Commission Regulation (EC) No 795/2004 of21 April 2004 laying down detailed rules for the implementation of the single payment scheme provided for in Council Regulation (EC) No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers
Date: 2004-04-21
Institutions: European Commission
Subjects: agricultural product, aid system, farmers' income, production aid, single payment scheme

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I

(Acts whose publication is obligatory)

COMMISSION REGULATION (EC) No 795/2004
of 21 april 2004
laying down detailed rules for the implementation of the single payment scheme provided for in
Council Regulation (EC) No 1782/2003 establishing common rules for direct support schemes
under the common agricultural policy and establishing certain support schemes for farmers

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(5)

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 1782/2003 of
29 September 2003 establishing common rules for direct support
schemes under the common agricultural policy and establishing
certain support schemes for farmers and amending Regulations
(EEC) No 2019/93, (EC) No 1452/2001, (EC) No 1453/2001,
(EC) No 1454/2001, (EC) N 1868/94, (EC) No 1251/1999,
(EC) No 1254/1999, (EC) No 1673/2000, (EEC) No 2358/71 and
(EC) No 2529/2001 (1), and in particular the second subpara-
graph of Article 40(5), Articles 42(4) and (9), 46(3), 52(2), 54(5),
145(c) and (d) and 155 thereof,

Whereas:

Article 42(3) and (5) of Regulation (EC) No 1782/2003
provides for optional cases of allocation of payment
entitlements from the national reserve. It is appropriate to
provide for rules for the calculation of the number and
value of the payment entitlements to be allocated in such
a way. In order to allow certain flexibility to Member States
which are in a better position to evaluate the situation of
each farmer applying for such measures, the maximum
number of entitlements to be allocated should not be
higher than the number of hectares declared and its value
should not be higher than an amount to be fixed by the
Member State according to objective criteria. According to
article 42(6) of Regulation (EC) No 1782/2003, in case of
increase of the unit value of existing payment entitlements,
a regional average should be respected. Member States
should be allowed to establish that regional value at the
appropriate territorial level. However, in no case, due to its
nature of aid decoupled from the production, the amount
should be differentiated or calculated in function of secto-
rial productions.

(1)

(2)

(3)

(4)

Detailed rules for the implementation of Title III of Regu-
lation (EC) No 1782/2003 establishing the single payment
scheme for farmers should be laid down.

(6)

For clarity reasons it is appropriate to provide for certain
definitions. Where appropriate, definitions which already
apply in similar situations and/or which have been already
used for years should be used.

In order to facilitate the calculation of the unit value of the
payment entitlements, it should be provided for clear rules
on the round up of figures and for the possibility to split
existing payment entitlements in case the size of the parcel
which is declared or transferred with the entitlement only
amounts to a fraction of hectares.

(7)

Specific provisions should be provided for the establish-
ment of the national reserve and in particular the calcula-
tion of the reductions of the reference amounts or the pay-
ment entitlements, as well as the application of the
reduction in cases of full or partial decoupling of the dairy
premiums and additional payments referred to in Articles
95 and 96 of Regulation (EC) No 1782/2003.

(1) OJ L 270, 21.10.2003, p. 1. Regulation as amended by Regulation

(EC) No 21/2004 (OJ L 5, 9.1.2004, p. 8).

Under certain circumstances farmers could end up with
more entitlements than land to use them, for example in
case of common use of a forage area, because of the expiry
of a lease or the participation to an afforestation program
or by buying, in accordance to national provisions, milk
reference quantities which were leased in the reference
period with land. Therefore it seems appropriate to pro-
vide for a mechanism that should guarantee the farmer’s
support by concentrating it on the remaining available
hectares. However, in order to avoid abuse of that mecha-
nism, some conditions for the access to that mechanism
should be provided for.

According to Regulation (EC) No 1782/2003 the national
reserve shall be replenished via unused entitlements or, on
an optional basis, via retention on sales of payments
entitlements or on sales that have taken place before a cer-
tain date. It is therefore necessary to provide for a date after
which the unused entitlements revert to the national
reserve. For administrative reasons, it should also be pro-
vided that the payment entitlements accompanied by the
authorisation to grow fruit and vegetable or table potatoes
or set-aside entitlements when reverting to the national
reserve should lose the accompanying obligation or autho-
risation. Moreover, this is also justified by the fact that that
obligation or authorisation is established on the basis of

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historical references and once the single payment scheme
is in place it will not be possible to determine who should
receive set-aside entitlements of authorisations out of the
reserve as the support will be decoupled.

