanced territorial development, with a
focus on rural employment, growth and poverty in rural areas.

By means of implementing acts, the Commission shall define the set
of indicators specific to these objectives and areas.

Moreover, as regards rural development, a reinforced common
monitoring and evaluation system is proposed. That system aims (a) to
demonstrate the progress and achievements of rural development policy and
assess the impact, effectiveness, efficiency and relevance of rural development
policy interventions, (b)     to contribute to better targeted support for
rural development, and (c) to support a common learning process related to
monitoring and evaluation. The Commission will establish, by means of
implementing act, a list of common indicators linked to the policy priorities.

1.5.
Grounds for the proposal/initiative
1.5.1.
Requirement(s) to be met in the short or long
term

In order to meet the multi-annual strategic objectives of the CAP
which are a direct translation of the Europe 2020 strategy for European rural
areas and to fulfil the relevant requirements of the Treaty, the proposals aim
to lay down the legislative framework for the Common Agricultural Policy for
the period after 2013.

1.5.2.
Added value of EU involvement

The future CAP will not only be a policy that caters for a small,
albeit essential, part of the EU economy, but also a policy of strategic
importance for food security, the environment and territorial balance. Thus,
the CAP, as a truly common policy, makes the most efficient use of limited
budgetary resources in maintaining a sustainable agriculture throughout the EU,
addressing important cross-border issues such as climate change and reinforcing
solidarity among Member States.

As mentioned in the Commission communication "A Budget for
Europe 2020"[30], the CAP is a genuinely
European policy. Instead of operating 27 separate agricultural policies and
budgets, Member States pool resources to operate a single European policy with
a single European budget. This naturally means that the CAP accounts for a
significant proportion of the EU budget. However, this approach is both more
efficient and economical than an uncoordinated national approach.

1.5.3.
Lessons learned from similar experiences in the
past

On the basis of the evaluation of the current policy framework, an
extensive consultation with stakeholders as well as an analysis of future
challenges and needs, a comprehensive impact assessment has been carried out.
More details can be found in the impact assessment and the explanatory memorandum
that are accompanying the legal proposals.

1.5.4.
Coherence and possible synergy with other
relevant instruments

The legislative proposals concerned by this financial statement
should be seen in the broader context of the proposal for a single framework
regulation with common rules for the common strategic framework funds (EAFRD,
ERDF, ESF, Cohesion Fund and EMFF). That framework regulation will make an
important contribution to reducing administrative burden, to spending EU funds
in an effective way, and to put simplification into practice. This also
underpins the new concepts of the common strategic framework for all these
funds and the upcoming Partnership Contracts which will also cover these funds.

The common strategic framework, which will be established, will
translate the objectives and priorities of the Europe 2020 Strategy into
priorities for the EAFRD together with the ERDF, ESF, Cohesion Fund and EMFF,
which will ensure an integrated use of the funds to deliver common objectives.

The common strategic framework will also set out coordination
mechanisms with other relevant Union policies and instruments.

Moreover, as regards the CAP, significant synergies and
simplification effects will be obtained by harmonising and aligning the
management and control rules for the first (EAGF) and second (EAFRD) pillar of
the CAP. The strong link between the EAGF and the EAFRD should be maintained
and the structures already in place in the Member States be sustained.

1.6.
Duration and financial impact

x Proposal/initiative of limited
duration (for the draft regulations on direct payment schemes, rural
development and transitional regulations)

–
x   Proposal/initiative in effect from
01/01/2014 to 31/12/2020

–
x   Financial impact for the period of the next
multi-annual financial framework. For rural development, impact on payments to
2023.

x Proposal/initiative of unlimited
duration (for the draft regulation on the single CMO and the horizontal
regulation)

–
Implementation from 2014.

1.7.
Management mode(s) envisaged[31]

x Centralised direct management
by the Commission

 ̈ Centralised indirect management with the delegation of implementation tasks to:

–
 ̈  executive agencies

–
 ̈  bodies set up by the Communities[32]

–
 ̈  national public-sector bodies/bodies with public-service mission

–
 ̈  persons entrusted with the implementation of specific actions
pursuant to Title V of the Treaty on European Union and identified in the
relevant basic act within the meaning of Article 49 of the Financial Regulation

x Shared management with the
Member States

 ̈ Decentralised management with third countries

 ̈ Joint management with international organisations (to be specified)

Comments

No
substantive change compared to the present situation, i.e. the bulk of
expenditure concerned by the legislative proposals on the CAP reform will be
managed by shared management with the Member States. However, a very minor part
will continue to fall under centralised direct management by the Commission.

2.
MANAGEMENT MEASURES
2.1.
Monitoring and reporting rules

In terms of monitoring and evaluation of the CAP, the Commission
will present a report to the European Parliament and the Council every 4 years,
with the first report to be presented not later than end 2017.

This is complemented by specific provisions in all areas of the CAP,
with various comprehensive reporting and notifications requirements to be
specified in the implementing rules.

As regards rural development, rules are also provided for monitoring
at programme level, which will be aligned with the other funds, and which will
be coupled with ex ante, on-going and ex post evaluations.

2.2.
Management and control system
2.2.1.
Risk(s) identified

There are more than seven million beneficiaries of the CAP,
receiving support under a large variety of different aid schemes, each of which
having detailed and sometimes complex eligibility criteria.

The reduction in the error rate in the domain of the common
agricultural policy can already be considered as a trend. Thus, most recently
an error rate close to 2% confirms the overall positive assessment of previous
years. It is the intention to continue the efforts in order to achieve an error
rate below 2%.

