EN Official Journal of the European Union L 347/608

REGULATION (EU) No 1307/2013 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 17 December 2013

establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009

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,

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

Having regard to the opinion of the Court of Auditors (1),

Having regard to the opinions of the European Economic and Social Committee (2),

Having regard to the opinion of the Committee of the Regions (3),

Acting in accordance with the ordinary legislative procedure (4),

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 entitled "The CAP towards 2020: Meeting the food, natural resources and territorial challenges of the future" set out potential challenges, objectives and orientations for the Common Agricultural Policy ("the 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 (5). 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 streamline and simplify the relevant provisions.

(2) One of the core objectives, and one of the key requirements, of the CAP reform is the reduction of the administrative burden. This should be taken firmly into account when shaping the relevant provisions for the direct support scheme.

(3) All the basic elements pertaining to the payment of Union support to farmers should be included in this Regulation, which should also fix the conditions of access to payments which are inextricably linked to those basic elements.

(4) It is necessary to clarify that Regulation (EU) No 1306/2013 of the European Parliament and of Council (6) and the provisions adopted pursuant to it are to 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 1306/2013, in particular the 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 the case of non-compliance, the 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 the rules related to the payment of advances and the recovery of undue payments.

(5) In order to supplement or amend certain non-essential elements of this Regulation, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union (TFEU) 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 to the Council.

(6) This Regulation should contain a list of the direct payment support schemes covered by it. In order to take into account new legislation on support schemes which may be adopted after the entry into force of this Regulation, the power to adopt certain acts should be delegated to the Commission in respect of the amendment of that list.

(7) In order to ensure legal certainty, the power to adopt certain acts should be delegated to the Commission in respect of establishing the framework within which Member States are to define the criteria to be met by farmers in order to fulfil the obligation to maintain the agricultural area in a state suitable for grazing or cultivation, and 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 determine the predominance of grasses and other herbaceous forage and to determine the established local practices as regards permanent grassland and permanent pasture ('permanent grassland').

(8) 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 1306/2013, an adjustment of the level of direct support in any calendar year should be made as provided for under Article 25 of that Regulation. In order to ensure that it contributes to achieving the objective of a more balanced distribution of payments between small and large beneficiaries, the adjustment of the direct payments should only be applied to payments to be granted to farmers in excess of EUR 2 000 in the corresponding calendar year. Taking into account the levels of direct payments to farmers in Bulgaria, Croatia 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 Bulgaria and Romania from 1 January 2016, and in Croatia from 1 January 2022. Specific rules should be laid down in respect of that instrument of financial discipline and of certain other provisions in the case of a legal person, or a group of natural or legal persons, where national law provides for individual members' rights and obligations comparable to those of individual farmers who have the status of a head of holding, in order to strengthen the agricultural structures and promote the establishment of the legal persons or groups concerned.

(9) In order to ensure the correct application of the adjustment of direct payments with respect to financial discipline, the power to adopt certain acts should be delegated to the Commission in respect 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.

(10) Experience acquired in the application of the various support schemes for farmers has shown that support was in a number of cases granted to natural or legal persons whose business purpose was not, or was only marginally targeted at an agricultural activity. To ensure that support is better targeted, Member States should refrain from granting direct payments to certain natural and legal persons unless such persons can demonstrate that their agricultural activity is not marginal. Member States should also have the possibility of not granting direct payments to other natural or legal persons whose agricultural activity is marginal. However, Member States should be allowed to grant direct payments to smaller part-time farmers, since those farmers contribute directly to the vitality of rural areas. Member States should also refrain from granting direct payments to natural or legal persons whose agricultural areas are mainly areas naturally kept in a state suitable for grazing or cultivation and who do not carry out a certain minimum activity.

(11) In order to guarantee the protection of the rights of farmers, the power to adopt certain acts should be delegated to the Commission in respect of laying down criteria for determining the cases where a farmer's agricultural area is to be considered to be mainly an area naturally kept in a state suitable for grazing or cultivation, criteria to establish the distinction between receipts resulting from agricultural and from non-agricultural activities and the amount of direct payments relevant for applying the marginality test, and criteria to be met by farmers in order to prove that their agricultural activity is not marginal.

(12) To avoid the excessive administrative burden caused by managing payments of small amounts, Member States should in general refrain from granting direct payments where the amount would be lower than EUR 100, or where the eligible area of the holding for which support is claimed would be less than one hectare. However, as Member States' farming structures vary considerably and may differ significantly from the average farming 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 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. Since 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 the equal treatment of farmers in Bulgaria, Croatia and Romania whose direct payments are subject to phasing-in, the minimum threshold should, in those Member States, be based on the final amounts to be granted at the end of the phasing-in process.

(13) 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. Larger beneficiaries, due to their ability to exploit economies of size, do not require the same level of unitary support in order 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. Member States should therefore reduce by at least 5 % the part of the basic payment to be granted to farmers which exceeds EUR 150 000. To avoid disproportionate effects on large farms with high employment numbers, Member States may decide to take into account salaried labour intensity when applying the mechanism. In order to make such reduction of the support level effective, no advantage should be granted to farmers who artificially create the conditions to avoid its effects. The proceeds of the reduction of payments to large beneficiaries should remain in the Member States where they were generated and should be made available as Union support for measures financed under the European Agricultural Fund for Rural Development (EAFRD).

(14) Net ceilings should be determined for each Member State in order to limit the payments to be made to farmers following the application of the reduction of payments. To take into account the specific characteristics of CAP support granted in accordance with Regulation (EU) No 228/2013 of the European Parliament and of the Council (7) and Regulation (EU) No 229/2013 of the European Parliament and of the Council (8), and the fact that these direct payments are not subject to reduction of payments, the net ceiling for the Member States concerned should not include those direct payments.

(15) 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 and the application of the reduction and, where applicable, capping of payments, as well as those resulting from the notifications to be made by Croatia regarding the de-mined land that has returned to use for agricultural activities, the power to adopt certain acts should be delegated to the Commission in respect of adapting the national and net ceilings set out in this Regulation.

(16) It should be specified that those provisions of this Regulation which could give rise to behaviour of a Member State capable of constituting 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 any undue distortion of competition.

(17) 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. Member States should also be given the possibility to transfer funds from their support assigned for rural development to their direct payments ceiling. To ensure the effectiveness of this tool, Member States should be given the possibility to review their initial decision once, with effect from claim year 2018, provided that any decision based on such review does not entail any decrease in the amounts assigned for rural development.

(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 support schemes, in particular in the light of economic developments or the budgetary situation, with the result that beneficiaries cannot assume that support conditions remain unchanged.

(19) Farmers in Member States which acceded to the 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 still be in force in 2015, and for Croatia, it will be in force until 2021. Furthermore, those Member States were allowed to grant complementary national direct payments. The possibility for granting such payments should be maintained for Croatia and, as a complement to the basic payment scheme for Bulgaria and Romania, until they are fully phased-in. As regards authorising Croatia to grant complementary national direct payments, the Commission should be empowered to adopt implementing acts without applying Regulation (EU) No 182/2011 of the European Parliament and of the Council (9).

(20) Regulation (EC) No 73/2009, as amended by the Act of Accession of 2011, provides for a special national de-mining reserve for Croatia in order to finance, for a period of ten years after its accession to the Union, the allocation of payment entitlements to land which is de-mined and returned to agricultural use every year. It is appropriate to set the rules for determining the amounts allotted to funding support for that land under the support schemes provided for in this Regulation and the rules for the management of that reserve. In order to take account of the amounts resulting from the notifications to be made by Croatia regarding the de-mined land that has returned to use for agricultural activities, the power to adopt certain acts should be delegated to the Commission in respect of reviewing certain financial provisions applying to Croatia.