In case of application of the retention on sale of payment
entitlements, maximum percentages and criteria of appli-
cation should be established and differentiated taking into
account the type of transfers and of payment entitlements
to be transferred. If speculative risks exist in the first years
of application of the single payment scheme, Member State
may be allowed to increase the percentage of retention for
sales without land. In no case the application of such reten-
tions should result in a substantial obstacle or prohibition
of transfer of payment entitlements.

In order to facilitate the administration of the national
reserve, it is appropriate to provide for management of the
national reserve at regional level except in cases referred to
in Article 42(3) of Regulation (EC) No 1782/2003, where
applicable, and in Article 42(4) of that Regulation, where
Member
are obliged to allocate payment
entitlements.

States

(8)

(9)

(10)

In order to facilitate the implementation of the single pay-
ment scheme, it is appropriate to allow Member States to
proceed already in the year preceding the first year of
application of the scheme to the identification of the
potential beneficiaries of the scheme in particular, in case
of modifications in the holding due to inheritance or legal
changes and to the provisional establishment of payment
entitlements.

(11) Article 33 of Regulation (EC) No 1782/2003 allows farm-
ers to access to the single payment scheme under specific
circumstances. In order to avoid that such circumstances
may be used to escape the application of the rules on nor-
mal transfers of a holding with the attached reference
amounts, some conditions and definitions should be set up
for the application of such circumstances.

(12) Article 46(2) of Regulation (EC) No 1782/2003 provides
that a farmer may transfer his payment entitlements with-
out land only after he has used, within the meaning of
Article 44 of that Regulation, at least 80 % of his payment
entitlements during at least one calendar year. In order to
take into account the transfers of land that have taken place
in the period before the application of the single payment
scheme, it is justified to consider the transfer of holding or
part of it together with the future payment entitlements as
a valid transfer of the payment entitlements with land
within the meaning of Article 46 of Regulation (EC)
No 1782/2003, subject to certain conditions, in particular
the fact that the seller should apply for the establishment
of the payment entitlements as far as that Regulation
clearly provides that only those who received the direct
payment in the reference period have access to the scheme.

(13) Article 42(4) of Regulation (EC) No 1782/2003 allows the
Commission to define the special situations which shall
give right to the establishment of reference amounts for
certain farmers finding themselves in situations which pre-
vented them, in full or partially, from receiving direct pay-
ments in the reference period. It is therefore appropriate to
list those special situations by providing for rules in order
to avoid cumulating the benefit from the different alloca-
tion of payment entitlements on the same farmer without
prejudice to the possibility for the Commission to add fur-
ther cases where the case may be. Moreover, Member States
should be given the flexibility to establish the reference
amount to be allocated.

(14) Where a Member State according to national law or well
established usual practice includes in the definition of long
term lease also lease for 5 years, it is appropriate to allow
Member State to apply this shorter term where the case
may be.

(15) Due to the fact that dairy premiums and additional pay-
ments will be included in the single payment scheme on
the basis of a different reference period than the one
referred to in Article 37 of Regulation (EC) No 1782/2003,
it is appropriate, for the purpose of establishing the refer-
ence amount, to take into account of dairy farmers finding
themselves in a situation referred to in Article 40 of Regu-
lation (EC) No 1782/2003 who lease, because of that situ-
ation, their individual reference quantity or part of it
according to Article 16 of Regulation (EC) No 1788/2003
during the twelve-month period ending on 31 March of
the first year of application of the single payment scheme.

(16)

(17)

In cases where a farmer retires or dies and provides for
transferring his holding or part of it to a member of the
family or inheritant who intends to continue the agricul-
tural activity on this holding, it is appropriate to ensure
that the transfer of the holding or part of it within a family
can easily take place in particular, in the case where the
transferred land was leased to a third person during the ref-
erence period without prejudging the possibility for the
inheritant to continue the agricultural activity.