2.2.2.
Control method(s) envisaged

The legislative package, in particular the proposal for the
regulation on the financing, management and monitoring of the common
agricultural policy, envisages maintaining and reinforcing the current system
established by Regulation (EC) No 1290/2005. It provides for a compulsory
administrative structure at Member State level, centred around accredited
paying agencies, which are responsible for carrying out controls at final
beneficiary level in accordance with the principles set out under point 2.3.
Every year, the head of each paying agency is required to provide a statement
of assurance which covers the completeness, accuracy and veracity of the
accounts, the proper functioning of the internal control systems and the
legality and regularity of the underlying transactions. An independent audit
body is required to provide an opinion on all these three elements.

The Commission will continue to audit agricultural expenditure,
using a risk-based approach in order to ensure that its audits are targeted to
the areas of highest risk. Where these audits reveal that expenditure has been
incurred in breach of Union rules, it will exclude the amounts concerned from
Union financing under the conformity clearance system.

As regards the cost of controls, a detailed analysis is provided in
annex 8 to the impact assessment accompanying the legislative proposals.

2.3.
Measures to prevent fraud and irregularities

The legislative package, in particular the proposal for the
regulation on the financing, management and monitoring of the common
agricultural policy, envisages maintaining and reinforcing the current detailed
systems for controls and penalties to be applied by the paying agencies, with
common basis features and special rules tailored to the specificities of each
aid regime. The systems generally provide for exhaustive administrative
controls of 100% of the aid applications, cross-checks with other databases
where this is considered appropriate as well as pre-payment on-the-spot checks
of a minimum number of transactions, depending on the risk associated with the
regime in question. If these on-the-spot checks reveal a high number of
irregularities, additional checks must be carried out. In this context, the by
far most important system is the Integrated Administration and Control System
(IACS), which in financial year 2010 covered around 80% of total expenditure
under the EAGF and the EAFRD. For Member States with properly functioning
control systems and low error rates, the Commission will be empowered to allow
for a reduction of the number of on-the-spot checks.

The package further envisages that Member States shall prevent,
detect and correct irregularities and fraud, impose effective, dissuasive and
proportionate penalties as laid down in Union legislation or national law, and
recover any irregular payments plus interests. It includes an automatic
clearance mechanism for irregularity cases, which provides that if recovery has
not taken place within four years of the date of the recovery request, or
within eight years in the case of legal proceedings, the amounts not recovered
shall be borne by the Member State concerned. This mechanism will be a strong
incentive for Member States to recover irregular payments as quickly as
possible.

3.
ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE

The amounts indicated in this financial
statement are expressed in current prices and in commitments.

In addition to the changes resulting from the
legislative proposals as listed in the accompanying tables below, the
legislative proposals imply further changes which have no financial impact.

For any of the years in the period 2014-2020,
the application of financial discipline cannot be excluded at this stage.
However, this will not depend on the reform proposals as such, but on other
factors, such as the execution of direct aids or future developments in the
agricultural markets.

As concerns direct aids, the extended net
ceilings for 2014 (calendar year 2013) included in the proposal regarding
transition are higher than the amounts allocated to direct aids indicated in
the accompanying tables. The purpose of this extension is to ensure a
continuation of the existing legislation in a scenario in which all the other
elements would remain unchanged, without prejudice to the possible need for
applying the financial discipline mechanism.

The reform proposals contain provisions giving
Member States a set degree of flexibility in relation to their allocation of
direct aids respectively rural development. In case Member States decide to use
that flexibility, this will have financial consequences within the given
financial amounts, which cannot be quantified at this stage.

This financial statement does not take into
account the possible use of the crises reserve. It should be underlined that
the amounts taken into account for market-related expenditure are based on no
public intervention buying-in and other measures related to a crisis situation
in any sectors.

3.1.
Heading(s) of the multiannual financial
framework and expenditure budget line(s) affected

Table 1: Amounts for the CAP
including complementary amounts foreseen in the MFF proposals and the CAP
reform proposals

In million EUR (current prices)

Budget year || 2013 || 2013 adjusted (1) || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL 2014-2020

|| || || || || || || || || ||

Inside MFF || || || || || || || || || ||

Heading 2 || || || || || || || || || ||

Direct aids and market-related expenditure (2) (3) (4) || 44 939 || 45 304 || 44 830 || 45 054 || 45 299 || 45 519 || 45 508 || 45 497 || 45 485 || 317 193

Estimated assigned revenue || 672 || 672 || 672 || 672 || 672 || 672 || 672 || 672 || 672 || 4 704

P1 Direct aids and market-related expenditure (with assigned revenue) || 45 611 || 45 976 || 45 502 || 45 726 || 45 971 || 46 191 || 46 180 || 46 169 || 46 157 || 321 897

P2 Rural development (4) || 14 817 || 14 451 || 14 451 || 14 451 || 14 451 || 14 451 || 14 451 || 14 451 || 14 451 || 101 157

Total || 60 428 || 60 428 || 59 953 || 60 177 || 60 423 || 60 642 || 60 631 || 60 620 || 60 608 || 423 054

Heading 1 || || || || || || || || || ||

CSF Agricultural research and innovation || N.A. || N.A. || 682 || 696 || 710 || 724 || 738 || 753 || 768 || 5 072

Most deprived persons || N.A. || N.A. || 379 || 387 || 394 || 402 || 410 || 418 || 427 || 2 818

Total || N.A. || N.A. || 1 061 || 1 082 || 1 104 || 1 126 || 1 149 || 1 172 || 1 195 || 7 889