(21) In order to ensure a better distribution of support across 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 (10), and continued under Regulation (EC) No 73/2009, which combined previously existing support mechanisms in a single scheme of decoupled direct payments. Such a move should, in principle, result in the expiry of payment entitlements obtained under those Regulations and the allocation of new ones. That allocation of new payment entitlements should be based, as a general rule, on the number of eligible hectares at the disposal of farmers in the first year of implementation of the scheme. However, Member States which currently operate the single payment scheme on a regional or regional hybrid basis should have the possibility of keeping their existing payment entitlements. In order to avoid a situation in a given Member State in which an increase in the eligible area dilutes disproportionately the amount of direct payments per hectare and thus affects the internal convergence process, Member States should be allowed, when carrying out the first allocation of payment entitlements, to apply certain limitations for the purpose of establishing the number of payment entitlements.

(22) Due to the successive integration of various sectors into the single payment scheme and the subsequent period of adjustment granted to farmers, it has become increasingly difficult to justify the existence 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 that have direct payments below the level of 90 % of the Union average should close one third of the gap between their current level and this level, with all Member States arriving at a minimum level by financial year 2020. This convergence should be financed proportionally by all Member States that have direct payment levels above the Union average level.

(23) In addition, as a general rule, all payment entitlements activated in 2019 in a Member State or in a region should have a uniform unit value. However, in order to avoid disruptive financial consequences for farmers, Member States should be allowed to take historical factors into account when calculating the value of payment entitlements which farmers should have in 2019, provided that no payment entitlements in 2019 have a value lower than 60 % of the average. Member States should finance this convergence by reducing, on the basis of objective and non-discriminative criteria which they are to establish, the value of payment entitlements that exceeds the 2019 average. In this context and in order to avoid unacceptably disruptive losses for certain farmers, Member States may limit this reduction to 30 % of the initial value of the concerned entitlements, even if such a limitation does not allow for all payment entitlements to reach 60 % of the average value for 2019. Except for those Member States that opt for a uniform unit value from the first year of implementation of the scheme, the convergence should be made in equal steps. The convergence of the payment entitlements with a value above the average should also take account of the estimated resources available for payment entitlements. However, for those Member States which keep their existing payment entitlements and which have already opted for convergence steps in accordance with Article 63(3) of Regulation (EC) No 1782/2003, those convergence steps should be implemented, where applicable, and the value of all payment entitlements should be adjusted to take account of the estimated resources available for payment entitlements.

(24) The experience gained through applying the single payment scheme has shown 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, or should be allowed to establish regional reserves. Such national or regional reserves should be used, as a matter of priority, to facilitate the participation of young farmers and farmers commencing their agricultural activity in the scheme and using them should be allowed in order to take account of certain other specific situations. Rules on the transfer and use of payment entitlements should be retained.

(25) The experience gained through applying Regulation (EC) No 73/2009 has shown that Member States did not use the entire amount of the funds available under the national ceilings laid down in that Regulation. While, compared to the system under that Regulation, this Regulation reduces the risk of unspent funds Member States should nonetheless have the possibility of distributing payment entitlements for a higher value than the amount available for their basic payment scheme, in order to facilitate a more efficient use of the funds. Member States should therefore be allowed, within certain common limits and in respect of the net ceilings for direct payments, to calculate the necessary amount by which their basic payment ceiling may be increased.

(26) As a general rule, any agricultural area of the holding, including areas that were not in good agricultural condition on 30 June 2003 in Member States acceding to the Union on 1 May 2004 that opted to apply the single area payment scheme, that is used for an agricultural activity is eligible to benefit from the basic payment. Given the potential for non-agricultural activities to contribute to the income diversification of agricultural holdings and to the vitality of rural areas, an agricultural area of a holding that is used also for non-agricultural activities is to be considered eligible on condition that it is used predominantly for agricultural activities. For the purpose of assessing that predominance, common criteria should be set for all Member States. In this context and in order to ensure better targeting of direct payments, it should be possible for Member States to draw up, in the interests of legal certainty and clarity, a list of areas which are predominantly used for non-agricultural activities and are hence ineligible. Furthermore, in order to maintain the eligibility of land that was eligible for the purpose of activating set-aside entitlements prior to the abolition of the set-aside obligation, it should be provided that certain afforested areas, including those afforested under national schemes complying with the relevant rules in Council Regulation (EC) No 1698/2005 (11) or Regulation (EU) No 1305/2013 of the European Parliament and of the Council (12), or areas subject to certain environmental commitments, are eligible to benefit from the basic payment.

(27) In order to avoid a situation in which, in a given Member State, an increase in the eligible area dilutes disproportionately the amount of direct payments per hectare and thus affects the internal convergence process, Member States should be allowed to use a reduction coefficient for determining the eligible area of permanent grassland where grasses and other herbaceous forage are traditionally not predominant in grazing areas, but form part of established local practices.

(28) 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 market for hemp. Hence, payments should continue to be granted only for areas sown with varieties of hemp offering certain guarantees with regard to its psychotropic substance content.

(29) In order to ensure legal certainty, and in order to clarify the specific situations that may arise in the application of the basic payment scheme, the power to adopt certain acts should be delegated to the Commission in respect of rules on eligibility and access in respect of the basic payment scheme of farmers, in the case of inheritance and anticipated inheritance, inheritance under a lease, change of legal status or denomination, transfer of payment entitlements, and in the case of a merger or scission of the holding and in the case of a contract clause regarding the right to receive payment entitlements in the first year of allocation of payment entitlements. Moreover, that delegation of power should also cover rules on the calculation of the value and number or on the change 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. Furthermore, that delegation of power should also cover rules on the establishment and calculation of the value and number of payment entitlements received from the national reserve or regional reserves; rules on the modification of the unit value of payment entitlements in the case of fractions of payment entitlements and the transfer of payment entitlements without land. In addition, that delegation of power should also cover criteria for the allocation of payment entitlements to farmers who did not receive direct payments in 2013 or pursuant to the use of the national or regional reserve; criteria for applying limitations on the number of payment entitlements to be allocated; and criteria for setting the reduction coefficient for conversion of certain permanent grassland to eligible hectares.

(30) In order to ensure the proper management of payment entitlements, the power to adopt certain acts should be delegated to the Commission in respect of rules on the content of the declaration and the requirements for the activation of payment entitlements.

(31) In order to preserve public health, the power to adopt certain acts should be delegated to the Commission in respect of laying down 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.

(32) In view of the considerable administrative, technical and logistical difficulties the transition to the basic payment scheme represents for the Member States applying the single area payment scheme under Regulation (EC) No 73/2009, they should be allowed to apply the single area payment scheme for the purpose of granting the basic payment for a further transitional period until the end of 2020 at the latest. If a Member State decides to introduce the basic payment scheme by 2018, it may opt for differentiating the payments under the single area payment scheme according to the level of certain payments granted in 2014 under the regimes for specific support and separate payments provided for in Regulation (EC) No 73/2009, or, in the case of Cyprus, under the sector-specific financial envelopes for transitional national aid.

(33) 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 single area payment scheme, the power to adopt certain acts should be delegated to the Commission in respect of laying down rules on eligibility and access in respect of the single area payment scheme of farmers.

(34) In Member States applying the single area payment scheme which were allowed to grant transitional national aid, such aid has played an important role in supporting the income of farmers in specific sectors. For that reason, and in order to avoid a sudden and substantial decrease of support from 2015 in those sectors benefiting, until 2014, from transitional national aid, it is appropriate to provide, in those Member States, for the possibility to grant that aid as a complement to the single area payment scheme. In order to ensure the continuity of the support with the transitional national aid granted so far, it is appropriate to limit the conditions to those applicable in 2013 to that aid, or in the case of Bulgaria and Romania to complementary national direct payments, authorised by the Commission following the requests from Member States. It is also appropriate to limit the maximum amounts of aid by sector, compared to their levels in 2013, to ensure a steady decrease of the aid levels and to ensure their compatibility with the convergence mechanism.