Farmers who made investments resulting in a potential
increase of the amount in direct payments that they should
have been granted if the single payment scheme had not
been introduced should also benefit from the allocation of
entitlements. Specific rules should be provided for the cal-
culation of the payment entitlements in case a farmer
already owns payment entitlements or has no hectares. In
the same circumstances, farmers who bought or leased
land or participated in national programmes of reconver-
sion of production for which a direct payment under the
single payment scheme could have been granted in the ref-
erence period would find themselves without payment
entitlements whilst they acquired land or participated in
such programmes in order to exercise an agricultural activ-
ity that could in the future still benefit from certain direct
payments. Therefore it is also appropriate to provide for
the allocation of payment entitlements in that case.

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(18)

For the good administration of the scheme, it is appropri-
ate to provide for rules in case of transfers of payment
entitlements.

(19) Article 46 of Regulation (EC) No 1782/2003 provides that
a Member State may decide that payment entitlements may
only be transferred or used within one and the same region.
In order to avoid practical problems, specific rules should
be provided for holdings situated in between two or more
regions.

(20) Article 43(2) of Regulation (EC) No 1782/2003 provides
that all forage area in the reference period should be
included in the calculation of the payment entitlements. In
order to facilitate the task of the national administrations
in establishing the number of forage hectares, it is appro-
priate to give them the possibility to take into account the
number of forage area declared in the area aid application
before the introduction of the single payment scheme,
whilst letting the farmer the possibility to prove that his
forage area in the reference period was lower.

(21) Article 52 of Regulation (EC) No 1782/2003 allows for the
production of hemp under certain conditions. It is neces-
sary to establish the list of eligible varieties as well as to
provide for the certification of those varieties.

(26) Article 69 of Regulation (EC) No 1782/2003 allows Mem-
ber States, within a budgetary limit, to provide for an addi-
tional payment for specific types of farming which are
important for the protection or enhancement of the envi-
ronment or for improving the quality and marketing of
agricultural products. It is therefore necessary to define
which farmers should be concerned, how this payment
should be compatible with existing measures under the
rural development and to define which type of farming
should be covered by the measure.

(27) Article 58 of Regulation (EC) No 1782/2003 provides that
Member States shall define the regions in accordance with
objective criteria and Article 59 of that Regulation pro-
vides that Member States may proceed to a regionalisation
of the single payment scheme in duly justified cases and in
accordance with objective criteria. It is therefore appropri-
ate to provide for the communication of all the necessary
data and information to proceed to the assessment of such
criteria.

(28)

In order to assess the application of the single payment
scheme, it is appropriate to establish the modalities and
deadlines for the exchange of information between the
Commission and the Member States and to inform the
Commission of the areas for which the aid has been paid,
at national, and, where the case may be, at regional level.

(22)

(23)

(24)

Specific rules should be provided for the calculation of the
livestock unit in case of establishment of entitlements sub-
ject to special conditions by referring to the existing con-
version table provided for in the beef sector.

(29) The measures provided for in this Regulation are in accor-
dance with the opinion of the Management Committee for
Direct Payments,

Specific rules are also needed to facilitate the establishment
of payment entitlements in case of anticipated decoupling
of the payments in the milk sector.

HAS ADOPTED THIS REGULATION:

Pursuant to Article 54 of Regulation (EC) No 1782/2003,
any set-aside entitlement accompanied by an hectare eli-
gible for set-aside entitlement shall give right to the pay-
ment of the amount fixed by the set-aside entitlement. The
minimum period for which land is to be set aside should
extend at least over the growing cycle of the arable crops.
However, in order to take certain specific circumstances
into account, it should be possible for land set aside to be
used before the minimum set-aside period expires. Provi-
sions should also be laid down regarding environmental
protection and the maintenance and utilisation of the areas
set aside.

CHAPTER 1

SCOPE AND GENERAL PROVISIONS

Article 1

Subject matter and scope

This Regulation lays down detailed rules for the implementation
of the single payment scheme provided for in Title III of Regula-
tion (EC) No 1782/2003.

(25) Where a Member State decides to make use of the option
of regionalising the single payment scheme, specific pro-
visions should be established in order to facilitate the cal-
culation of the regional reference amount for holdings situ-
ated in between two or more regions, as well as in order to
guarantee a full allocation of the regional amount in the
first year of application of the scheme. Some of the provi-
sions provided for by this Regulation, notably on the estab-
lishment of the national reserve, initial allocation of pay-
ment entitlements and transfer of payment entitlements
should be adjusted in order to make them applicable in the
regional model.