Heading 3 || || || || || || || || || ||

Food safety || N.A. || N.A. || 350 || 350 || 350 || 350 || 350 || 350 || 350 || 2 450

|| || || || || || || || || ||

Outside MFF || || || || || || || || || ||

Reserve for agricultural crises || N.A. || N.A. || 531 || 541 || 552 || 563 || 574 || 586 || 598 || 3 945

European Globalisation Fund (EGF) || || || || || || || || || ||

Of which maximum available for agriculture: (5) || N.A. || N.A. || 379 || 387 || 394 || 402 || 410 || 418 || 427 || 2 818

|| || || || || || || || || ||

TOTAL || || || || || || || || || ||

TOTAL Commission proposals (MFF + outside MFF) + assigned revenue || 60 428 || 60 428 || 62 274 || 62 537 || 62  823 || 63 084 || 63 114 || 63 146 || 63 177 || 440 156

TOTAL MFF proposals (i.e. excluding Reserve and EGF) + assigned revenue || 60 428 || 60 428 || 61 364 || 61 609 || 61 877 || 62 119 || 62 130 || 62 141 || 62 153 || 433 393

Notes:

(1)           Taking into account legislative changes
already agreed, i.e. voluntary modulation for the UK and Article 136
"unspent amounts" will cease to apply by the end of 2013.

(2)           The amounts
relate to the proposed annual ceiling for the first pillar. However, it should
also be noted that it is proposed to move negative expenditure from accounting
clearance (currently under budget item 05 07 01 06) to assigned revenue (under
item 67 03). For details, see estimated revenue table on the page below.

(3)           The 2013 figures include the amounts for
veterinary and phytosanitary measures as well as market measures for the
fisheries sector.

(4)           The amounts in
the table above are in line with those in the Commission communication "A
Budget for Europe 2020" (COM(2011)500 final of 29 June 2011). However, it
remains to be decided if the MFF will reflect the transfer that is proposed for
the envelope of one Member State of the cotton national restructuring programme
to rural development as from 2014, implying an adjustment (4 million EUR per
year) of the amounts for respectively the EAGF sub-ceiling and for pillar 2. In
the tables in the sections below, the amounts have been transferred,
irrespective of them being reflected in the MFF.

(5)           In accordance
with the Commission communication "A Budget for Europe 2020"
(COM(2011)500 final), a total amount of up to 2.5 billion EUR in 2011 prices
will be available under the European Globalisation Fund for providing
additional support to farmers suffering from effects of globalisation. In the
table above, the breakdown by year in current prices is only indicative.
The proposal for the inter-institutional agreement between the European
Parliament, the Council and the Commission on cooperation in budgetary matters
and on sound financial management (COM(2011)403 final of 29 June 2011) sets
out, for the EGF, an overall maximum annual amount of 429 million EUR in 2011
prices.

3.2.
Estimated impact on expenditure
3.2.1.
Summary of estimated impact on expenditure

Table 2: Estimated revenue as well as
expenditure for Policy Area 05 within Heading 2

In million EUR (current prices)

Budget year || 2013 || 2013 adjusted || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL 2014-2020

REVENUE || || || || || || || || || ||

123 – Sugar production charge (own resources) || 123 || 123 || 123 || 123 || || || || || || 246

|| || || || || || || || || ||

67 03 - Assigned revenue || 672 || 672 || 741 || 741 || 741 || 741 || 741 || 741 || 741 || 5 187

of which: ex 05 07 01 06 - Accounting clearance || 0 || 0 || 69 || 69 || 69 || 69 || 69 || 69 || 69 || 483

Total || 795 || 795 || 864 || 864 || 741 || 741 || 741 || 741 || 741 || 5 433

EXPENDITURE || || || || || || || || || ||

05 02 - Markets (1) || 3 311 || 3 311 || 2 622 || 2 641 || 2 670 || 2 699 || 2 722 || 2 710 || 2 699 || 18 764

05 03 - Direct aids (before capping) (2) || 42 170 || 42 535 || 42 876 || 43 081 || 43 297 || 43 488 || 43 454 || 43 454 || 43 454 || 303 105

05 03 – Direct aids (after capping) || 42 170 || 42 535 || 42 876 || 42 917 || 43 125 || 43 303 || 43 269 || 43 269 || 43 269 || 302 027

|| || || || || || || || || ||

05 04 - Rural development (before capping) || 14 817 || 14 451 || 14 455 || 14 455 || 14 455 || 14 455 || 14 455 || 14 455 || 14 455 || 101 185

05 04 - Rural development (after capping) || 14 817 || 14 451 || 14 455 || 14 619 || 14 627 || 14 640 || 14 641 || 14 641 || 14 641 || 102 263

|| || || || || || || || || ||

05 07 01 06 - Accounting clearance || -69 || -69 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0

Total || 60 229 || 60 229 || 59 953 || 60 177 || 60 423 || 60 642 || 60 631 || 60 620 || 60 608 || 423 054

NET BUDGET after assigned revenue || || || 59 212 || 59 436 || 59 682 || 59 901 || 59 890 || 59 879 || 59 867 || 417 867

Notes:

(1)           For 2013, preliminary
estimate based on Draft Budget 2012 taking into account legal adjustments
already agreed for 2013 (e.g. wine ceiling, abolition of potato starch premium,
dried fodder) as well as some foreseen developments. For all years, the
estimates assume that there will be no additional financing need for support
measures due to market disturbances or crises.

(2)           The
2013 amount includes an estimate of wine grubbing-up 2012.

