98/667/EC: Commission Decision of 6 May 1998 concerning the extension of eligibility for regional aid for the acquisition costs of intangible property for large firms provided for in the 25th outline plan for the joint Federal Government/Länder programme for improving regional economic structures [notified under document number C(1998) 1942] (Only the German text is authentic) (Text with EEA relevance)
Date: 1998-05-06
Institutions: European Commission
Subjects: Germany, action programme, aid to undertakings, common market, large business, regional aid

L 316/48

EN

Official  Journal  of  the  European  Communities

25.11.98

COMMISSION  DECISION

of  6  May  1998

concerning  the  extension  of  eligibility  for  regional  aid  for  the  acquisition  costs  of  intangible
property  for  large  firms  provided  for  in  the  25th  outline  plan  for  the  joint  Federal
Government/Länder programme  for  improving  regional  economic  structures

(notified  under  document  number  C(1998)  1942)

(Only  the  German  text  is  authentic)

(Text  with  EEA  relevance)

(98/667/EC)

THE  COMMISSION  OF  THE  EUROPEAN  COMMUNITIES,

the terms for aid made, on the basis of annually-adopted
outline  plans.

Having  regard  to  the  Treaty  establishing  the  European
Community,  and  in  particular  the  first  paragraph  of
Article  93(2)  thereof,

Having  regard  to  the  Agreement  on  the  European
Economic  Area,  and 
in  particular  Article  62(1)(a)
thereof,

Having  given  notice  to  the  other  Member  States  and  the
parties  concerned 
in
submit 
accordance  with  Article  93(2)  of  the  Treaty  establishing
the  European  Community,

their  comments, 

to 

The  preceding  plan,  the  24th  outline  plan,  authorised  by
the  Commission  (N  531/95) (1)  specifies  that,  in  addition
to  acquisition  costs,  manufacturing  costs  and  leasing
costs  of  tangible  property,  the  acquisition  costs  of
in  an
intangible  property  which  can  be 
enterprise’s  assets 
licences,
investment  or  application  planning)  are  eligible  for  aid
provided  that  the  intangible  property:

(for  example,  patents, 

included 

— is  acquired  from  a  third  party  or  from  an  enterprise
which  has  no  business,  legal  or  personal  links  with
the  aid  recipient,

Whereas:

and

I

By 
letter  dated  25  March  1996,  Germany,  acting
pursuant  to  Article  92(3)  of  the  EC  Treaty  notified  the
Commission of the 25th outline plan for the joint Federal
Government/Länder  programme  for  improving  regional
economic  structures  (‘the  25th  outline  plan’).  By  letter
the  Commission  notified
dated  12  August  1996, 
Germany  of 
initiate  the  procedure
pursuant to Article 93(2) of the EC Treaty concerning the
25th outline plan which, inter alia, extended eligibility for
regional  aid  for  the  acquisition  costs  of  intangible
property  for  large  firms.

its  decision  to 

The  present  procedure  concerns  the  provisions  detailed
below.

The  joint  programme  for  improving  regional  economic
structures,  which  is  jointly  financed  and  administered  by
the  Federal  Government  and  the  Länder,  forms  the
main  regional  aid  scheme  in  Germany.  It  provides
for  assistance  and  guarantees 
investment  and
infrastructure  projects  for  economic  activities  in  assisted
areas  that  are  eligible  for  regional  aid  pursuant  to
Article  92(3)(a)  and  (c)  of  the  EC  Treaty.  The  budgetary
funds for each aid period are fixed, and any alterations in

for 

in 

the 

investment  project 

— has  remained  for  at  least  three  years  after  the
termination  of 
the
ownership of the aid recipient, unless it is replaced by
assets of equal or higher value; moreover, during that
period  the  assisted  property  may  not  be  leased  or
granted  as  security  other  than  in  the  context  of
corporate restructuring recognised for tax purposes or
the  creation  of  a  partnership  under  paragraph  15  of
the  Income  Tax  Law  while  remaining  within  the
business  of 
the  aid  recipient  and/or  a  related
enterprise,

and

— does  not  account  for  more  than  25 %  of  the  total

investment  project.

