EFTA SURVEILLANCE AUTHORITY DECISION No 54/96/COL of 15 May 1996 on the ninth amendment of the procedural and substantive rules in the field of State Aid

THE EFTA SURVEILLANCE AUTHORITY,

has amended the Procedural and Substantive Rules in the Field of State Aid (1), adopted on 19 January 1994 (2), as last amended by Decision No 53/96/COL (3), as follows:

1. Chapter 12 of the State Aid Guidelines shall be replaced by the following:

'12. THE DE MINIMIS RULE AND ITS APPLICATION (1)

12.1. The de minimis rule

(1) The EFTA Surveillance Authority is of the view that aid below a certain amount is considered not to have an appreciable effect on trade and competition between the Contracting Parties. Therefore Article 61 (1) of the EEA Agreement can be said not to apply and notification is not required for payments of aid as defined below.

(2) Individual awards of aid to any one firm of up to ECU 100 000 and schemes under which the amount of aid a given firm may receive over a three-year period is limited to that figure need not be notified under Article 1 (3) of Protocol 3 to the Surveillance and Court Agreement, provided that the conditions laid down below are observed.

(3) The three-year period to which the limit is to be applied should be regarded as beginning on the date when the firm first was granted aid under the de minimis rule.

(4) The ceiling for the de minimis aid applies to the total of all public assistance considered to be de minimis aid and will not affect the possibility of the recipient obtaining other aid under schemes approved by the EFTA Surveillance Authority.

(5) The ceiling will apply to all aid granted by national, regional and local authorities, and to aid of all kinds, irrespective of the form it takes or the objective pursued, with the exception of export aid, which is excluded from the benefit of the de minimis rule (2).

(6) The de minimis rule will be of interest primarily to SMEs, though it applies irrespective of the size of the recipient. It does not apply to the steel industry covered by ECSC Treaty nor to shipbuilding or transport.

12.2. Principles for calculating the cash grant equivalent of de minimis aid

(1) The limit in the de minimis rule is expressed as a cash grant of ECU 100 000. In cases where assistance is provided otherwise than as a grant, it has to be converted into its cash grant equivalent value for the purposes of applying the de minimis limit. Of the other forms in which aid with a low cash value is given, the commonest are soft loans, tax allowances and loan guarantees. The conversion of aid in these forms into its cash grant equivalent is to be carried out as follows.

(2) The cash grant equivalent should be calculated gross, i.e. before tax, if the aid is taxable. If the aid is not taxable, as in the case of some tax allowances, the nominal amount of the aid, which is both gross and net, should be taken.

(3) All aid receivable in the future should be discounted to its present value. The discount rate used should be the reference interest rate which applies at the time the aid is granted. However, a cash grant is to be counted as a single lump sum even if it is to be paid in instalments.

(4) The cash grant equivalent of a soft loan in a given year is the difference between the interest due at the reference interest rate and that actually paid. All the interest that will be saved until the loan has been fully repaid should be discounted to its value at the time the loan is granted and added together. An example of how to calculate the cash grant equivalent of a soft loan is given in section 12.4.

(5) The cash grant equivalent of a tax allowance is the saving in tax payments in the year concerned. Again, tax savings to be obtained in the future should be discounted to their present value using the reference interest rate.

(6) For loan guarantees, the cash grant equivalent in a given year can be either:

- calculated in the same way as the cash grant equivalent of a soft loan, once the premiums paid have been deducted, the interest subsidy representing the difference between the reference interest rate and the rate obtained thanks to the state guarantee (when the risk of default of payment is particularly high, e.g. due to a poor financial position or limited creditworthiness of the beneficiary, lack of security or owing to the terms of the guarantee itself, the use of this option has to be assessed in the light of other relevant rules applicable in such situations), or

- taken to be the difference between (a) the outstanding sum guaranteed, multiplied by the risk factor (the probability of default) and (b) any premium paid, i.e.

(guaranteed sum × risk) - premium

The risk factor should reflect the experience of default on loans extended in similar circumstances (sector, size of firm, level of general economic activity). Discounting to present value should be carried out in the same way as before.

12.3. Monitoring of the de minimis rule by the EFTA States

(1) The EFTA Surveillance Authority has a duty to satisfy itself that the EFTA States are not given their enterprises aid which is incompatible with the functioning of the EEA Agreement (3). The EFTA States are under an obligation to facilitate the achievement of this task by establishing machinery to ensure that, where aid is given to the same recipient under separate measures all of which are covered by the de minimis rule, the total amount of the aid does not exceed ECU 100 000 over a period of three years. In particular, any decision granting de minimis aid or the rules of any scheme providing for aid of this kind must include an explicit stipulation that any additional aid granted to the same recipient under the de minimis rule must not raise the total de minimis aid received by the enterprise to a level above the ceiling of ECU 100 000 over a period of three years. The machinery established must also enable the EFTA States to answer any questions which the EFTA Surveillance Authority might wish to ask.