Table 3: Calculation of the financial
impact by budget chapter of the CAP reform proposals as regards revenue and CAP
expenditure

In million EUR (current prices)

Budget year || 2013 || 2013 adjusted || || TOTAL 2014-2020

|| || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 ||

REVENUE || || || || || || || || || ||

123 – Sugar production charge (own resources) || 123 || 123 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0

|| || || || || || || || || ||

67 03 - Assigned revenue || 672 || 672 || 69 || 69 || 69 || 69 || 69 || 69 || 69 || 483

of which: ex 05 07 01 06 - Accounting clearance || 0 || 0 || 69 || 69 || 69 || 69 || 69 || 69 || 69 || 483

Total || 795 || 795 || 69 || 69 || 69 || 69 || 69 || 69 || 69 || 483

EXPENDITURE || || || || || || || || || ||

05 02 - Markets (1) || 3 311 || 3 311 || -689 || -670 || -641 || -612 || -589 || -601 || -612 || -4 413

05 03 - Direct aids (before capping) (2) || 42 170 || 42 535 || -460 || -492 || -534 || -577 || -617 || -617 || -617 || -3 913

05 03 - Direct aids – Estimated product of capping to be transferred to rural development || || || 0 || -164 || -172 || -185 || -186 || -186 || -186 || -1 078

05 04 - Rural development (before capping) || 14 817 || 14 451 || 4 || 4 || 4 || 4 || 4 || 4 || 4 || 28

05 04 - Rural development – Estimated product of capping to be transferred from direct aids || || || 0 || 164 || 172 || 185 || 186 || 186 || 186 || 1 078

05 07 01 06 - Accounting clearance || -69 || -69 || 69 || 69 || 69 || 69 || 69 || 69 || 69 || 483

Total || 60 229 || 60 229 || -1 076 || -1 089 || -1 102 || -1 115 || -1 133 || -1 144 || -1 156 || -7 815

NET BUDGET after assigned revenue || || || -1 145 || -1 158 || -1 171 || -1 184 || -1 202 || -1 213 || -1 225 || -8 298

Notes:

(1)           For 2013, preliminary
estimate based on Draft Budget 2012 taking into account legal adjustments
already agreed for 2013 (e.g. wine ceiling, abolition of potato starch premium,
dried fodder) as well as some foreseen developments. For all years, the
estimates assume that there will be no additional financing need for support
measures due to market disturbances or crises.

(2)           The
2013 amount includes an estimate of wine grubbing-up 2012.

Table 4: Calculation of the financial
impact of the CAP reform proposals as regards CAP market-related expenditure

In million EUR (current prices)

BUDGET YEAR || || Legal base || Estimated needs || Changes to 2013 ||

|| || || 2013 (1) || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL 2014-2020

Exceptional measures: streamlined and extended scope of legal base || || Art. 154, 155, 156 || pm || pm || pm || pm || pm || pm || pm || pm || pm

Removal of intervention for durum wheat and sorghum || || ex Art.10 || pm || - || - || - || - || - || - || - || -

Food programmes for most deprived || (2) || Ex-Art. 27 of Reg 1234/2007 || 500.0 || -500.0 || -500.0 || -500.0 || -500.0 || -500.0 || -500.0 || -500.0 || -3 500.0

Private storage (Flax fibre) || || Art. 16 || N.A. || pm || pm || pm || pm || pm || pm || pm || Pm

Aid for cotton - Restructuring || (3) || ex Art. 5 of Reg. 637/2008 || 10.0 || -4.0 || -4.0 || -4.0 || -4.0 || -4.0 || -4.0 || -4.0 || -28.0

Setting-up aid for F&V producer groups || || ex Art. 117 || 30.0 || 0.0 || 0.0 || 0.0 || -15.0 || -15.0 || -30.0 || -30.0 || -90.0

School fruit scheme || || Art. 21 || 90.0 || 60.0 || 60.0 || 60.0 || 60.0 || 60.0 || 60.0 || 60.0 || 420.0

Abolition hops PO || || ex Art. 111 || 2.3 || -2.3 || -2.3 || -2.3 || -2.3 || -2.3 || -2.3 || -2.3 || -15.9

Optional private storage for skimmed-milk powder || || Art. 16 || N.A. || pm || pm || pm || pm || pm || pm || pm || pm

Abolition aid for use of skimmed milk/SMP as feedingstuff/casein and use of casein || || ex Art. 101, 102 || pm || - || - || - || - || - || - || - || -

Optional private storage for butter || (4) || Art. 16 || 14.0 || [-1.0] || [-14.0] || [-14.0] || [-14.0] || [-14.0] || [-14.0] || [-14.0] || [-85.0]

Abolition milk promotional levy || || ex Art. 309 || pm || - || - || - || - || - || - || - || -

TOTAL 05 02 || || || || || || || || || || ||

Net effect of reform proposals (5) || || || || -446.3 || -446.3 || -446.3 || -461.3 || -461.3 || -476.3 || -476.3 || -3 213.9

Notes:

(1)           The 2013 needs are estimated
based on the Commission's Draft Budget 2012, except for (a) the fruit &
vegetables sectors where the needs are based on the financial statement of the
respective reforms and (b) any legal changes already agreed.

(2)           The
2013 amount corresponds to Commission proposal COM(2010)486. As from 2014, the
measure will be financed within Heading 1.

(3)           The envelope for the cotton
restructuring programme for Greece (4 million EUR/year) will be transferred to
rural development as from 2014. The envelope for Spain (6.1 million EUR/year)
will go to the Single Payment Scheme as from 2018 (already decided).

(4)           Estimated
effect in case of non-application of the measure.

(5)           In addition to expenditure
within chapters 05 02 and 05 03, it is anticipated that direct expenditure
within chapters 05 01, 05 07 and 05 08 will be financed by revenue that will be
assigned to the EAGF.