(35) Specific rules should be provided for the first allocation and for the calculation of the value of payment entitlements when Member States having applied the single area payment scheme pursuant to this Regulation introduce the basic payment scheme. In order to ensure a smooth transition between those schemes, the power to adopt certain acts should be delegated to the Commission in respect of further rules on the introduction of the basic payment scheme in Member States having applied the single area payment scheme.

(36) Taking into account the need for the unitary support to farmers with smaller holdings to be sufficient in order to achieve the objective of income support effectively, Member States should be allowed to redistribute direct support between farmers by granting them an extra payment for the first hectares.

(37) 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 in order to grant, on top of the basic payment, an annual payment which may take account of internal convergence in the Member State or region, for compulsory practices to be followed by farmers addressing, as a priority, both climate and environment policy goals. Those practices should take the form of simple, generalised, non-contractual and annual actions that go beyond cross-compliance and that are linked to agriculture, such as crop diversification, the maintenance of permanent grassland, including traditional orchards where fruit trees are grown in low density on grassland, and the establishment of ecological focus areas. In order to better achieve the objectives of "greening" and to allow for its efficient administration and control, such practices should apply to the whole eligible area of the holding. The compulsory nature of those practices should also concern farmers whose holdings are fully or partly situated in "Natura 2000" areas covered by Council Directive 92/43/EEC (13) and by Directive 2009/147/EC of the European Parliament and of the Council (14), or in areas covered by Directive 2000/60/EC of the European Parliament and of the Council (15), as long as those practices are compatible with the objectives of those Directives.

(38) Given the recognised environmental benefits of the organic farming systems, farmers should, for those units of their holding on which they fulfil the conditions laid down in Council Regulation (EC) No 834/2007 (16), benefit from the "greening" component without needing to fulfil any further obligation.

(39) Failure to respect the "greening" component should lead to penalties on the basis of Regulation (EU) No 1306/2013.

(40) In order to accommodate the diversity of agricultural systems and the different environmental situations across the Union, it is justified to recognise, in addition to the three greening practices established in this Regulation, practices covered by agri-environment-climate measures or certification schemes that are similar to greening and that yield an equivalent or higher level of benefit for the climate and the environment. For reasons of legal clarity these practices should be laid down in an Annex to this Regulation. Member States should decide whether to offer to farmers the possibility of using equivalent practices and the greening practices established in this Regulation in order to require the farmer to observe the practices best suited to ensure the objectives of the measure and they should notify the Commission of their decisions. For reasons of legal certainty, the Commission should assess whether the practices covered by the notified equivalent measures are covered by the Annex. If the Commission considers this not to be the case, it should notify Member States accordingly by means of an implementing act adopted without applying Regulation (EU) No 182/2011. In order to allow a simpler implementation of equivalence and for reasons of controllability, rules should be laid down as regards the area coverage of equivalent measures, taking into account the specific characteristics of agri-environment-climate measures and certification schemes. In order to ensure that equivalent practices are properly applied and that double funding is avoided, the power to adopt certain acts should be delegated to the Commission for the purpose of adding practices to the list of equivalent practices, establishing requirements for the national or regional certification schemes and, where necessary, establishing detailed rules for the calculation of related amounts.

(41) The obligations relating to crop diversification should be applied in a way that takes into account the difficulty for smaller farms to diversify, while continuing to make progress towards enhanced environmental benefit, and in particular the improvement of soil quality. Exceptions should be provided for farms that already fulfil the objectives of crop diversification as a result of being covered to a significant extent by grassland or fallowland, for specialised farms rotating their parcels each year or for farms that because of their geographical localisation would have excessive difficulties in introducing a third crop. In order to ensure that the obligations referred to in the crop diversification measure are applied in a proportionate and non-discriminatory way and lead to an enhanced environmental protection, the power to adopt certain acts should be delegated to the Commission in respect of recognising further genera and species and laying down rules concerning the application of the precise calculation of shares of different crops.

(42) For the sake of the environmental benefits of permanent grassland and in particular carbon sequestration, provision should be made for the maintenance of permanent grassland. This protection should consist of a ban on ploughing and conversion on the environmentally most sensitive areas in "Natura 2000" areas covered by Directives 92/43/EEC and 2009/147/EC, and of a more general safeguard, based on a ratio of permanent grassland, against conversion to other uses. Member States should be empowered to delineate further environmentally sensitive areas not covered by those Directives. In addition, they should choose at which territorial level the ratio should apply. In order to assure an efficient protection of permanent grassland, the power to adopt certain acts should be delegated to the Commission for the purpose of defining the framework for the designation, by Member States, of permanent grasslands not covered by Directives 92/43/EEC or 2009/147/EC.

(43) In order to ensure that the ratio of permanent grassland to the total agricultural area is correctly determined and maintained, the power to adopt certain acts should be delegated to the Commission in respect of the establishment of detailed methods for the determination of that ratio, detailed rules on maintenance of permanent grassland and the relevant time frame for an obligation upon individual farmers to reconvert land.

(44) Ecological focus areas should be established, in particular, in order to safeguard and improve biodiversity on farms. The ecological focus area should therefore consist of areas directly affecting biodiversity such as land lying fallow, landscape features, terraces, buffer strips, afforested areas and agro-forestry areas, or indirectly affecting biodiversity through a reduced use of inputs on the farm, such as areas covered by catch crops and winter green cover. The obligations laid down in respect of the ecological focus area should be applied in a way that avoids putting a disproportionate burden on smaller farms in comparison to the additional enhanced environmental benefit. Exceptions should be provided for farms that already fulfil the objectives of ecological focus areas by being covered to a significant extent by grassland or fallowland. Exceptions should also be provided, in the case of predominantly forested Member States, for farmers that pursue an agricultural activity in areas facing natural constraints in certain predominantly forested areas where there is a significant risk of land abandonment. In addition, provision should be made for the possibility for Member States and farmers to implement at a regional or collective level the obligation in order to obtain adjacent ecological focus areas that are more beneficial for the environment. For the sake of simplification, Member States should have the option to standardise the measurement of the ecological focus areas.

(45) In order to ensure the that ecological focus areas are established in an efficient and coherent way, while taking into account Member States' specific characteristics, the power to adopt certain acts should be delegated to the Commission in respect of laying down further criteria for the qualification of areas as ecological focus areas; recognising other types of ecological focus areas; establishing conversion and weighting factors for certain types of ecological focus area; establishing rules for the implementation, by Member States, of a part of the ecological focus area at regional level; laying down rules for collective implementation of the obligation to keep ecological focus areas by holdings in close proximity; establishing the framework for the criteria, to be defined by Member States, for identifying such close proximity; and establishing the methods of determination of the ratio of forest to agricultural land. When adding other types of ecological focus area, the Commission should ensure that they aim to improve the general environmental performance of the holding, in particular as regards biodiversity, the improvement of soil and water quality, the preservation of landscape and meeting the climate change mitigation and adaptation objectives.

(46) 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 direct payments ceilings to grant an annual area-based payment, on top of the basic payment, to all farmers operating in those areas or in some of those areas, where decided by the Member State. That payment should not replace the support given under rural development programmes and should not be granted to farmers in areas which were designated in accordance with Regulation (EC) No 1698/2005 but have not been designated in accordance with Regulation (EU) No 1305/2013.

(47) 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. For that purpose, Member States should use part of their national ceilings for direct payments to grant to young farmers an annual payment, on top of the basic payment. Member States should be able to decide on a calculation method for that payment and, if that method implies an obligation to set a limit on the payment per farmer, such a limit is to be set in respect of the general principles of Union law. Since it should only cover the initial period of the life of the business and should not become an operating aid, that payment should only be granted during a maximum period of five years. It should be available to young farmers commencing their agricultural activity who are no more than 40 years of age in the year of the first submission of the application under the basic payment scheme or under the single area payment scheme.