Under the 25th outline plan, Germany intends to remove
the  third  of  those  conditions,  that  is  the  limit  on
eligibility  for  aid  for 
it
accounts  for  more  than  25 %  of  the  cost  of  the  overall
investment  project.

intangible  property  where 

In  its  decision  to  initiate  the  procedure,  the  Commission
expressed  doubts  whether  the  projected  aid  for  large
firms  was  compatible  with  the  common  market  on  the
following  grounds:

(1) OJ  C  291,  4.10.1996,  p.  4.

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— the amendment envisaged has the effect of broadening
the  basis  of  the  scheme  and,  applying  the  same  aid
intensity,  would  have  the  effect  of  increasing  the
permissible volume of aid above that permitted on the
uniform basis of assessment laid down in the common
first
method  of  assessing  aid  adopted  by 
resolution  of  20  October  1971  of  the  representatives
of  the  Governments  of  the  Member  States,  meeting
within  the  Council,  on  general  systems  of  regional
aid (2),

the 

— under  the  rules  applicable  when  the  decision  to
initiate  the  procedure  was  adopted,  the  acquisition
costs  of  intangible  property  other  than  research  and
development  projects  were  eligible  for  aid  only  in  the
case  of  small  and  medium-sized  enterprises  pursuant
to  the  Community  guidelines  for  State  aid  for  small
and  medium-sized  enterprises (3),

— in  view  of  the  mobility  of  intangible  investments
within  the  common  market  and  in  particular  within
firms  belonging  to  the  same  enterprise,  effective
control  of  misuse  of  such  aid  can  scarcely  be
conceived in so far as, even if aid were granted solely
in  areas  eligible  for  regional  aid,  it  might  in  reality
benefit  firms  outside  those  areas.

In  addition,  the  Commission  made  the  following  points:

— in  the  course  of  the  procedure  for  drawing  up  the
guidelines  on  national  regional  aid (4)  and  at  the
multilateral  meetings  on 
several
delegations  emphasised  that  the  expenditure  on
intangible  property  by  large  firms  should  also  be
eligible  for  aid,

this  matter, 

— the  Green  Paper  on  innovation (5)  stresses  the  need  to

stimulate innovation,

— in  the  framework  for  State  aid  for  research  and
development (6),  the  Commission  confirmed  the  need
to  stimulate 
intangible  property,
notably  in  assisted  areas.

investment 

in 

Regarding  the  eligibility  of  expenditure  on  intangible
property by large firms in the new Länder (areas specified
in  Article  92(3)(a)  of  the  EC  Treaty),  the  Commission
made  the  following  points:

— in  the  areas  specified  in  Article  92(3)(a)  of  the  EC
Treaty,  under  the  Commission  communication  of
the  application  of
1988  on 

the  method 

for 

(2) OJ  C  111,  4.11.1971,  p.  1.
(3) OJ  C  213,  23.7.1996,  p.  4.
(4) OJ  C  74,  10.3.1998,  p.  9.
(5) COM(95)  688  final.
(6) OJ  C  45,  17.2.1996,  p.  5.

Article  92(3)(a)  and  (c)  to  regional  aid (7),  large  firms
may  be  granted,  in  addition  to  aid  for  investment  in
plant  and  machinery,  operating  aid,  whose  distorting
effects undoubtedly exceed those of aid for intangible
property  up  to  the  ceiling  for  regional  aid,

— in  the  areas  specified  in  Article  92(3)(a)  of  the  EC
Treaty  there  is  often  no  appropriate  local  R&D
activity, as is in fact the case in the new Länder. It  is
crucial  to  the  success  of  the  development  strategy  for
the  new  Länder  that  firms  there  should  develop
competitive  products  and  processes.  In  view  of  their
liquidity difficulties, therefore, it may be fully justified
to  take 
into  account  their  expenditure  on  the
acquisition  of  intangible  property.