Article 2

Definitions

For the purposes of Title III of Regulation (EC) No 1782/2003 and
of this Regulation, the following definitions shall apply:

(a)

‘agricultural area’ shall mean the total area taken up by arable
land, permanent pasture and permanent crops;

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‘arable land’ shall mean‘arable land’ within the meaning of
Article 2 point
(1) of Commission Regulation (EC)
No 795/2004 (1);

(j)

(b)

(c)

‘permanent crops’ shall mean non-rotational crops other
than permanent pasture that occupy the land for five years or
longer and yield repeated harvests including nurseries as
defined in Annex I point (G/05) of Commission Decision
2000/115/EC (2), with the exception of multiannual crops
and the nurseries of such multiannual crops;

(d)

‘multiannual crops’ shall mean crops of
products:

the following

CN code

0709 10 00
0709 20 00
0709 90 90
0810 20

0810 30

0810 40

Ex 0602 90 41
Ex 0602 90 51
Ex 1214 90 90

Artichokes
Asparagus
Rhubarb
Raspberries, blackberries,
mulberries and loganberries
Black-, white or redcurrants and
gooseberries
Cranberries, bilberries and other
fruits of the genus Vaccinium
short rotation coppice
Miscanthus sinensis
Phalaris arundicea (Reed canary
grass)

‘Production unit’ shall mean at least one area which gave
right to direct payments in the reference period, including
forage area within the meaning of Article 43(3) of Regula-
tion (EC) No 1782/2003, or one animal which would have
given right to direct payments in the reference period, accom-
panied, where the case may be, by a corresponding premium
right;

(k) For the purposes of Articles 37(2) and 42(3) of Regulation
(EC) No 1782/2003,‘farmers commencing an agricultural
activity’ shall mean a natural or legal person that did not have
any agricultural activity in his own name and at his own risk
or must not have had the control of a legal person exercising
an agricultural activity in the 5 years preceding the start of
the new agricultural activity.

In case of a legal person, the natural person(s) who has the
control of the legal person must not have had any agricul-
tural activity in his own name and at his own risk or must
not have had the control of a legal person exercising an agri-
cultural activity in the 5 years preceding the start of the agri-
cultural activity by the legal person.

Article 3

Calculation of the unit value of payment entitlements

(e)

(f)

(g)

‘permanent pasture’ shall mean ‘permanent pasture’ within
the meaning of Article 2 point (2) of Commission Regulation
(EC) No 795/2004;

1.
Payment entitlements shall be calculated up to three deci-
mals and rounded up or down to the nearest second decimal. If
the calculation gives a result which is exactly half-way, the sum
shall be rounded up to the nearest second decimal.

‘grassland’ shall mean arable land used for grass production
(sown or natural); for the purposes of Article 61 of Regula-
tion (EC) No 1782/2003 grassland shall include permanent
pasture;

‘sale’ shall mean the sale or any other definitive transfer of
ownership of land or payment entitlements. The definition
shall not include the sale of land where land is transferred to
public authorities and/or for use in the public interest and the
transfer is carried out for non agricultural purposes;

2. Where the size of a parcel, which is declared in accordance
with Article 44(3) of Regulation (EC) No 1782/2003, or which is
transferred with an entitlement in accordance with Article 46(2)
of that Regulation, amounts to a fraction of an hectare, the entitle-
ment concerned shall be declared or transferred with the land at a
value calculated to the extent of the same fraction. The remaining
part of the entitlement shall remain at the disposal of the farmer
at a value calculated correspondingly.

(h)

‘lease’ shall mean lease or similar types of
transactions;

temporary

(i)

‘transfer or sale or lease of payment entitlement with land’
shall mean the sale or lease of payment entitlements with,
respectively, the sale or lease of a corresponding number of
hectares of eligible land within the meaning of Article 44(2)
held by the transferor.

In case of lease, the payment entitlements and the hectares
shall be leased for the same time period.

The case where all the payment entitlements subject to spe-
cial conditions referred to in Article 49(2) of Regulation (EC)
No 1782/2003 are transferred shall be considered as a case
of transfer of payment entitlement with land.

(1) OJ L 141, 30.4.2004, p.1.
(2) OJ L 38, 12.2.2000, p.1.