Table 5: Calculation of the financial
impact of the CAP reform proposals as regards direct aids

In million EUR (current prices)

BUDGET YEAR || || Legal base || Estimated needs || Changes to 2013 ||

|| || 2013 (1) || 2013 adjusted (2) || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL 2014-2020

|| || || || || || || || || || || ||

Direct aids || || || 42 169.9 || 42 535.4 || 341.0 || 381.1 || 589.6 || 768.0 || 733.2 || 733.2 || 733.2 || 4 279.3

- Changes already decided: || || || || || || || || || || || ||

Phasing-in EU 12 || || || || || 875.0 || 1 133.9 || 1 392.8 || 1 651.6 || 1 651.6 || 1 651.6 || 1 651.6 || 10 008.1

Cotton restructuring || || || || || 0.0 || 0.0 || 0.0 || 0.0 || 6.1 || 6.1 || 6.1 || 18.4

Health Check || || || || || -64.3 || -64.3 || -64.3 || -90.0 || -90.0 || -90.0 || -90.0 || -552.8

Previous reforms || || || || || -9.9 || -32.4 || -32.4 || -32.4 || -32.4 || -32.4 || -32.4 || -204.2

|| || || || || || || || || || || ||

- Changes due to new CAP reform proposals || || || -459.8 || -656.1 || -706.5 || -761.3 || -802.2 || -802.2 || -802.2 || -4 990.3

Of which: capping || || || || || 0.0 || -164.1 || -172.1 || -184.7 || -185.6 || -185.6 || -185.6 || -1 077.7

|| || || || || || || || || || || ||

TOTAL 05 03 || || || || || || || || || || || ||

Net effect of reform proposals || || || || || -459.8 || -656.1 || -706.5 || -761.3 || -802.2 || -802.2 || -802.2 || -4 990.3

TOTAL EXPENDITURE || || || 42 169.9 || 42 535.4 || 42 876.4 || 42 916.5 || 43 125.0 || 43 303.4 || 43 268.7 || 43 268.7 || 43 268.7 || 302 027.3

Notes:

(1)           The
2013 amount includes an estimate of wine grubbing-up 2012.

(2)           Taking
into account legislative changes already agreed, i.e. voluntary modulation for
the UK and Article 136 "unspent amounts" will cease to apply by the
end of 2013.

Table 6: Components of direct aids

In million EUR (current prices)

BUDGET YEAR || || || || || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL 2014-2020

Annex II || || || || || 42 407.2 || 42 623.4 || 42 814.2 || 42 780.3 || 42 780.3 || 42 780.3 || 256 185.7

Payment for agricultural practices beneficial for the climate and environment (30%) || || || || || 12 866.5 || 12 855.3 || 12 844.3 || 12 834.1 || 12 834.1 || 12 834.1 || 77 068.4

Maximum that can be allocated to the Payment for young farmers (2%) || || || || || 857.8 || 857.0 || 856.3 || 855.6 || 855.6 || 855.6 || 5 137.9

Basic Payment Scheme, Payment for areas with Natural Constraints, Voluntary Coupled Support || || || || || 28 682.9 || 28 911.1 || 29 113.6 || 29 090.6 || 29 090.6 || 29 090.6 || 173 979.4

Maximum that can be taken from the above lines to finance the Small Farmer Scheme (10%) || || || || || 4 288.8 || 4 285.1 || 4 281.4 || 4 278.0 || 4 278.0 || 4 278.0 || 25 689.3

Wine transfers included in Annex II[33] || || || || || 159.9 || 159.9 || 159.9 || 159.9 || 159.9 || 159.9 || 959.1

Capping || || || || || -164.1 || -172.1 || -184.7 || -185.6 || -185.6 || -185.6 || -1 077.7

Cotton || || || || || 256.0 || 256.3 || 256.5 || 256.6 || 256.6 || 256.6 || 1 538.6

POSEI/Small Aegean Islands || || || || || 417.4 || 417.4 || 417.4 || 417.4 || 417.4 || 417.4 || 2 504.4

Table 7: Calculation of the financial
impact of the CAP reform proposals as regards transitional measures for
granting direct aids in 2014

In million EUR (current prices)

BUDGET YEAR || || Legal base || Estimated needs || Changes to 2013

|| || || 2013 (1) || 2013 adjusted || 2014 (2)

Annex IV to Council Regulation (EC) No 73/2009 || || || 40 165.0 || 40 530.5 || 541.9

Phasing-in EU 10 || || || || || 616.1

Health Check || || || || || -64.3

Previous reforms || || || || || -9.9

TOTAL 05 03 || || || || ||

TOTAL EXPENDITURE || || || 40 165.0 || 40 530.5 || 41 072.4

Notes:

(1)           The
2013 amount includes an estimate of wine grubbing-up 2012.

(2)           The
extended net ceilings include an
estimate of the wine transfers to SPS based on the decisions taken by the Member
States for 2013.