The  decision  to  initiate  the  procedure  was  notified  to
Germany  and  at  the  same  time  it  was  asked  for  its
comments  on  that  decision.  Following  the  publication  of
the  decision  in  the  Official  Journal  of  the  European
Communities (8),  other  Member  States  and  interested
parties  were 
submit
observations.

the  opportunity 

given 

to 

II

By  letter  of  20  September  1996,  Germany  gave  its
comments  on  the  decision,  which  are  summarised
below.

Germany  points  out  that  the  Green  Paper  on  innovation
stresses  the  need  to  assist  innovation  and  intangible
the  abovementioned  Community
investments  and 
framework  for  State  aid  for  research  and  development
also  emphasises  the  need  to  provide  aid  for  intangible
investments.

intangible 

Regarding  the  Commission’s  expressed  concern  over  the
risk of misuse of aid because of the mobility of intangible
property, Germany’s view is that the basic conditions for
the  grant  of  aid  for 
investment  can  be
considered  an  effective  means  of  preventing  misuse.  It
points  out  that  the  acquisition  costs  of 
intangible
property only qualify for assistance if the investor has not
acquired  it  from  an  associated  enterprise,  or  one  having
business,  legal  or  personal  links  to  the  investor.  It
considers  that  those  exclusionary  conditions  ensure  that,
for example, a parent company set up outside the assisted
area cannot benefit from the assistance for the acquisition
costs  of 
it  remitted
intangible  property  by  having 
indirectly  to  it.  Germany  therefore  concludes  that  the
programme  precludes  remitting 
the  aid  under  an
agreement  to  that  effect  or  an  agreement  conferring
control  of  the  aided  company  on  another  company.
Moreover,  the  conditions  excluding  aid  also  exclude

(7) OJ  C  212,  12.8.1988,  p.  2.
(8) OJ  C  35,  4.2.1997,  p.  6.

L 316/50

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25.11.98

assistance in cases where the links between the businesses
are  purely  personal.  Germany  therefore  concludes  that
assistance  for  the  acquisition  of  intangible  property  by
large  firms  will  only  be  granted  if  there  are  no  links,
formal  or  otherwise,  between  the  applicant  enterprise  set
up  in  the  assisted  area  and  other  enterprises  from  which
the  applicant  enterprise  acquires  the  property,  whether
the  latter  are  set  up  inside  or  outside  that  area.

Regarding  the  Council  resolution  of  20  October  1971 (9)
specifying 
the  common  method  of  assessing  aid,
Germany’s  position  is  that  the  standard  base  should
reflect the pattern of investments which are typical of the
Member  State  in  question.  The  programme  has  been  in
operation  for  over  25  years  and,  in  the  view  of  the
German  authorities,  it  is  necessary  to  adapt  it  to  take
account  of  the 
intangible
property  since  it  should  be  fully  included  in  that  base,
and  in  the  case  of  large  firms  too.

increasing  significance  of 

Lastly,  Germany  employs  current  data  to  bring  out
the  increasing  significance  of  intangible  property  in
investment aid. The data indicate that investment projects
for intangible property are more effective in creating jobs
than ‘classic’ investments. In addition, if large firms were
no  longer  excluded,  it  would  be  possible  to  assist
investment  projects  with  a  particularly  high  level  of
innovation.

and  the  resultant  risk  of  misuse;  another  delegation
considered  that  a  limit  on  eligibility  for  aid  of  25 %  of
the  total  investment  concerned  in  the  standard  base  was
over-restrictive.

Lastly,  Germany,  in  its  written  observations  of  16  June
1997  on  the  draft  guidelines  on  national  regional  aid,
made  no  substantive  observations  on  the  eligibility  of
intangible  property  for  aid,  but  only  referred  to  the
procedure involved.