CHAPTER 2

NATIONAL RESERVE

Section 1

Establishment of the national reserve

Article 4

Reductions

1.
The reduction provided for in Article 42(1) of Regulation
(EC) No 1782/2003 shall apply to all reference amounts after any
possible reduction under Article 41(2) of that Regulation and,
where applicable, after any possible reduction under Article 65(1)
and the second subparagraph of Article 70(2) of that Regulation.

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In case of application of the reduction referred to in
2.
Article 42(7) of Regulation (EC) No 1782/2003, the unit value of
all payment entitlements which have been established at the date
of application of
reduction shall be reduced
proportionately.

the linear

3. When a farmer who owns payment entitlements applies for
payment entitlements from the national reserve, he may receive a
number of payment entitlements not higher than the number of
hectares he holds for which he does not own any payment
entitlement.

Article 5

Dairy premiums and additional payments

The unit value of each payment entitlement he already owns may
be increased within the limit of the regional average referred to in
paragraph 4.

1.
The percentage of reduction fixed by the Member States in
accordance with Article 42(1) of Regulation (EC) No 1782/2003
shall apply in 2007 to the amounts resulting from dairy premi-
ums and additional payments to be included in the single pay-
ment scheme.

Article 42(8) of Regulation (EC) No 1782/2003 shall apply to
payment entitlements whose unit value has been increased by
more than 20 % in accordance with the second subparagraph of
this paragraph.

2. Where a Member State makes use of the option, provided
for in the first subparagraph of Article 62 of Regulation (EC)
No 1782/2003, to include in full the amounts resulting from
dairy premiums and additional payments in the single payment
scheme, it shall apply the percentage of reduction referred to in
paragraph 1 of this Article in the year in which it makes use of
that option. In the following years, the Member State concerned
shall apply the reduction within the limit of the increase of the
amounts provided for in Articles 95(2) and 96(2) of Regulation
(EC) No 1782/2003.

3. Where a Member State makes use of the option, provided
for in the first subparagraph of Article 62 of Regulation (EC)
No 1782/2003, to include in part the amounts resulting from
dairy premiums and additional payments in the single payment
scheme, it shall apply the percentage of reduction referred to in
paragraph 1 of this Article to the corresponding amounts included
in the single payment scheme in the year in which it makes use of
that option, taking into account the increase of the amounts pro-
vided for
in Article 95(2) and 96(2) of Regulation (EC)
No 1782/2003.

Section 2

Establishment of payment entitlements from the national
reserve

Article 6

Establishment of payment entitlements

1. Where a Member State makes use of the options provided
for in Article 42(3) and (5) of Regulation (EC) No 1782/2003,
farmers may receive, in accordance with the conditions laid down
in this Section and in accordance with the objective criteria laid
down by the Member State concerned, payment entitlements
from the national reserve.

The regional average shall be established by Member States
4.
at the appropriate territorial level in accordance with objective cri-
teria and in such a way as to ensure equal treatment between
farmers and to avoid market and competition distortion. It shall
be established at a date to be fixed by the Member States. It may
be reviewed annually. It shall be based on the value of the pay-
ment entitlements allocated to the farmers in the region con-
cerned. It shall not be differentiated per sector of production.

5.
The value of each payment entitlement received in accor-
dance with paragraph 2 or 3, except second subparagraph of
paragraph 3, shall be calculated by dividing a reference amount,
established by the Member State, in accordance with objective cri-
teria and in such a way as to ensure equal treatment between
farmers and to avoid market and competition distortion, by a
number of hectares not higher than the number of hectares
referred to in paragraph 2.

Article 7

Application of Article 42(5) of Regulation (EC)
No 1782/2003 in case of fewer hectares than payment
entitlements

1. Where a Member State makes use of the option provided
for in Article 42(5) of Regulation (EC) No 1782/2003, it may in
particular allocate, upon request, in accordance with this Article,
payment entitlements to farmers, in the areas concerned, who
declare fewer hectares than the number corresponding to pay-
ment entitlements they would be or would have been allocated in
accordance with Article 43 of that Regulation.

In that case, the farmer shall give up to the national reserve all the
payment entitlement he owns or should have been allocated,
except set-aside entitlements and payment entitlements subject to
special conditions referred to in Article 49 of Regulation (EC)
No 1782/2003.