(48) In order to guarantee the protection of the rights of beneficiaries and to avoid discrimination between them, the power to adopt certain acts should be delegated to the Commission in respect of defining the conditions under which a legal person may be considered eligible for receiving the payment for young farmers.

(49) Member States should be allowed to use part of their national ceilings for direct payments for coupled support in certain sectors or regions 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 in their specific sectors or 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 8 % of their national ceilings for this support, or 13 % where their level of coupled support exceeds 5 % in at least one of the years of the period 2010-2014 or where they apply the single area payment scheme until 31 December 2014. Furthermore, in order to maintain the protein-based autonomy of the breeding sector, Member States which decide to use at least 2 % of their national ceilings to support the production of protein crops should be allowed to increase those percentages by up to two percentage points. In duly justified cases where certain sensitive needs in a sector or a region are demonstrated, and upon approval by the Commission, Member States should be allowed to use more than 13 % of their national ceiling. As an alternative to those percentages, Member States may choose to use up to EUR 3 million per year for financing the coupled support. Coupled support should only be granted to the extent necessary to create an incentive to maintain current levels of production in the sectors or regions concerned. That support should also be available to farmers holding, on31 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 13 % of the annual national ceiling fixed per Member State, the Commission should be further empowered to adopt implementing acts without applying Regulation (EU) No 182/2011.

(50) 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 certain acts should be delegated to the Commission in respect of establishing the conditions for granting voluntary coupled support, as well as rules on its consistency with other Union measures and on the cumulation of support.

(51) In order to ensure against any risk of disruption to production in the cotton producing regions, a part of support to the cotton sector under Regulation (EC) No 73/2009 continued to be linked to the cultivation of cotton through a crop-specific payment per eligible hectare, taking into account all relevant factors. This situation should be maintained in accordance with the objectives set out in Protocol No 4 on cotton attached to the 1979 Act of Accession.

(52) In order to ensure the efficient application and management of the crop-specific payment for cotton, the power to adopt certain acts should be delegated to the Commission in respect of establishing rules and conditions for the authorisation of land and varieties for the purposes of the crop-specific payment for cotton; rules on the conditions for the granting of that payment, on the eligibility requirements and the agronomic practices; criteria for the approval of interbranch organisations; obligations for producers; and rules governing the situation where the approved interbranch organisation does not satisfy those criteria.

(53) Chapter 2 of Council Regulation (EC) No 637/2008 (17) required each cotton producing Member State to submit to the Commission either every four years and for the first time by 1 January 2009 a draft four-year restructuring programme, or by 31 December 2009 a single draft modified eight-year restructuring programme. 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 1305/2013. Such measures would also allow for a greater co-ordination with measures in other sectors. The acquired rights and legitimate expectations of undertakings already involved in restructuring programmes should, however, be respected. Therefore, the ongoing programmes of four or eight years should be allowed to run their course, with no possiblity of extension. Funds available from the four-year programmes could then be integrated into the available Union funds for measures under rural development from 2014. Given the programming period, funds available after the end of the eight-year programmes would not be useful in rural development programmes in 2018, and could therefore be more usefully transferred to support schemes under this Regulation, as already provided for in 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 and should therefore be repealed.

(54) Member States should be allowed to establish a simple and specific scheme for small farmers in order to reduce the administrative costs linked to the management and control of direct support. For that purpose, Member States should be allowed to establish either a lump-sum payment that replaces all direct payments, or a payment based on the amount due to the farmers each year. Rules simplifying formalities should be introduced by reducing, inter alia, 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 1306/2013 without jeopardising 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 1306/2013 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, in principle, be limited to existing holdings. Participation of farmers in the scheme should be optional. However, in order to further increase the impact of the scheme in terms of simplification, Member States should be allowed to include certain farmers in the scheme automatically, subject to the possibility for them to opt-out.

(55) In order to ensure legal certainty, the power to adopt certain acts should be delegated to the Commission in respect of establishing conditions for participation in the small farmers scheme if the situation of the participating farmer changes.

(56) In the interest of simplification and in order 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 (EU) No 228/2013. As a consequence, provisions in this Regulation relating to the basic payment and related payments, to coupled support and to the small farmers scheme should not apply to those regions.

(57) 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 correct application of the rules set out in this Regulation and to make such notifications fast, efficient, accurate, cost-effective and compatible with the protection of personal data, the power to adopt certain acts should be delegated to the Commission in respect of establishing the necessary measures regarding notifications to be made by Member States to the Commission or for the purpose of checking, controlling, monitoring, evaluating and auditing direct payments and for complying with requirements laid down in international agreements, including notification requirements under those agreements and in respect of further rules on the nature and type of the information to be notified, the categories of data to be processed and maximum period of retention, the access rights to the information or information systems and the conditions of publication of the information.

(58) Personal data collected for the purposes of the application of direct payments should be processed in a way that is compatible with those purposes. It should also be made anonymous, be aggregated when processed for monitoring or evaluation purposes, and be protected in accordance with Union law 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 (18) and Regulation (EC) No 45/2001 of the European Parliament and of the Council (19). Data subjects should be informed of such processing and of their data protection rights.

(59) The European Data Protection Supervisor was consulted and delivered an opinion on 14 December 2011 (20).

(60) 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 certain acts should be delegated to the Commission in respect of establishing the necessary measures to protect any acquired rights and legitimate expectations of farmers.

(61) 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: setting the amount to be included in the special national de-mining reserve for Croatia; fixing the annual national ceiling for the basic payment scheme; adopting rules on applications for allocation of payment entitlements; adopting measures regarding the reversion of non-activated payment entitlements to the national reserve; adopting modalities of the notification of transfer of payment entitlements to the national authorities and the deadlines within which such notifications are to take place; fixing the annual national ceiling for the single area payment scheme; adopting rules on applications for allocation of payment entitlements submitted in the year of allocation of payment entitlements where Member States change to the basic payment scheme; fixing annual ceilings for the redistributive payment. Those powers should be exercised in accordance with Regulation (EU) No 182/2011.

(62) In order to ensure uniform conditions for the implementation of this Regulation and to avoid unfair competition or discrimination between farmers, implementing powers should also be conferred on the Commission in respect of: adopting rules on the procedure, including on the timetables for their submission, for the Member States' notifications and the Commission assessment as regards equivalent practices; adopting certain limits within which the obligation to maintain permanent grassland is considered to be being complied with; setting out the annual ceiling for the payment for agricultural practices beneficial for the climate and the environment; setting out the annual ceiling for the payment for areas with natural constraints; setting out the annual ceiling for the payment for young farmers. Those powers should be exercised in accordance with Regulation (EU) No 182/2011.

(63) In order to ensure uniform conditions for the implementation of this Regulation and to avoid unfair competition or discrimination between farmers, implementing powers should also be conferred on the Commission in respect of: setting out the annual ceilings for the voluntary coupled support; adopting rules on the procedure for the assessment and approval of decisions in the framework of the voluntary coupled support; adopting rules on the authorisation procedure and on the notifications to the producers related to the authorisation of land and varieties for the purposes of the crop-specific payment for cotton; adopting rules on the calculation of the reduction of the amount of the crop-specific payment for cotton; adopting rules concerning general notification requirements and methods; and adopting necessary and justifiable measures to resolve specific problems in an emergency. Those powers should be exercised in accordance with Regulation (EU) No 182/2011.

(64) In order to solve urgent problems occurring in one or more Member States while ensuring the continuity of the direct payments system, the Commission should adopt immediately applicable implementing acts where, in duly justified cases, extraordinary circumstances affect the granting of support and jeopardise the effective implementation of the payments under the support schemes listed in this Regulation.