It  should  be  noted  that  the  guidelines  were  adopted  with
regard to national regional aid on 16 December 1997 (10).
They  lay  down  that  eligible  expenditure  may  include
certain  categories  of  intangible  investment  (transfer  of
technology  through  the  acquisition  of  patents,  operating
or  patented  know-how  licences  and  unpatented  know-
how)  provided  that  the  limit  of  25 %  of  the  standard
base  is  not  exceeded  in  the  case  of  large  firms.  Further,
the  intangible  property  must  be  used  exclusively  in  the
establishment  receiving  that  aid,  regarded  as  amortisable
assets,  purchased  from  third  parties  under  market
conditions,  included  in  the  assets  of  the  firm  and  remain
in  the  establishment  receiving  the  regional  aid  for  at
least  five  years.  Pursuant  to  point  6.1  of  the  guidelines,
the  Commission  has  proposed  to  all  Member  States
as  appropriate  measures  under  Article  93(1)  of  the  EC
Treaty  that  all  regional  aid  schemes  in  operation  on
1  January  2000  be  altered  to  ensure  that  they  are
compatible  with  the  guidelines  on  that  date.

III

IV

The  other  Member  States  and  other  interested  parties
have  not  presented  any  comments  in  this  procedure.

However, in the process of drafting the new guidelines on
national  regional  aid  a  number  of  Member  States
expressed  their  views  on  the  eligibility  for  aid  of  the
acquisition costs of intangible property for large firms. In
the  course  of  the  multilateral  meetings  held  on  15  May
1996 and 23 May 1997 to discuss the draft guidelines, a
number  of  other  delegations  gave  their  opinion,  in  the
German  delegation’s  presence,  on  the  eligibility  of
intangible  property  for  aid.

In  fact  a  majority  of  the  Member  States’  delegations
advocated that intangible assets should be eligible for aid,
to  some  extent  at  least.  On  the  other  hand,  at  the
multilateral  meeting  of  23  May  1997  one  delegation
raised  the  issue  of  the  mobility  of  immaterial  property

The  investment  aid  and  guarantees  including  those  for
intangible  property  granted  under  the  joint  Federal
Government/Länder  programme  for  improving  regional
economic  structures  constitute  aid  for  the  purposes  of
Article  92(1)  of  the  EC  Treaty.  They  are  made  available
through  State  means  to  specific  enterprises  or  industries
and are liable to affect trade between Member States and
thereby  to  distort  competition.

In  accordance  with  the  common  method  of  assessing  aid
indicated  in  the  resolution  of  20  October  1971,  the
in  dealing  with  regional  aid,  adopts
Commission, 
a  standard  basis  for  aid  consisting  of 
investment
expenditure  on  land,  buildings  and  plant  weighted  for
each  Member  State.  Under  point  5(d)  of  the  Annex  to
that  resolution,  in  Germany’s  case  this  amounts  to  65 %
for plant and machinery, 30 % for buildings and 5 %  for
land.  If  aid  is  granted  for  additional  expenditure,  in  this

(9) See  footnote  2.

(10) See  footnote  4.

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L 316/51

intangible  property,  under  the  1971  common
case 
method  a  fresh  calculation  must  be  made  of  the  base  in
the  scheme  in  relation  to  the  standard  base.

There  is  also  no  reason  to  apply  the  derogations  in
Article 92(3)(b) and (d) because the aid is not to promote
the  execution  of  an  important  project  of  common
European  interest  or  to  remedy  a  serious  disturbance  in
the economy of a Member State, nor is it aid to promote
culture  and  heritage  conservation.

The  base  for  the  costs  eligible  for  aid  specified  in  the
24th  outline  plan  previously  authorised  by 
the
Commission,  already  include,  together  with  plant  and
buildings  (but  excluding  land)  the  acquisition  costs  of
intangible property provided that they do not account for
more  than  25 %  of  the  total  investment.  The  aid  granted
under  the  24th  outline  plan  is  thus  founded  on  a  base
other than the standard base. No provision is made for a
fresh  calculation  of  the  base  for  expenses  eligible  for  aid
under 
joint  Federal
Government/Länder  programme.  It  follows  that  the
volume  of  aid  permissible  under  the  24th  outline  plan
can  exceed  that  permitted  through  the  application  of  the
standard  base  since  the  basis  of  calculation  can  be
extended  beyond  25 %,  which 
is  only  partially
compensated  by  the  exclusion  of  land  from  the  base  for
the  programme.