2. When a farmer who does not own any payment entitlement
applies for payment entitlements from the national reserve, he
may receive a number of payment entitlements not higher than
the number of hectares he holds (owned or leased) at that time.

2.
The number of payment entitlements allocated from the
national reserve shall be equal to the number of hectares the
farmer declares.

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The five years period provided for in Article 42(8) of Regu-
3.
lation (EC) No 1782/2003 shall apply or, where the case may be,
restart to apply to all the payment entitlements allocated.

Article 9

Retention on sales of payment entitlements

4.
The unit value of the payment entitlements allocated from
the national reserve shall be calculated by dividing the farmer’s
reference amount by the number of hectares he declares reduced
by a number of hectares equal to the number of set-aside entitle-
ments he owns. The regional average provided for in Article 6 (4)
shall not apply.

Paragraphs 1, 2, 3 and 4 shall not apply to a farmer who
5.
declares less than 50 % of the total number of hectares, within the
meaning of Article 43(1)
and (2) of Regulation (EC)
No 1782/2003, which he held (leased and owned) in the refer-
ence period.

6.
Paragraph 1, 2, 3 and 4 shall not apply to a farmer who
declares fewer hectares than the number corresponding to pay-
ment entitlements he would be or have been allocated in accor-
dance with Article 43 of Regulation (EC) No 1782/2003 due to
the fact that he transferred those hectares by sale or lease.

1. Where a Member State makes use of the option provided
for in Article 46(3) of Regulation (EC) No 1782/2003, the Mem-
ber State may decide that it shall revert to the national reserve:

(a)

in case of sale of payment entitlements without land, up to
30 % of the value of each payment entitlement or the equiva-
lent amount expressed in number of payment entitlements.
However during the first 3 years of application of the single
payment scheme, the percentage of 30 % may be replaced
by 50 %;

and/or

(b)

in case of sale of payment entitlements with land, up to 10 %
of the value of each payment entitlement or the equivalent
amount expressed in number of payment entitlements;

and/or

(c)

in case of sale of set-aside entitlements without land, up to
30 % of the value of each payment entitlement. However dur-
ing the first 3 years of application of the single payment
scheme, the percentage of 30 % may be replaced by 50 %;

The farmer concerned shall declare all the hectares he holds

7.
at the time of the request.

and/or

Section 3

Replenishment of the national reserve

Article 8

Unused payment entitlements

1. Without prejudice to Article 34(3) of Regulation (EC)
No 1782/2003, unused payment entitlements shall revert to the
national reserve on the day following the last day for modifying
the application under the single payment scheme in the calendar
year in which the period referred to in the second subparagraph
of Article 42(8) or
in Article 45(1) of Regulation (EC)
No 1782/2003 expires.

For the purposes of this Article, ‘unused payment entitlement’
shall mean that no payment has been granted for that entitlement
during the period referred to in the first subparagraph. Payment
entitlements for which an application is made and accompanying
an area determined within the meaning of Article 2 point (22) of
Regulation (EC) No 795/2004 shall be deemed as being used.

(d)

in case of sale of payment entitlements with an entire hold-
ing, up to 5 % of the value of each payment entitlement
and/or the equivalent amount expressed in number of pay-
ment entitlements;

and/or

(e)

in case of sale of payment entitlements to which it is linked
the authorisation referred to in Article 60 of Regulation (EC)
No 1782/2003, up to 10 % of the value of each payment
entitlement.

In case of sale of payment entitlements with or without land to a
farmer commencing an agricultural activity and in case of actual
or anticipated inheritance of payment entitlements no retention
shall apply.

2. When fixing the percentages referred to in paragraph 1, a
Member State may differentiate the percentage within one of the
cases referred to in paragraph 1 a) to e) in accordance with objec-
tive criteria and in such a way as to ensure equal treatment
between farmers and to avoid market and competition distortion.

Article 10

Windfall profit clause

2.
Set-aside entitlements and payment entitlements accompa-
nied by the authorisation provided for in Article 60 of Regulation
(EC) No 1782/2003 when reverting to the national reserve shall
loose the accompanying obligation or authorisation.