Table 8: Calculation of the financial
impact of the CAP reform proposals as regards rural development

In million EUR (current prices)

BUDGET YEAR || || Legal base || Rural development allocation || Changes to 2013 ||

|| || || 2013 || 2013 adjusted (1) || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL 2014-2020

Rural development programmes || || || 14 788.9 || 14 423.4 || || || || || || || ||

Aid for cotton - Restructuring || (2) || || || || 4.0 || 4.0 || 4.0 || 4.0 || 4.0 || 4.0 || 4.0 || 28.0

Product of capping of direct aids || || || || || || 164.1 || 172.1 || 184.7 || 185.6 || 185.6 || 185.6 || 1 077.7

RD envelope excluding technical assistance || (3) || || || || -8.5 || -8.5 || -8.5 || -8.5 || -8.5 || -8.5 || -8.5 || -59.4

Technical assistance || (3) || || 27.6 || 27.6 || 8.5 || 3.5 || 3.5 || 3.5 || 3.5 || 3.5 || 3.5 || 29.4

Prize for local innovative co-operation projects || (4) || || N.A. || N.A. || 0.0 || 5.0 || 5.0 || 5.0 || 5.0 || 5.0 || 5.0 || 30.0

TOTAL 05 04 || || || || || || || || || || || ||

Net effect of reform proposals || || || || || 4.0 || 168.1 || 176.1 || 188.7 || 189.6 || 189.6 || 189.6 || 1 105.7

TOTAL EXPENDITURE (before capping) || || || 14 816.6 || 14 451.1 || 14 455.1 || 14 455.1 || 14 455.1 || 14 455.1 || 14 455.1 || 14 455.1 || 14 455.1 || 101 185.5

TOTAL EXPENDITURE (after capping) || || || 14 816.6 || 14 451.1 || 14 455.1 || 14 619.2 || 14 627.2 || 14 639.8 || 14 640.7 || 14 640.7 || 14 640.7 || 102 263.2

Notes:

(1)           Adjustments
in line with the existing legislation only applicable until the end of
financial year 2013.

(2)           The amounts in table 1
(section 3.1) are in line with those in the Commission communication "A
Budget for Europe 2020" (COM(2011)500 final). However, it remains to be
decided if the MFF will reflect the transfer that is proposed for the envelope
of one Member State of the cotton national restructuring programme to rural
development as from 2014, implying an adjustment (4 million EUR per year) of
the amounts for respectively the EAGF sub-ceiling and for pillar 2. In table 8
above, the amounts have been transferred, irrespective of them being reflected
in the MFF.

(3)           The
2013 amount for technical assistance was fixed based on the initial rural
development envelope (transfers from pillar 1 not included).

Technical assistance for 2014-2020 is fixed at 0.25%
of the total rural development envelope.

(4)           Covered
by the amount available for technical assistance.

Heading of multiannual financial framework: || 5 || " Administrative expenditure "

EUR million (to 3 decimal places)

Note:     It is estimated that the
legislative proposals will have no impact on appropriations of an
administrative nature, i.e. it is the intention that the legislative framework
can be implemented with the present level of human resources and administrative
expenditure.

|| || || Year 2014 || Year 2015 || Year 2016 || Year 2017 || Year 2018 || Year 2019 || Year 2020 || TOTAL

DG: AGRI ||

 Human resources || 136.998 || 136.998 || 136.998 || 136.998 || 136.998 || 136.998 || 136.998 || 958.986

 Other administrative expenditure || 9.704 || 9.704 || 9.704 || 9.704 || 9.704 || 9.704 || 9.704 || 67.928

TOTAL DG AGRI || Appropriations || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 1 026.914

TOTAL appropriations under HEADING 5 of the multiannual financial framework || (Total commitments = Total payments) || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 1 026.914

EUR million (to 3 decimal places)

|| || || Year N[34] || Year N+1 || Year N+2 || Year N+3 || ... enter as many years as necessary to show the duration of the impact (see point 1.6) || TOTAL

TOTAL appropriations under HEADINGS 1 to 5 of the multiannual financial framework || Commitments || || || || || || || ||

Payments || || || || || || || ||

3.2.2.
Estimated impact on operational appropriations

–
 ̈  The proposal/initiative does not require the use of operational
appropriations

–
x   The proposal/initiative requires the use of
operational appropriations, as explained below:

Commitment appropriations in EUR million (to 3 decimal
places)

Indicate objectives and outputs ò || || || Year 2014 || Year 2015 || Year 2016 || Year 2017 || Year 2018 || Year 2019 || Year 2020 || TOTAL

OUTPUTS

Type of output || Average cost of the output || Number of outputs || Cost || Number of outputs || Cost || Number of outputs || Cost || Number of outputs || Cost || Number of outputs || Cost || Number of outputs || Cost || Number of outputs || Cost || Total number of outputs || Total cost

SPECIFIC OBJECTIVE No 5: To improve the competitiveness of the agricultural sector and enhance its value share in the food chain || || || || || || || || || || || || || || || ||

- Fruit & vegetables: Marketing through producer organisations (POs)[35] || Propor-tion of the value of produc-tion marke-ted through POs in value of the total produc-tion || || || 830.0 || || 830.0 || || 830.0 || || 830.0 || || 830.0 || || 830.0 || || 830.0 || || 5 810.0

- Wine: National envelope – Restructuring35 || Number of hectares || || 54 326 || 475.1 || 54 326 || 475.1 || 54 326 || 475.1 || 54 326 || 475.1 || 54 326 || 475.1 || 54 326 || 475.1 || 54 326 || 475.1 || || 3 326.0

- Wine: National envelope – Investments35 || || || 1 147 || 178.9 || 1 147 || 178.9 || 1 147 || 178.9 || 1 147 || 178.9 || 1 147 || 178.9 || 1 147 || 178.9 || 1 147 || 178.9 || || 1 252.6

- Wine: National envelope – By-product distillation35 || Hecto-litres || || 700 000 || 98.1 || 700 000 || 98.1 || 700 000 || 98.1 || 700 000 || 98.1 || 700 000 || 98.1 || 700 000 || 98.1 || 700 000 || 98.1 || || 686.4