the  outline  plan 

the 

for 

regional  aid  and 

This  decision  is  not  concerned  with  the  compatibility
with  the  common  market  of  the  24th  outline  plan.  Since
the  Commission  has  adopted  the  new  guidelines  on
national 
the
appropriate measures for their implementation and since,
under  the  guidelines,  the  acquisition  costs  of  certain
intangible  property  qualify  for  aid  provided  that  they  do
not exceed 25 % of the standard base in the case of large
firms,  appropriate  measures  pursuant  to  Article  93(1)  to
adapt the 24th outline plan for the future to the rules on
State  aid  should  not  be  proposed  at  the  present  stage.

the  proposal 

for 

The  present  aid  project  under  the  25th  outline  plan
abolishes  the  exclusionary  threshold  for  aid  for  the
acquisition  costs  of  intangible  property  for  large  firms.
The  question  consequently  arises  whether  allowing
without  restriction,  subject  to  certain  conditions,  the
acquisition  costs  of  intangible  property  included  in  the
assets  of  the  firm  to  be  included  in  the  base  for  regional
aid  in  the  case  of  large  firms  in  national  development
areas under Article 92(3)(a) and (c) of the EC Treaty can
be  considered  to  be  compatible  with  the  common
market.

The  derogation  in  Article  92(2)  of  the  EC  Treaty  is  not
applicable  since  the  aid  in  question  is  not  aid  having  a
social  character  (under  indent  (a)),  aid  to  make  good  the
damage  caused  by  natural  disasters  or  exceptional
occurrences (under indent (b)), or aid granted in order to
compensate for the economic disadvantages caused by the
division  of  Germany  (under  indent  (c)).

Lastly, the derogation in Article 92(3)(c), which concerns
aid  for  the  development  of  certain  economic  activities  or
of  certain  economic  areas,  is  not  applicable.  As  has  been
pointed  out,  the  present  procedure  concerns  only  the
eligibility  of  aid  for  the  acquisition  costs  of  intangible
property  for  large  firms  since  the  Community  guidelines
on State aid for small and medium-sized enterprises make
provision,  on  certain  conditions,  for  the  unrestricted
inclusion of the acquisition costs of intangible property in
the  base  for  aid  for  SMEs.  Moreover,  the  present  aid
project  makes  no  provision  for  aid  for  the  acquisition  of
intangible property in connection with the implementation
of  a  research  and  development  project.  For  this  reason
the provisions on the eligibility of intangible property for
aid contained in the Community framework for State aid
for research and development do not apply to the present
case.

However, it is necessary to verify whether the aid project
can  be  considered  to  be  compatible  with  the  common
market under the derogations concerning particular areas
envisaged  in  Article  92(3)(a)  and  (c).  Since  the  25th
outline  plan  was  notified  before  the  entry  into  force  of
the  new  1997  guidelines  on  national  regional  aid,  the
compatibility of the project must be assessed, pursuant to
point  6.1  of  those  guidelines,  on  the  basis  of  the  rules
applicable  at  the  time  of  notification.

the  1994  Commission  White  Paper, 

As Germany pointed out in its comments, the significance
of  innovation  for  ensuring  that  European  enterprises
can  stand  up  to  globalised  competition  is  emphasised
in 
‘Growth,
Competitiveness, Employment’ (11) and in the 1995 Green
Paper  on  innovation.  To  strengthen  the  innovatory
capacities  of  European  businesses,  particular  importance
is  attached,  in  addition  to  the  completion  of  the  internal
market,  economic  and  monetary  union  and  an
operational  competition  policy,  to  research,  further
training  and  dissemination  of  research.  It  is  observed  in
that connection, inter alia, that there is less investment in
research  and  technological  development  in  the  Member
States  of  the  Union  than  in  other  industrialised  States
such  as  the  United  States  of  America  or  Japan.  It  is  also
indicated  that  the  cost  of  registering  a  patent  in  the
Community is six times what it is in the United States of
America.  Germany  expressly  pointed  out  the  particular

(11) COM(93)  700  final.