(65) Since the objectives of this Regulation cannot be sufficiently achieved by the Member States but can rather, by reason of 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, be better achieved at Union level through the multiannual guarantee of Union financing and by concentrating on clearly identified priorities, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union (TEU). In accordance with the principle of proportionality as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.

(66) Given that Regulation (EC) No 73/2009 is to continue to apply in 2014, this Regulation should apply in general from 1 January 2015. However, the provisions of this Regulation on flexibility between pillars provide for the possibility for Member States to take decisions and notify them to the Commssion by 31 December 2013. In addition, some other provisions of this Regulation require action to be taken in 2014. Those provisions should, therefore, apply from the entry into force of this Regulation.

(67) Due to the urgency of preparing the smooth implementation of the measures envisaged, this Regulation should enter into force on the day of its publication in the Official Journal of the European Union,

HAVE ADOPTED THIS REGULATION:

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 ("direct payments");

(b) specific rules concerning: (i) a basic payment for farmers ("the basic payment scheme" and a transitional simplified scheme, "the single area payment scheme"); (ii) a voluntary transitional national aid for farmers; (iii) a voluntary redistributive payment; (iv) a payment for farmers observing agricultural practices beneficial for the climate and the environment; (v) a voluntary payment for farmers in areas with natural constraints; (vi) a payment for young farmers commencing their agricultural activity; (vii) a voluntary coupled support scheme; (viii) a crop-specific payment for cotton; (ix) a voluntary simplified scheme for small farmers; (x) a framework within which Bulgaria, Croatia and Romania may complement direct payments.

Article 2

Amendment of Annex I

In order to ensure legal certainty, the Commission shall be empowered to adopt delegated acts in accordance with Article 70 amending the list of support schemes set out in Annex I to the extent necessary to take account of any new legislative acts on support schemes which may be adopted after the adoption of this Regulation.

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 TFEU ("the outermost regions") and to the direct payments granted in the smaller Aegean islands in accordance with Regulation (EU) No 229/2013.

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

Article 4

Definitions and related provisions

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, regardless of the legal status granted to such group and its members by national law, whose holding is situated within the territorial scope of the Treaties, as defined in Article 52 TEU in conjunction with Articles 349 and 355 TFEU, 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: (i) production, rearing or growing of agricultural products, including harvesting, milking, breeding animals, and keeping animals for farming purposes, (ii) maintaining an agricultural area in a state which makes it suitable for grazing or cultivation without preparatory action going beyond usual agricultural methods and machineries, based on criteria established by Member States on the basis of a framework established by the Commission, or (iii) carrying out a minimum activity, defined by Member States, on agricultural areas naturally kept in a state suitable for grazing or cultivation;

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

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

(f) "arable land" means land cultivated for crop production or areas available for crop production but lying 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 28 of Regulation (EU) No 1305/2013, 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 and permanent pasture that occupy the land for five years or more and yield repeated harvests, including nurseries and short rotation coppice;

(h) "permanent grassland and permanent pasture" (together referred to as "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 more; it may include other species such as shrubs and/or trees which can be grazed provided that the grasses and other herbaceous forage remain predominant as well as, where Member States so decide, land which can be grazed and which forms part of established local practices where grasses and other herbaceous forage are traditionally not predominant in grazing areas;

(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, — nurseries of 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 0602 90 41 to be defined by Member States that consist of woody, perennial crops, the rootstock or stools of which remain 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;

(l) "sale" means the sale or any other definitive transfer of ownership of land or payment entitlements; it does not include the sale of land where land is transferred to public authorities or for use in the public interest and where the transfer is carried out for non-agricultural purposes;

(m) "lease" means a rental agreement or similar temporary transaction;

(n) "transfer" means the lease or sale or actual inheritance or anticipated inheritance of land or payment entitlements or any other definitive transfer thereof; it does not cover the reversion of entitlements upon expiry of a lease.

2. Member States shall:

(a) establish criteria to be met by farmers in order to fulfil the obligation to maintain an agricultural area in a state suitable for grazing or cultivation, as referred to in point (c)(ii) of paragraph 1;

(b) where applicable in a Member State, define the minimum activity to be carried out on agricultural areas naturally kept in a state suitable for grazing or cultivation, as referred to in point (c)(iii) of paragraph 1;

(c) define the tree species qualifying for short rotation coppice and determine the maximum harvest cycle in respect of those tree species, as referred to in point (k) of paragraph 1.

Member States may decide that land which can be grazed and which forms part of established local practices where grasses and other herbaceous forage are traditionally not predominant in grazing areas is to be considered to be permanent grassland, as referred to in point (h) of paragraph 1.

3. In order to ensure legal certainty, the Commission shall be empowered to adopt delegated acts in accordance with Article 70 establishing:

(a) the framework within which Member States are to establish the criteria to be met by farmers in order to fulfil the obligation to maintain an agricultural area in a state suitable for grazing or cultivation, as referred to in point (c)(ii) of paragraph 1;

(b) the framework within which Member States shall define the minimum activity to be carried out on agricultural areas naturally kept in a state suitable for grazing or cultivation, as referred to in point (c)(iii) of paragraph 1;

(c) the criteria to determine the predominance of grasses and other herbaceous forage and the criteria to determine the established local practices referred to in point (h) of paragraph 1.

TITLE II

GENERAL PROVISIONS ON DIRECT PAYMENTS

CHAPTER 1

Common rules on direct payments

Article 5

General common agricultural policy provisions

Regulation (EU) No 1306/2013 and the provisions adopted pursuant thereto shall apply to the schemes provided for in this Regulation.

Article 6

National ceilings

1. For each Member State and for each year, the national ceiling comprising the total value of all allocated payment entitlements, of the national reserve or the regional reserves and of the ceilings fixed in accordance with Articles 42, 47, 49, 51 and 53 shall be as set out in Annex II.

Where a Member State makes use of the option provided for in Article 22(2), the national ceiling set out in Annex II for that Member State for the respective year may be exceeded by the amount calculated in accordance with that paragraph.

2. By way of derogation from paragraph 1, for each Member State applying the single area payment scheme and for each year, the national ceiling, comprising the ceilings fixed in accordance with Articles 36, 42, 47, 49, 51 and 53, shall be as set out in Annex II.

3. 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 Member States in accordance with Article 14 and those resulting from the application of Article 20(2), the Commission shall be empowered to adopt delegated acts in accordance with Article 70 adapting 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 corresponding ceiling set out in Annex III.

Where the total amount of direct payments to be granted in a Member State would be higher than the ceiling set out in Annex III, that Member State shall make a linear reduction in the amounts of all direct payments with the exception of direct payments granted under Regulation (EU) No 228/2013 and Regulation (EU) No 229/2013.

2. For each Member State and for each calendar year, the estimated product of the reduction of payments referred to in Article 11 (which is reflected by the difference between the national ceiling set out in Annex II, to which is added the amount available in accordance with Article 58, and the net ceiling set out in Annex III) shall be made available as Union support for measures under rural development programming financed under the European Agricultural Fund for Rural Development (EAFRD) as specified in Regulation (EU) No 1305/2013.

3. 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 taken by Member States pursuant to Article 14, the Commission shall be empowered to adopt delegated acts in accordance with Article 70 adapting the ceilings set out in Annex III.

Article 8

Financial discipline

1. The adjustment rate determined in accordance with Article 26 of Regulation (EU) No 1306/2013 shall only apply to direct payments in excess of EUR 2 000 to be granted to farmers in the corresponding calendar year.

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

As a result of the gradual introduction of direct payments provided for in Article 17, paragraph 1 of this Article shall apply to Croatia from 1 January 2022.

3. In order to ensure the correct application of the adjustments of direct payments with respect to financial discipline, the Commission shall be empowered to adopt delegated acts in accordance with Article 70 laying down rules on the basis for calculation of reductions to be applied by Member States to farmers pursuant to paragraph 1 of this Article.