- Wine: National envelope – Potable alcohol35 || Number of hectares || || 32 754 || 14.2 || 32 754 || 14.2 || 32 754 || 14.2 || 32 754 || 14.2 || 32 754 || 14.2 || 32 754 || 14.2 || 32 754 || 14.2 || || 14.2

- Wine: National envelope – Use of concentrated must35 || Hecto-litres || || 9 || 37.4 || 9 || 37.4 || 9 || 37.4 || 9 || 37.4 || 9 || 37.4 || 9 || 37.4 || 9 || 37.4 || || 261.8

- Wine: National envelope – promotion35 || || || || 267.9 || || 267.9 || || 267.9 || || 267.9 || || 267.9 || || 267.9 || || 267.9 || || 1 875.3

- Other || || || || 720.2 || || 739.6 || || 768.7 || || 797.7 || || 820.3 || || 808.8 || || 797.1 || || 5 452.3

Sub-total for specific objective N°5 || || 2 621.8 || || 2 641.2 || || 2 670.3 || || 2 699.3 || || 2 721.9 || || 2 710.4 || || 2 698.7 || || 18 763.5

SPECIFIC OBJECTIVE No 6: To contribute to farm incomes and limit farm income variability || || || || || || || || || || || || || || || ||

- Direct income support[36] || Number of hectares paid (in million) || || 161.014 || 42 876.4 || 161.014 || 43 080.6 || 161.014 || 43 297.1 || 161.014 || 43 488.1 || 161.014 || 43 454.3 || 161.014 || 43 454.3 || 161.014 || 43 454.3 || 161.014 || 303 105.0

Sub-total for specific objective N°6 || || 42 876.4 || || 43 080.6 || || 43 297.1 || || 43 488.1 || || 43 454.3 || || 43 454.3 || || 43 454.3 || || 303 105.0

TOTAL COST || || || || || || || || || || || || || || || ||

Note: For specific objectives 1 to 4 and 7
to 10, the outputs are still to be determined (see section 1.4.2 above).

3.2.3.
Estimated impact on appropriations of an
administrative nature
3.2.3.1.
Summary

–
 ̈  The proposal/initiative does not require the use of administrative
appropriations

–
x   The proposal/initiative requires the use of
administrative appropriations, as explained below:

EUR million (to 3 decimal places)

|| Year 2014 || Year 2015 || Year 2016 || Year 2017 || Year 2018 || Year 2019 || Year 2020 || TOTAL

HEADING 5 of the multiannual financial framework || || || || || || || ||

Human resources [37] || 136.998 || 136.998 || 136.998 || 136.998 || 136.998 || 136.998 || 136.998 || 958.986

Other administrative expenditure || 9.704 || 9.704 || 9.704 || 9.704 || 9.704 || 9.704 || 9.704 || 67.928

Subtotal HEADING 5 of the multiannual financial framework || || || || || || || ||

Outside HEADING 5 of the multiannual financial framework || || || || || || || ||

Human resources || || || || || || || ||

Other expenditure of an administrative nature || || || || || || || ||

Subtotal outside HEADING 5 of the multiannual financial framework || || || || || || || ||

TOTAL || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 1 026.914

3.2.3.2.
 Estimated requirements
of human resources

–
 ̈  The proposal/initiative does not require the use of human
resources

–
x   The proposal/initiative requires the use of
human resources, as explained below:

Note: It is estimated that the legislative
proposals will have no impact on appropriations of an administrative nature,
i.e. it is the intention that the legislative framework can be implemented with
the present level of human resources and administrative expenditure. The
figures for the period 2014-2020 are based on the situation for 2011.

Estimate to be expressed in full amounts
(or at most to one decimal place)

|| Year 2014 || Year 2015 || Year 2016 || Year 2017 || Year 2018 || Year 2019 || Year 2020

 Establishment plan posts (officials and temporary agents) ||

XX 01 01 01 (Headquarters and Commission’s Representation Offices) || 1 034 || 1 034 || 1 034 || 1 034 || 1 034 || 1 034 || 1 034

XX 01 01 02 (Delegations) || 3 || 3 || 3 || 3 || 3 || 3 || 3

XX 01 05 01 (Indirect research) || || || || || || ||

10 01 05 01 (Direct research) || || || || || || ||

 External personnel (in Full Time Equivalent unit: FTE)[38] ||

XX 01 02 01 (CA, INT, SNE from the "global envelope") || 78 || 78 || 78 || 78 || 78 || 78 || 78

XX 01 02 02 (CA, INT, JED, LA and SNE in the delegations) || || || || || || ||

XX 01 04 yy || - at Headquarters || || || || || || ||

- in delegations || || || || || || ||

XX 01 05 02 (CA, INT, SNE - Indirect research) || || || || || || ||

10 01 05 02 (CA, INT, SNE - Direct research) || || || || || || ||

Other budget lines (specify) || || || || || || ||

TOTAL[39] || 1 115 || 1 115 || 1 115 || 1 115 || 1 115 || 1 115 || 1 115

XX is the
policy area or budget title concerned.

The human resources required
will be met by staff from the DG who are already assigned to management of the action
and/or have been redeployed within the DG, together if necessary with any
additional allocation which may be granted to the managing DG under the annual
allocation procedure and in the light of budgetary constraints.

Description of
tasks to be carried out:

Officials and temporary agents ||

External personnel ||

3.2.4.
Compatibility with the current multiannual
financial framework

–
x   Proposal/initiative is compatible with the PROPOSALS
FOR THE 2014-2020 multiannual financial framework.

–
 ̈  Proposal/initiative will entail reprogramming of the relevant
heading in the multiannual financial framework.

–
 ̈  Proposal/initiative requires application of the flexibility
instrument or revision of the multiannual financial framework.