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25.11.98

investment 

the
significance  of 
economically  less  developed  areas  of  the  Community,
where  SMEs 
in
obtaining  financing  for  innovatory  measures.

in  particular  encounter  difficulties 

innovation 

in 

in 

have greater eligibility for aid up to the limits fixed in
the  WTO  rules  on  aid  and  includes  among  eligible
R&D  costs 
technical  knowledge  and
patents,  etc.  bought  from  outside  sources’,

‘research, 

Regarding  the  use  of  public  funds  to  attain  these
objectives,  it  is  indicated  in  the  White  Paper  that
‘investment 
in  training,  research,  the  promotion  of
innovation  and,  generally  speaking,  the  non-physical
components  of  value-added  must  be  treated  at  least  as
favourably  as  traditional  forms  of  investment.  The  aim
should  be  to  promote  the  emergence  of  new  generations
of  products 
the
technologies  available  on  the  world  market,  and  to
encourage  the  dynamic  incorporation  of  innovation  into
processes,  products  and  organisation.  An  essential
precondition  is  that  there  should  be  an  increase  in
research  activities  by  Community  firms  and  greater
selectivity  in  government  assistance’ (12).

that  make  optimum  use  of  all 

— regarding  SMEs,  the  1996  Community  guidelines  on
State  aid  for  small  and  medium-sized  enterprises  lay
down  that  aid  for  intangible  investment  inside  and
outside  national  assisted  areas  and  expenditure  on
consultancy  services,  training  and  dissemination  of
knowledge  qualify  for  aid,

— the 1997 guidelines on national regional aid lay down
that  expenditure  on  certain  categories  of  intangible
assets  can  be  eligible  for  aid,  on  certain  conditions,
provided that it does not exceed 25 % of the standard
base  in  the  case  of  large  firms,

Regarding  the  provisions  on  State  aid,  the  Green  Paper
on  innovation  focuses  on  the  revision  of  the  Community
framework  for  State  aid  for  research  and  development.

— in  the  draft  Community  guidelines  for  State  aid  for
training,  last  considered  by  the  Member  States  at  the
multilateral  meeting  on  10  March  1998,  there  are
greater  possibilities  for  granting  aid  for  training
measures,  also  in  the  case  of  large  firms.

Lastly, a recent publication (13)  indicates  that  expenditure
on  intangible  investments  as  very  broadly  defined  covers
expenditure  on  research  and  development,  acquisition  of
technology,  public-relations  work,  training  and  software
and  that  enterprises’  expenditure  on  such  property  has
increased  at  both  macroeconomic  and  microeconomic
levels.

The  foregoing  points  show  that  enabling  the  acquisition
costs of intangible property to be included in the assets of
a  firm  forms  only  one  of  the  proposed  measures
to  promote  innovation  by  enterprises;  other  measures
to
include 
establish  an  environment  favourable  to  innovation  or
measures  to  promote  training,  research  and  development
and  investment  in  intangible  property  which  cannot  be
included  in  the  assets  of  the  firm.

legislative  and  administrative  measures 

Regarding  State  aid,  the  Commission  has  already  taken
the  following  steps  to  support  businesses’  ability  to
innovate:

— the  Community  framework  for  State  aid  for  research
and  development  published  in  1996  lays  down  that
research  and  development  projects,  in  the  case  of
large firms and outside national assisted areas as well,

This  shows  that  the  Commission  has  already  adopted
considerable  measures  on  State  aid  with  a  view  to
attaining 
innovatory
its  objective  of  promoting  the 
capacities  of  large  firms.  In  particular,  as  Germany
indicated  in  its  comments,  the  Commission  has,  by
adopting  the  new  guidelines  on  national  regional  aid,
adjusted  the  base  for  costs  eligible  for  regional  aid  to
the  increasing  significance  of  intangible  investment  in
enterprises’  investments.

Unlimited  eligibility  for  regional  aid  for  the  acquisition
costs of intangible property, where those costs exceed the
levels  in  the  abovementioned  rules,  cannot  be  considered
to  be  compatible  with  the  common  market  on  the  basis
of  the  derogations  for  specific  areas  contained 
in
Article  92(3)(a)  and  (c)  for  the  reasons  set  out  below.

costs  of 

First,  unlimited  eligibility  for  regional  aid  for  the
acquisition 
intangible  property  would
considerably  extend  the  standard  base  for  calculating  the
basis  for  granting  investment  aid.  This  would  produce  a
considerable increase in the permissible volume of aid on
the  basis  of  the  same  aid  intensity.  The  result  would  be
an  increased  risk  of  distortion  of  competition  through
State  aid.