1.
In cases referred to in Article 42(9) of Regulation (EC)
No 1782/2003, the following shall revert to the national reserve:

(a)

in case of sale, up to 90 % of the reference amount to be
established in accordance with Article 37 of Regulation (EC)

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No 1782/2003 for the seller in respect of the production
units and the hectares of the holding or part of the holding
transferred;

CHAPTER 3

ALLOCATION OF PAYMENT ENTITLEMENTS

(b)

(c)

in case of six-year lease, up to 50 % of the reference amount
to be established in accordance with Article 37 of Regulation
(EC) No 1782/2003 for the lessor in respect of the produc-
tion units and the hectares of the holding or part of the hold-
ing transferred;

in case of a lease of more than six years, 5 % per any year
after the six-year period but corresponding to no more than
20 % of the reference amount to be established in accordance
with Article 37 of Regulation (EC) No 1782/2003 for the les-
sor in respect of the production units and the hectares of the
holding or part of the holding transferred.

2.
The payment entitlements to be established for the seller or
the lessor shall be calculated in accordance with Article 43 of
Regulation (EC) No 1782/2003 on the basis of the remaining ref-
erence amount and hectares.

3.
Paragraph 1 shall not apply in cases where, within one year
but not later than 30 april 2004 from the sale or the lease, the
seller or the lessor bought or rented for six or more years another
holding or part of it. In that case, the seller or the lessor shall keep
a number of payment entitlements at least equal to the number
of payment entitlements that the farmer may use on the new
holding pursuant to Article 44 of Regulation (EC) No 1782/2003.

4.
Paragraph 1 shall not apply in cases where the farmer
proves, to the satisfaction of the Member State, that the price of
sale or lease corresponds to the value of the holding or, in case of
partial
the holding without payment
entitlements.

transfer of part of

Section 4

Regional administration

Article 11

Regional reserves

Section 1

Initial allocation of payment entitlements

Article 12

Applications

1.
Starting from the calendar year preceding the first year of
application of the single payment scheme Member States may
proceed to the identification of the eligible farmers referred to in
Article 33 of Regulation (EC) No 1782/2003, to the provisional
establishment of the amounts and the number of hectares referred
to respectively in Article 34(1) (a) and (b) of that Regulation and
to a preliminary verification of the conditions referred to in para-
graph 5 of this Article.

2.
For the provisional establishment of payment entitlements,
Member States may send the application form referred to in
Article 34(1) of Regulation (EC) No 1782/2003, by a date to be
fixed by the Member States but not later than 15 April of the first
year of application of the single payment scheme, to the farmers
referred to in Article 33(1) (a) of that Regulation or, where the
case may be, to the farmers identified in accordance with para-
graph 1 of this Article. In this case and by the same date, farmers
other than those referred to in Article 33(1) (a) of Regulation (EC)
No 1782/2003 shall make an application to establish their pay-
ment entitlements.

3. Where a Member State does not make use of the option
provided for in paragraph 2, the Member State shall send the
application form referred to in Article 34(1) of Regulation (EC) No
1782/2003 by a date to be fixed by the Member State but not
later than one month before the last date for lodging an applica-
tion under the single payment scheme.

4.
The definitive establishment of payment entitlements to be
allocated in the first year of application of the single payment
scheme shall be subject to the application under the single pay-
ment scheme in accordance with Article 34(3) of Regulation (EC)
No 1782/2003.

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

No transfer of payment entitlements shall be possible before the
definitive establishment.

In that case, Member States may allocate, in full or in part, the
amounts available at national level in accordance with Articles 4,
5, 8, 9 and 10.

5.
The applicant shall prove to the satisfaction of the Member
State that, at the date of application for the payment entitlements,
he is a farmer within the meaning of Article 2(a) of Regulation
(EC) No 1782/2003.

2.
The amounts allocated to each regional level may be con-
sidered available for allocation within the region concerned only,
except in cases referred to in Article 42(4) of Regulation (EC)
No 1782/2003 or, according to the Member State’s choice, in
case of application of Article 42(3) of that Regulation.

6.
A Member State may decide to set up a minimum size per
holding for which the establishment of payment entitlements may
be requested. However, the minimum size shall not be higher
than 0,3 ha.

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No minimum size shall be set up for the establishment of the pay-
ment entitlements subject to special conditions referred to in
Articles 47 to 50 of Regulation (EC) No 1782/2003.