4. In the case of a legal person, or a group of natural or legal persons, Member States may apply the adjustment rate referred to in paragraph 1 at the level of the members of those legal persons or groups where national law provides for the individual members to assume rights and obligations comparable to those of individual farmers who have the status of a head of holding, in particular as regards their economic, social and tax status, provided that they have contributed to strengthening the agricultural structures of the legal persons or groups concerned.

Article 9

Active farmer

1. No direct payments shall be granted to natural or legal persons, or to groups of natural or legal persons, whose agricultural areas are mainly areas naturally kept in a state suitable for grazing or cultivation and who do not carry out on those areas the minimum activity defined by Member States in accordance with point (b) of Article 4(2).

2. No direct payments shall be granted to natural or legal persons, or to groups of natural or legal persons, who operate airports, railway services, waterworks, real estate services, permanent sport and recreational grounds.

Where appropriate, Member States may, on the basis of objective and non-discriminatory criteria, decide to add to the list in the first subparagraph any other similar non-agricultural businesses or activities, and may subsequently decide to withdraw any such additions.

A person or group of persons falling within the scope of the first or second subparagraph shall, however, be regarded as an active farmer if it provides verifiable evidence, in the form that is required by Member States, which demonstrates any of the following:

(a) that the annual amount of direct payments is at least 5 % of the total receipts that it obtained from non-agricultural activities in the most recent fiscal year for which such evidence is available;

(b) that its agricultural activities are not insignificant;

(c) that its principal business or company objects consist of exercising an agricultural activity.

3. In addition to paragraphs 1 and 2, Member States may decide, on the basis of objective and non-discriminatory criteria, that no direct payments are to be granted to natural or legal persons, or to groups of natural or legal persons:

(a) whose agricultural activities form only an insignificant part of their overall economic activities; and/or

(b) whose principal activity or company objects do not consist of exercising an agricultural activity.

4. Paragraphs 2 and 3 shall not apply to farmers who only received direct payments not exceeding a certain amount for the previous year. Such amount shall be decided by Member States on the basis of objective criteria such as their national or regional characteristics, and shall not be higher than EUR 5 000.

5. In order to guarantee the protection of the rights of farmers, the Commission shall be empowered to adopt delegated acts in accordance with Article 70 laying down:

(a) criteria for determining the cases where a farmer's agricultural area is to be considered to be mainly an area naturally kept in a state suitable for grazing or cultivation;

(b) criteria for establishing the distinction between receipts resulting from agricultural and non-agricultural activities;

(c) criteria for establishing the amounts of direct payments referred to in paragraphs 2 and 4, especially concerning direct payments in the first year of allocation of payment entitlements where the value of the payment entitlements is not yet definitively established, as well as concerning direct payments for new farmers;

(d) criteria that farmers are to meet in order to prove for the purposes of paragraphs 2 and 3 that their agricultural activities are not insignificant and that their principal business or company objects consist of exercising an agricultural activity.

6. Member States shall notify the Commission by 1 August 2014 of any decision referred to in paragraphs 2, 3 or 4 and, in the case of amendments thereto, within two weeks of the date on which any decision to amend was taken.

Article 10

Minimum requirements for receiving direct payments

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

(a) where the total amount of direct payments claimed or due to be granted before the application of Article 63 of Regulation (EU) No 1306/2013 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 application of Article 63 of Regulation (EU) No 1306/2013 is less than one hectare.

2. In order to take account of the structure of their agricultural economies, Member States may adjust the thresholds set out in points (a) and (b) of paragraph 1 within the limits set out in Annex IV.

3. Where a Member State has decided to apply an area threshold pursuant to point (b) of paragraph 1, it shall nevertheless apply point (a) of that paragraph to those farmers receiving the animal-related coupled support referred to in Title IV who hold fewer hectares than the area threshold.

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

5. In Bulgaria and Romania, for the year 2015, the amount claimed or due to be granted as referred to in point (a) of paragraph 1 shall be calculated on the basis of the relevant amount set out in point A of Annex V.

In Croatia, for the years 2015-2021, the amount claimed or due to be granted as referred to in point (a) of paragraph 1 shall be calculated on the basis of the amount set out in point A of Annex VI.

Article 11

Reduction of payments

1. Member States shall reduce the amount of direct payments to be granted to a farmer pursuant to Chapter 1 of Title III for a given calendar year by at least 5 % for the part of the amount exceeding EUR 150 000.

2. Before applying paragraph 1, Member States may subtract the salaries linked to an agricultural activity actually paid and declared by the farmer in the previous calendar year, including taxes and social contributions related to employment, from the amount of direct payments to be granted to a farmer pursuant to Chapter 1 of Title III in a given calendar year. Where no data is available on the salaries actually paid and declared by the farmer in the previous calendar year, the most recent data available shall be used.

3. Where a Member State decides to grant a redistributive payment to farmers pursuant to Chapter 2 of Title III and to use more than 5 % of the annual national ceiling set out in Annex II for that purpose, it may decide not to apply this Article.

Where a Member State decides to grant a redistributive payment to farmers pursuant to Chapter 2 of Title III and the application of the maximum limits set out in Article 41(4) prevents it from using more than 5 % of the annual national ceiling set out in Annex II for that purpose, that Member State may decide not to apply this Article.

4. No advantage by means of avoiding reductions of the payment shall be granted in favour of farmers in respect of whom it is established that they artificially created, after 18 October 2011, the conditions to avoid the effects of this Article.

5. In the case of a legal person, or a group of natural or legal persons, Member States may apply the reduction referred to in paragraph 1 at the level of the members of those legal persons or groups where national law provides for the individual members to assume rights and obligations comparable to those of individual farmers who have the status of a head of holding, in particular as regards their economic, social and tax status, provided that they have contributed to strengthening the agricultural structures of the legal persons or groups concerned.

6. Member States shall notify the Commission by 1 August 2014 of the decisions taken in accordance with this Article and of any estimated product of reductions for the years 2015 to 2019.

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 211(1) of Regulation (EU) No 1308/2013 of the European Parliament and of the Council (21), Articles 107, 108 and 109 TFEU shall not apply to payments made by Member States in conformity with this Regulation.

Article 14

Flexibility between pillars

1. By 31 December 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 1305/2013, up to 15 % of their annual national ceilings for calendar year 2014 set out in Annex VIII to Regulation (EC) No 73/2009 and of their annual national ceilings for calendar years 2015 to 2019 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 31 December 2013. That decision shall set out the percentage referred to in that subparagraph, which may vary by calendar year.

Member States which do not take the decision referred to in the first subparagraph in respect of calendar year 2014 may, by 1 August 2014, take that decision in respect of calendar years 2015 to 2019. They shall notify the Commission of any such decision by that date.

Member States may decide to review the decisions referred to in this paragraph with effect from calendar year 2018. Any decisions based on such review shall not result in a decrease of the percentage notified to the Commission in accordance with the first, second and third subparagraphs. Member States shall notify the Commission of any decision based on such review by 1 August 2017.

2. By 31 December 2013, Member States which do not take the decision referred to in paragraph 1 may decide to make available as direct payments up to 15 % or, in the case of Bulgaria, Estonia, Spain, Latvia, Lithuania, Poland, Portugal, Romania, Slovakia, Finland, Sweden and the United Kingdom, up to 25 % of the amount allocated to support for measures under rural development programming financed under the EAFRD in the period 2015-2020, as specified in Regulation (EU) No 1305/2013. 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 31 December 2013. That decision shall set out the percentage referred to in that subparagraph, which may vary by calendar year.

Member States which do not take the decision referred to in the first subparagraph in respect of financial year 2015 may, by 1 August 2014, take that decision in respect of financial years 2016 to 2020. They shall notify the Commission of any such decision by that date.