12.4. Calculation of the cash grant equivalent of a soft loan

(1) The following gives an example of how the grant equivalent of a soft loan can be calculated.

(2) A public authority commits itself to paying an interest subsidy on a ECU 500 000 10-year loan to maintain the interest rate to the borrower at 6 %. The official reference interest rate fixed by the EFTA Surveillance Authority for the country concerned in that year is 8 %. In calculating the cash grant equivalent of the subsidy throughout the term of the loan, it may be assumed that the reference interest rate remains constant over the period. The cash equivalent of the subsidy depends on whether or not a grace period on principal repayments is granted.

12.4.1. No grace period

(1) The loan is assumed to be paid off in linear instalments starting in year one. The cash grant equivalent of the interest subsidy in the first year is the principal sum multiplied by the interest subsidy in percent, divided by the reference interest rate, thus:

1. ECU 500 000 × >NUM>0,02 >DEN>1,08 = ECU 9 259.

The subsidy in years two to ten is calculated similarly, but at a compound discount rate, i.e.:

2. ECU 450 000 × >NUM>0,02 >DEN>(1,08) ² = ECU 7 716

3. ECU 400 000 × >NUM>0,02 >DEN>(1,08) ³ = ECU 6 351

4. ECU 350 000 × >NUM>0,02 >DEN>(1,08) 4 = ECU 5 145

5. ECU 300 000 × >NUM>0,02 >DEN>(1,08) 5 = ECU 4 083

6. ECU 250 000 × >NUM>0,02 >DEN>(1,08) 6 = ECU 3 151

7. ECU 200 000 × >NUM>0,02 >DEN>(1,08) 7 = ECU 2 334

8. ECU 150 000 × >NUM>0,02 >DEN>(1,08) 8 = ECU 1 621

9. ECU 100 000 × >NUM>0,02 >DEN>(1,08) 9 = ECU 1 000

10. ECU 50 000 × >NUM>0,02 >DEN>(1,08) 10 = ECU 463.

(2) The total cash grant equivalent is the sum of the discounted subsidies in each year, i.e. ECU 41 123.

12.4.2. With grace period

(1) It is assumed that no repayments of the principal have to be made in the first two years.

(2) The loan is repaid in linear instalments of ECU 62 500 from the third year onwards. The discounted cash grant equivalent of the interest subsidy in each year is:

1. ECU 500 000 × >NUM>0,02 >DEN>1,08 = ECU 9 259

2. ECU 500 000 × >NUM>0,02 >DEN>(1,08) ² = ECU 8 573

3. ECU 500 000 × >NUM>0,02 >DEN>(1,08) ³ = ECU 7 938

4. ECU 437 500 × >NUM>0,02 >DEN>(1,08) 4 = ECU 6 432

5. ECU 375 000 × >NUM>0,02 >DEN>(1,08) 5 = ECU 5 104

6. ECU 312 500 × >NUM>0,02 >DEN>(1,08) 6 = ECU 3 939

7. ECU 250 000 × >NUM>0,02 >DEN>(1,08) 7 = ECU 2 917

8. ECU 187 500 × >NUM>0,02 >DEN>(1,08) 8 = ECU 2 026

9. ECU 125 000 × >NUM>0,02 >DEN>(1,08) 9 = ECU 1 251

10. ECU 62 500 × >NUM>0,02 >DEN>(1,08) 10 = ECU 579

(3) In this case the total cash grant equivalent is ECU 48 018.

(1) This chapter corresponds to the Commission notice on the de minimis rule for State aid (OJ No C 68, 6. 3. 1996).

(2) 'Export aid` means any aid directly linked to the quantities exported, to the establishment and operation of a distribution network or to current expenditure linked to the export activity. It does not include aid towards the cost of participating in trade fairs, or of studies or consultancy services needed for the launch of a new or existing product on a new market.

(3) The Authority also reserves the right to take appropriate action against any aid which complies with the de minimis rule but infringes other provisions of the EEA Agreement.`

2. Paragraph 16.2.3 (2) of the State Aid Guidelines shall read as follows:

'(2) The only general exception is aid that is too small in amount to have a significant effect on competition and trade between the Contracting Parties and qualifies as de minimis aid (see Chapter 12 of these guidelines).`

Done at Brussels, 15 May 1996.

For the EFTA Surveillance Authority

Knut ALMESTAD

The President

(1) Hereinafter referred to as the State Aid Guidelines.

(2) OJ No L 231, 3. 9. 1994, p. 1.

(3) See page 20 of this Official Journal.