3.2.5.
Third-party contributions

–
The proposal/initiative does not provide for
co-financing by third parties

–
X  The proposal regarding rural development
(EAFRD) provides for the co-financing estimated below:

Appropriations in EUR million (to 3 decimal places)

|| Year 2014 || Year 2015 || Year 2016 || Year 2017 || Year 2018 || Year 2019 || Year 2020 || Total

Specify the co-financing body || MS || MS || MS || MS || MS || MS || MS || MS

TOTAL appropriations cofinanced [40] || To be determined || To be determined || To be determined || To be determined || To be determined || To be determined || To be determined || To be determined

3.3.
Estimated impact on revenue

–
x   Proposal/initiative has no financial impact
on revenue.

–
 ̈  Proposal/initiative has the following financial impact:

–
x   on own resources

–
x   on miscellaneous revenue

EUR million (to 3 decimal places)

Budget revenue line: || Appropriations available for the ongoing budget year || Impact of the proposal/initiative[41]

Year N || Year N+1 || Year N+2 || Year N+3 || ... insert as many columns as necessary in order to reflect the duration of the impact (see point 1.6)

|| || || || || || || ||

For miscellaneous
assigned revenue, specify the budget expenditure line(s) affected.

See tables 2 and 3 in section 3.2.1.

[1]               Communication from the Commission to the European
Parliament, the Council, the European Economic and Social Committee and the
Committee of the Regions A budget for Europe 2020, COM(2011)500 final,
29.6.2011.

[2]               Communication from the Commission to the European
Parliament, the Council, the European Economic and Social Committee and the
Committee of the Regions The CAP towards 2020: meeting the food, natural resources
and territorial challenges of the future, COM(2010)672 final, 18.11.2010.

[3]               See in particular the European Parliament resolution
of 23 June 2011, 2011/2015(INI), and the Presidency conclusions of 18.3.2011.

[4]               The current legislative framework comprises Council
Regulation (EC) No 73/2009 (direct payments), Council Regulation (EC) No
1234/2007 (market instruments), Council Regulation (EC) No 1698/2005 (rural
development) and Council Regulation (EC) No 1290/2005 (financing).

[5]               Proposal for a Regulation of
the European Parliament and of the Council laying down common provisions on the
European Regional Development Fund, the European Social Fund, the Cohesion
Fund, the European Agricultural Fund for Rural Development and the European
Maritime and Fisheries Fund covered by the Common Strategic Framework and
laying down general provisions on the European Regional Development Fund, the
European Social Fund and the Cohesion Fund and repealing Regulation (EC) No
1083/2006, COM(2011)615 of 6.10.2011.

[6]               See Annex 9 of the impact assessment for an overview
of the 517 contributions received.

[7]               OJ C [...], [...], p. [...].

[8]               OJ C [...], [...], p. [...].

[9]               OJ C [...], [...], p. [...].

[10]             OJ C [...], [...],
p. [...].

[11]             COM(2010) 672 final, 18.11.2010.

[12]             OJ L 30, 31.1.2009, p. 16.

[13]             OJ L .....

[14]             OJ L 55, 28.2.2011, p. 13.

[15]             OJ L [...], [...], p. [...].

[16]             OJ L 42, 14.2.2006, p. 1.

[17]             OJ L 265, 26.9.2006, p. 1.

[18]             OJ L 270, 21.10.2003, p. 1. Regulation repealed and
replaced by Regulation (EC) No 73/2009.

[19]             OJ L 206, 22.7.1992,
p. 7.

[20]             OJ L 20, 26.1.2010, p. 7.

[21]             OJ L 189, 20.7.2007, p. 1.

[22]             OJ L 277, 21.10.2005, p.1. Regulation repealed and
replaced by Regulation (EU) No...[RDR]

[23]             OJ L......

[24]             OJ L 178, 5.7.2008, p. 1.

[25]             OJ L 281, 23.11.1995, p.31.

[26]             OJ L 8, 12.1.2001, p. 1.

[27]             OJ L 327, 22.12.2000, p. 1.

[28]             ABM: Activity-Based Management – ABB: Activity-Based
Budgeting.

[29]             As referred to in Article 49(6)(a) or (b) of the
Financial Regulation.

[30]             COM(2011)500 final of 29 June 2011.

[31]             Details of management modes and references to the
Financial Regulation may be found on the BudgWeb site: http://www.cc.cec/budg/man/budgmanag/budgmanag_en.html

[32]             As referred to in Article 185 of the Financial
Regulation.

[33]             Direct aids for the period
2014-2020 include an estimate of the wine transfers to SPS based on the
decisions taken by the Member States for 2013.

[34]             Year N is the year in which implementation of the
proposal/initiative starts.

[35]             Based on past execution and estimates in the 2012 Draft
Budget. For the producer organisations in the fruit & vegetables sector,
the amounts are in line with the reform of that sector and, as already
indicated in the activity statements of the 2012 Draft Budget, outputs will
only be known in late 2011.

[36]             Based on potentially eligible areas for 2009.

[37]             Based on an average cost of 127 000 EUR for
establishment plan post of officials and temporary agents.

[38]             CA= Contract Agent; INT= agency staff ("Intérimaire");
JED= "Jeune Expert en Délégation" (Young Experts in
Delegations); LA= Local Agent; SNE= Seconded National Expert;

[39]             This does not include the sub-ceiling on budget line
05.010404.

[40]             This will be set out in the rural development
programmes to be submitted by the Member States.

[41]             As regards traditional own resources (customs duties,
sugar levies), the amounts indicated must be net amounts, i.e. gross amounts
after deduction of 25% for collection costs.