Member States may decide to review the decisions referred to in this paragraph with effect for financial years 2019 and 2020. Any decisions based on such review shall not result in an increase of the percentage notified to the Commission in accordance with the first, second and third subparagraphs. Member States shall notify the Commission of any decision based on such review by 1 August 2017.

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. That review may lead to the adoption of legislative acts, delegated acts under Article 290 TFEU or implementing acts under Article 291 TFEU.

CHAPTER 2

Provisions applying to Bulgaria, Croatia and Romania

Article 16

Gradual introduction of direct payments in Bulgaria and Romania

For Bulgaria and Romania, the ceilings fixed in accordance with Articles 42, 47, 49, 51, 53 and 65 shall, for 2015, be established on the basis of the amount set out in point A of Annex V.

Article 17

Gradual introduction of direct payments in Croatia

In Croatia, direct payments shall be introduced in accordance with the following schedule of increments expressed as a percentage of the corresponding level of the direct payments as applied from 2022:

25 % in 2013,

30 % in 2014,

35 % in 2015,

40 % in 2016,

50 % in 2017,

60 % in 2018,

70 % in 2019,

80 % in 2020,

90 % in 2021,

100 % from 2022.

Article 18

Complementary national direct payments and direct payments in Bulgaria and Romania

1. In 2015, Bulgaria and Romania may use national direct payments in order to complement payments granted under the basic payment scheme referred to in Sections 1, 2 and 3 of Chapter 1 of Title III. The total amount of those payments shall not exceed the relevant amount set out in point B of Annex V.

2. In 2015, Bulgaria may use national direct payments in order to complement payments granted under the crop-specific payment for cotton referred to in Chapter 2 of Title IV. The total amount of those payments shall not exceed the amount set out in point C of Annex V.

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

Article 19

Complementary national direct payments for Croatia

1. Subject to authorisation by the Commission, Croatia may complement any of the support schemes listed in Annex I, where relevant.

2. The amount of complementary national direct payments which may be granted in a given year and for a given support scheme shall be limited by a specific financial envelope. This envelope shall be established as the difference between:

(a) the amount of direct support available per support scheme concerned after the full introduction of direct payments in accordance with Article 17 for the calendar year 2022, and

(b) the amount of direct support available per support scheme concerned after the application of the schedule of increments in accordance with Article 17 for the calendar year concerned.

3. The total amount of complementary national direct payments granted shall not be higher than the ceiling set out in point B of Annex VI for a corresponding calendar year.

4. Croatia may decide, on the basis of objective criteria and after authorisation by the Commission, on the amounts of complementary national direct payments to be granted.

5. The Commission shall adopt implementing acts authorising the payments under this Article, specifying the relevant support schemes and defining the level up to which the complementary national direct payments may be paid.

As regards complementary national direct payments intended to complement the voluntary coupled support referred to in Chapter 1 of Title IV, the implementing acts shall also specify the specific types of farming or the specific agricultural sectors referred to in Article 52(3) to which the complementary national direct payments may relate.

Those implementing acts shall be adopted without applying the procedure referred to in Article 71(2) or (3).

6. The eligibility conditions for complementary national direct payments for Croatia shall be identical to those for support under corresponding support schemes as laid down in this Regulation.

7. Complementary national direct payments for Croatia shall be subject to any adjustments which may be rendered necessary by developments in the CAP. They shall be granted in accordance with objective criteria and in such a way as to ensure equal treatment between farmers and to avoid distortions of the market and of competition.

8. Croatia shall submit a report providing information on the measures for the implementation of the complementary national direct payments by 30 June of the year following their implementation. The report shall cover at least the following:

(a) any changes in the situation affecting the complementary national direct payments;

(b) for each complementary national direct payment, the numbers of beneficiaries and the total amount of complementary national direct payment granted, as well as the hectares and the number of animals or other units for which that complementary national direct payment has been granted;

(c) a report on control measures applied in relation to the complementary national direct payments granted.

Article 20

Special national de-mining reserve for Croatia

1. From 2015 onwards, Croatia shall notify the Commission by 31 January of each year of the areas which have been identified in accordance with Article 57a(10) of Regulation (EC) No 73/2009 and which were returned to use for agricultural activities in the previous calendar year.

Croatia shall also notify the Commission of the number of payment entitlements available to farmers on 31 December of the previous calendar year, as well as the amount remained unspent in the special national de-mining reserve on that same date.

Where applicable, the notifications provided in the first and second subparagraphs shall be made per region as defined in accordance with Article 23(1) of this Regulation.

2. When adapting Annex II pursuant to Article 6(3), the Commission shall calculate on a yearly basis the amount to be added to the amounts set for Croatia in that Annex in order to finance the support to be granted under the schemes listed in Annex I for the areas referred to in paragraph 1 of this Article. This amount shall be calculated on the basis of the data notified by Croatia in accordance with paragraph 1 of this Article and the estimated average direct payments per hectare in Croatia for the year concerned.

The maximum amount to be added in accordance with the first subparagraph, on the basis of all the areas notified by Croatia in accordance with paragraph 1 of this Article until 2022, shall be EUR 9 600 000 and shall be subject to the schedule of introduction of direct payments in accordance with Article 17. The resulting maximum annual amounts are set out in Annex VII.

3. The Commission shall adopt implementing acts setting the share of the amount to be added in accordance with paragraph 2 which Croatia shall include in the special national de-mining reserve in order to allocate payment entitlements for the areas referred to in paragraph 1. That share shall be calculated on the basis of the ratio between the ceiling for the basic payment scheme and the national ceiling set out in Annex II before the national ceiling's increase in accordance with paragraph 2. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 71(2).

4. For the years 2015 to 2022, Croatia shall use the special national de-mining reserve to allocate payment entitlements to farmers on the basis of de-mined land declared by the farmers in the year in question where:

(a) such land consists of eligible hectares within the meaning of Article 32(2) to (5);

(b) the land in question was returned to use for agricultural activities during the previous calendar year; and

(c) the land has been notified to the Commission in accordance with paragraph 1 of this Article.

5. The value of the payment entitlements established under this Article shall be the national or regional average value of payment entitlements in the year of allocation within the limits of the amount available in the special national de-mining reserve.

6. In order to take account of the consequences of the return of de-mined land to use for agricultural activities as notified by Croatia in accordance with this Article, the Commission shall be empowered to adopt delegated acts in accordance with Article 70 adapting the amounts set out in Annex VI.

TITLE III

BASIC PAYMENT SCHEME, SINGLE AREA PAYMENT SCHEME AND RELATED PAYMENTS

CHAPTER 1

Basic payment scheme and single area payment scheme

Section 1

Setting up of the basic payment scheme

Article 21

Payment entitlements

1. Support under the basic payment scheme shall be available to farmers:

(a) who obtain payment entitlements under this Regulation through allocation pursuant to Article 20(4), through first allocation pursuant to Article 24 or Article 39, through allocation from the national reserve or regional reserves pursuant to Article 30 or through transfer pursuant to Article 34; or

(b) who comply with Article 9 and hold owned or leased-in payment entitlements in a Member State which has decided, in accordance with paragraph 3, to keep its existing payment entitlements.

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 2014.

3. By way of derogation from paragraph 2, Member States which established the single payment scheme in accordance with Section I of Chapter 5 of Title III or Chapter 6 of Title III of Regulation (EC) No 1782/2003 or Chapter 3 of Title III of Regulation (EC) No 73/2009 may, by 1 August 2014, decide to keep the existing payment entitlements. They shall notify any such decision to the Commission by that date.

4. As regards Member States which take the decision referred to in paragraph 3, when the number of owned or leased-in payment entitlements established in accordance with Regulation (EC) No 1782/2003 and with Regulation (EC) No 73/2009 which a farmer holds on the final date for submission of applications to be set in accordance with point (b) of the first subparagraph of Article 78 of Regulation (EU) No 1306/2013 exceeds the number of eligible hectares which the farmer declares in his aid application in accordance with point (a) of the first subparagraph of Article 72(1) of Regulation (EU) No 1306/2013 for 2015, and which are at his disposal on a date fixed by the Member State, which shall be no later than the date fixed in that Member State for amending such an aid application, the number of payment entitlements exceeding the number of eligible hectares shall expire on the latter date.