(12) Point  2(3)(b).
(13) Intangible  investments,  impact  on  competition  and  scale
effects’,  The  Single  Market  Review,  Volume  2  of
subseries  V,  European  Commission,  1998.

Moreover,  this  extension  of  the  base  would  reduce
comparability  of  aid  between  Member  States  and  thus

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reduce  transparency  in  this  area  since  the  definition  of
intangible  property  which  qualifying  firms  could  include
in  their  assets  would  differ  in  the  various  Member  States
and  would  depend  on  different  accounting  rules (14).

up  an  enterprise  in  an  assisted  area  with  the  sole
aim  of  acquiring  intangible  property  and  subsequently
transferring  it  to  other  enterprises,  including  enterprises
outside  assisted  areas.

the 

relative  advantage 

Furthermore, extending the base in the case of large firms
conferred  under
removes 
Community  law  through  State  aid  for  SMEs  under  the
Community  guidelines  on  State  aid  for  small  and
medium-sized  enterprises.  Those  guidelines  are  intended
to  level  out  the  handicaps  limiting  SMEs’  access  to  the
financing necessary to acquire new technology. This does
not  apply  in  the  case  of  large  firms,  which  are  usually
better  able  to  carry  through  research  programmes  than
SMEs  and  develop  their  own  intangible  property.

Regarding  the  risk  of  misuse  of  aid  because  of  the
mobility  of  intangible  property,  the  points  set  out  below
should be made concerning Germany’s arguments on this
issue.  The  legal  condition  referred  to  by  Germany  that  a
person  investing  in  intangible  property  must  not  acquire
it  from  a  related  enterprise  cannot  preclude  a  situation
in
where  property 
implementation  of  an  investment  project  in  an  assisted
area  is  transferred  to  another  area,  for  example  one
which is ineligible for regional aid; the provision referred
to  by  Germany  can  prevent  the  transfer  of  property  for
which  aid  has  been  granted  where  intangible  property  is
acquired  from  a  related  enterprise  and  the  assignment  of
the  related  rights  to  that  enterprise.

for  which  aid  was 

received 

On  the  contrary,  under  this  provision,  where  intangible
property is acquired from a third party not related to the
enterprise in receipt of aid and set up in an assisted area,
it  is  impossible  to  preclude  the  transfer  of  the  property
for  which  aid  has  been  granted  to  an  area  ineligible  for
aid  and  the  assignment  of  the  rights  in  the  property  at  a
lower  price  than  would  have  been  the  case  without  State
aid  to  a  (related)  enterprise  in  an  area  ineligible  for  aid.

The fixing of a ceiling for eligibility for aid for intangible
property  in  relation  to  the  total  cost  of  the  tangible
investments  enables  the  intangible  investments  to  be
connected  to  the  tangible  investments  so  that  the  added
value  in  respect  of  which  aid  was  granted  can  be  more
securely  linked  to  the  assisted  region.  For  example,  the
fixing  of  that  ceiling  prevents  a  business  from  setting

(14) See  footnote  13.

the 

for  at 

investment  project 

three  years  after 
in 

The abovementioned condition under the outline plan for
the  joint  Federal  Government/Länder  programme  for
granting  aid  whereby  (tangible  and  intangible)  property
the
must  remain 
least 
implementation  of 
the
ownership  of  the  enterprise  in  receipt  of  aid  unless  it  is
replaced  by  property  of  equivalent  or  higher  value,
cannot  by 
itself  prevent  the  risk  of  misuse.  This
provision,  in  so  far  as  compliance  can  somehow  be
verified, ensures that the intangible property will be used
for this period in the enterprise in receipt of regional aid;
on the other hand, it does not prevent the rights linked to
the  property  being  used  in  other  enterprises,  including
those  set  up  outside  assisted  areas.