Article 22

Basic payment scheme ceiling

1. The Commission shall adopt implementing acts setting, for each Member State, the annual national ceiling for the basic payment scheme by deducting from the annual national ceiling set out in Annex II the ceilings fixed in accordance with Articles 42, 47, 49, 51 and 53. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 71(2).

2. For each Member State, the amount calculated in accordance with the paragraph 1 of this Article may be increased by a maximum of 3 % of the relevant annual national ceiling set out in Annex II after deduction of the amount resulting from the application of Article 47(1) for the relevant year. When a Member State applies such an increase, that increase shall be taken into account by the Commission when setting the annual national ceiling for the basic payment scheme pursuant to paragraph 1 of this Article. For that purpose, Member States shall notify the Commission by 1 August 2014 of the annual percentages by which the amount calculated pursuant to paragraph 1 of this Article is to be increased.

3. Member States may review their decision referred to in paragraph 2 on an annual basis and shall notify the Commission of any decision based on such review by 1 August of the year preceding its application.

4. For each Member State and each year, the total value of all payment entitlements and the national reserve or the regional reserves shall equal the respective annual national ceiling set by the Commission pursuant to paragraph 1.

5. If the ceiling for a Member State set by the Commission pursuant to paragraph 1 is different from that of the previous year as a result of any decision taken by that Member State in accordance with paragraph 3 of this Article, the third and fourth subparagraphs of Article 14(1), the third and fourth subparagraphs of Article 14(2), Article 42(1), the second subparagraph of Article 49(1), the second subparagraph of Article 51(1), or Article 53, that Member State shall linearly reduce or increase the value of all payment entitlements in order to ensure compliance with paragraph 4 of this Article.

Article 23

Regional allocation of the national ceilings

1. Member States may decide, by 1 August 2014, to apply the basic payment scheme at regional level. In such cases, they shall define the regions in accordance with objective and non-discriminatory criteria such as their agronomic and socio-economic characteristics, their regional agricultural potential, or their institutional or administrative structure.

Member States applying Article 36 may take the decision referred to in the first subparagraph by 1 August of the year preceding the first year of implementation of the basic payment scheme.

2. Member States shall divide the annual national ceiling for the basic payment scheme referred to in Article 22(1) between the regions in accordance with objective and non-discriminatory criteria.

Member States not applying Article 30(2) shall make that division after applying the linear reduction provided for in Article 30(1).

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 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 the relevant regions.

5. Member States applying paragraph 1 may decide to cease the application of the basic payment scheme at regional level from a date to be set by them.

6. Member States applying the first subparagraph of paragraph 1 shall notify the Commission of the decision referred to in that subparagraph and of the measures taken for the application of paragraphs 2 and 3 by 1 August 2014.

Member States applying the second subparagraph of paragraph 1 shall notify the Commission of any decision referred to in that subparagraph and of the measures taken for the application of paragraphs 2 and 3 by 1 August of the relevant year.

Member States applying paragraph 1 shall notify the Commission of any decision referred to in paragraph 5 by 1 August of the year preceding the first year of implementation of that decision.

Article 24

First allocation of payment entitlements

1. Payment entitlements shall be allocated to farmers who are entitled to be granted direct payments in accordance with Article 9 of this Regulation provided that:

(a) they apply for allocation of payment entitlements under the basic payment scheme by the final date for submission of applications in 2015 to be set in accordance with point (b) of the first subparagraph of Article 78 of Regulation (EU) No 1306/2013, except in case of force majeure or exceptional circumstances; and

(b) they were entitled to receive payments, before any reduction or exclusion provided for in Chapter 4 of Title II of Regulation (EC) No 73/2009, in respect of an aid application for direct payments, for transitional national aid or for complementary national direct payments in accordance with Regulation (EC) No 73/2009 for 2013.

The first subparagraph shall not apply in Member States applying Article 21(3) of this Regulation.

Member States may allocate payment entitlements to farmers who are entitled to be granted direct payments in accordance with Article 9 of this Regulation, who fulfil the condition provided for in point (a) of the first subparagraph and who:

(a) did not receive payments for 2013 in respect of an aid application as referred to in the first subparagraph of this paragraph and who, on the date fixed by the Member State concerned in accordance with Article 11(2) of Commission Regulation (EC) No 1122/2009 (22) for the claim year 2013: (i) in Member States applying the single payment scheme: — were producing fruits, vegetables, ware potatoes, seed potatoes or ornamental plants, and did so on a minimum area expressed in hectares if the Member State concerned decides to adopt such a requirement, or — were cultivating vineyards; or (ii) in Member States applying the single area payment scheme, had only agricultural land that was not in good agricultural condition on 30 June 2003 as provided for in Article 124(1) of Regulation (EC) No 73/2009;

(b) in 2014, are allocated payment entitlements from the national reserve under the single payment scheme pursuant to Article 41 or 57 of Regulation (EC) No 73/2009; or

(c) never held owned or leased-in payment entitlements established under Regulation (EC) No 73/2009 or Regulation (EC) No 1782/2003 and who submit verifiable evidence that, on the date fixed by the Member State in accordance with Article 11(2) of Regulation (EC) No 1122/2009 for the claim year 2013, they produced, reared or grew agricultural products, including through harvesting, milking, breeding animals and keeping animals for farming purposes. Member States may establish their own additional objective and non-discriminatory eligibility criteria for this category of farmers as regards appropriate skills, experience or education.

2. Except in the case of force majeure or exceptional circumstances, the number of payment entitlements allocated per farmer in 2015 shall be equal to the number of eligible hectares, which the farmer declares in his aid application in accordance with point (a) of the first subparagraph of Article 72(1) of Regulation (EU) No 1306/2013 for 2015 and which are at his disposal on a date fixed by the Member State. That date shall be no later than the date fixed in that Member State for amending such an aid application.

3. Member States may apply one or more of the limitations, as set out in paragraphs 4 to 7, on the number of payment entitlements to be allocated under paragraph 2.

4. Member States may decide that the number of payment entitlements to be allocated shall be equal to either the number of eligible hectares which the farmer declared in accordance with Article 34(2) of Regulation (EC) No 73/2009 in 2013, or the number of eligible hectares referred to in paragraph 2 of this Article, whichever is the lowest. For Croatia, the use of this option shall be without prejudice to the allocation of payment entitlements for de–mined hectares in accordance with Article 20(4) of this Regulation.

5. Where the total number of eligible hectares referred to in paragraph 2 of this Article declared in a Member State would result in an increase of more than 35 % of the total number of eligible hectares declared in accordance with Article 35 of Regulation (EC) No 73/2009 in 2009, or in the case of Croatia in 2013, Member States may limit the number of payment entitlements to be allocated in 2015 to a minimum of either 135 % or 145 % of the total number of eligible hectares declared in 2009, or, in the case of Croatia, of the total number of eligible hectares declared in 2013, in accordance with Article 35 of Regulation (EC) No 73/2009.

When using this option, Member States shall allocate a reduced number of payment entitlements to farmers. That number shall be calculated by applying a proportional reduction to the additional number of eligible hectares declared by each farmer in 2015 compared to the number of eligible hectares within the meaning of Article 34(2) of Regulation (EC) No 73/2009 that that farmer declared in his aid application in 2011 or, in the case of Croatia, in 2013, without prejudice to the de-mined hectares for which payment entitlements are to be allocated in accordance with Article 20(4) of this Regulation.

6. Member States may decide to apply, for the purposes of establishing the number of payment entitl