In order to minimise the risk of misuse of regional aid for
large  firms  while  at  the  same  time  permitting  certain
acquisition  costs  of  intangible  property  to  be  included  in
the base for costs eligible for aid, it is essential to link aid
for intangible investments to the use of those investments
for tangible assets, for example plant and equipment and
buildings, if the derogations in Article 92(3)(a) and (c) of
the  EC  Treaty  are  to  be  applied.

through 

technology 

Regarding  the  existing  unrestricted  eligibility  for  aid  of
these  costs  in  the  case  of  SMEs,  it  should  be  borne  in
mind  that  SMEs,  by  reason  of  their  typical  handicaps,
must  buy  in  intangible  property  instead  of  developing
new 
their  own  research  and
development more often than is the case with large firms.
In  adopting  the  Community  guidelines  on  State  aid  for
small  and  medium-sized  enterprises,  the  Commission
consequently  took  the  view  that  the  advantage  of  the
objective  of  promoting  innovation  for  SMEs  outweighed
the  disadvantage  of  the  increased  risk  of  misuse.  In  any
event,  the  risk  of  distortion  of  competition  through  any
misuse  of  aid  remains  limited  in  view  of  the  size  of
SMEs.

innovation  on 

the  part  of  businesses 

Lastly,  it  is  necessary  to  verify  whether,  by  reason  of  the
lack  of 
in
particularly  disadvantaged  regions  like  the  new  German
Länder, the unrestricted inclusion of the acquisition costs
of  intangible  property  in  the  base  for  aid  in  assisted
regions  can  be  considered  to  be  compatible  with  the
common  market  under  Article  92(3)(a).

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25.11.98

initial 

inappropriate 

It  consequently  appears 

Moreover, in such areas the Commission makes provision
for  preferential  aid,  permitting  increased  intensity  in  the
case  of  aid  for 
investment  and,  on  certain
conditions, permitting operating aid to be cumulated with
aid  for  initial  investment;  in  addition,  State  aid  for
research  and  development  can  be  granted  with  increased
intensity. 
to
provide  a  base  for  costs  eligible  for  aid  other  than  that
for  cases  of  aid  outside  assisted  areas  pursuant  to
Article  92(3)(a).  The  arguments  cited  above  concerning
the  extension  of  the  base  and  the  consequent  risk  of
distortion  of  competition,  the  lack  of  comparability
between the concepts of the intangible investments which
can  be  included  in  the  balance  sheet  of  the  recipient
enterprise, compensation for handicaps suffered by SMEs
in  relation  to  large  firms  and  the  risk  of  misuse  of
regional  aid 
investments  cannot  be
disregarded  in  the  case  of  aid  granted  in  those  regions.

intangible 

for 

these  grounds, 

the  Commission  considers 

the
On 
proposal  contained  in  the  25th  outline  plan  for  the  joint
Federal  Government/Länder  programme  for  improving
regional  economic  structures  to  repeal  the  provisions
rendering  large  firms  ineligible  for  aid  for  intangible
property  to  be  incompatible  with  the  common  market,

ineligible  for  aid  for 

programme  for  improving  regional  economic  structures
(‘the 25th outline plan’) of the provisions rendering large
firms 
is
incompatible  with  the  common  market  in  so  far  as  it
concerns  firms  that  do  not  meet  the  definition  of  small
and  medium-sized  enterprises.

intangible  property 

Article  2

Germany is not entitled to apply the 25th outline plan in
the  form  envisaged.

Article  3

Germany  shall  inform  the  Commission,  within  two
months of being notified of this decision, of the measures
taken  to  comply  therewith.

Article  4

This  Decision  is  addressed  to  the  Federal  Republic  of
Germany.

HAS  ADOPTED  THIS  DECISION:

Done  at  Brussels,  6  May  1998.

Article  1

The  repeal  envisaged  by  Germany  in  the  25th  outline
joint  Federal  Government/Länder
plan 

the 

for 

For  the  Commission

Karel  VAN  MIERT

Member  of  the  Commission