For the purposes of Article 33(1)(b) of Regulation (CE)
5.
No 1782/2003 and of this Regulation, the definition in the
national legislation for ‘inheritance’ and ‘anticipated inheritance’
shall be used.

7.
A Member State may decide that the application for the
definitive establishment of payment entitlements referred to in
paragraph 4 may be lodged at the same time as the application for
payment under the single payment scheme.

Article 14

Changes in legal status or denomination

Section 2

Allocation of payment entitlements outside the national
reserve

Article 13

Inheritance and anticipated inheritance

1.
In cases referred to in Article 33(1)(b) of Regulation (EC)
No 1782/2003, the farmer who has received the holding or part
of the holding shall claim, in his name, the payment entitlements
to be calculated for the holding or part of the holding received.

The number and value of the payment entitlements shall be estab-
lished on the basis of the reference amount and number of hect-
ares relating to the production units inherited.

2.
In cases of revocable anticipated inheritance, the access to
the single payment scheme shall be given only once to the desig-
nated inheritant by the date for lodging an application for the
payment under the single payment scheme.

Succession under a contract lease or inheritance or anticipated
inheritance from a farmer who is a natural person and who was a
lessee of a holding or part of it, in the reference period, which
would give right to payment entitlements, shall be treated as the
inheritance of a holding.

3.
In cases where a farmer referred to in paragraph 1 is already
entitled to payment entitlements, the number and value of his
payment entitlements shall be established on the basis of, respec-
tively, the sum of the reference amounts and the sum of the num-
ber of hectares relating to his original holding and the inherited
production units.

4.
In cases where a farmer referred to in paragraph 1 meets the
condition for applying two or more of Articles 19 to 23 of this
Regulation or Articles 37(2), 40, 42(3) or 42(5) of Regulation (EC)
No 1782/2003, he shall receive a number of payment entitle-
ments not higher than the highest number between the hectares
he inherited and those he declares in the first year of application
of the single payment scheme and whose value shall be the high-
est value he may obtain by applying separately each of the Articles
for which he meets the conditions.

1.
For the purposes of Article 33(2) of Regulation (EC)
No 1782/2003, in cases of changes of legal status or denomina-
tion, the farmer shall have access to the single payment scheme
under the same conditions as the farmer originally managing the
holding within the limit of the payment entitlements to be allo-
cated for the original holding under the following conditions:

(a)

the number and the value of the payment entitlements shall
be established on the basis of the reference amount and num-
ber of hectares relating to the original holding;

(b)

in case of changes of the legal status of a legal person or from
a natural person to a legal person or from a legal person to a
natural person, the farmer managing the new holding shall
be the farmer who was in control of the original holding in
terms of management, benefits and financial risk;

2. Where the cases referred to in Article 33(2) of Regulation
(EC) No 1782/2003 occur in the period between1 January and
the date for lodging an application in the first year of application
of the single payment scheme, paragraph 1 of this Article shall
apply.

Article 15

Mergers and scissions

For the purposes of the first subparagraph of Article 33(3)
1.
of Regulation (EC) No 1782/2003, ‘merger’ shall mean the merger
of
two or more separate farmers within the meaning of
Article 2 (a) of Regulation (EC) No 1782/2003 into one new
farmer within the meaning of Article 2 (a) of Regulation (EC) No
1782/2003 controlled in terms of management, benefits and
financial risks by the farmers originally managing the holdings or
one of them.

The number and value of the payment entitlements shall be estab-
lished on the basis of the reference amount and number of hect-
ares relating to the original holdings.

For

the purposes of

2.
second subparagraph of
Article 33(3) of Regulation (EC) No 1782/2003, ‘scission’ shall
mean the scission of one farmer within the meaning of
Article 2 (a) of Regulation (EC) No 1782/2003 into at least

the

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two new separate farmerswithin the meaning of Article 2 (a) of
Regulation (EC) No 1782/2003 of which at least one remains
controlled, in terms of management, benefits and financial risks,
by at least one of the legal or natural persons originally managing
the holding or the scission of one farmer within the meaning of
Article 2 (a) of Regulation (EC) No 1782/2003 into at least one
new separate farmer within the meaning of Article 2 (a) of Regu-
lation (EC) No 1782/2003 the other one remaining controlled, in
terms of management, benefits and financial risks, by the farmer
originally managing the holding.

The number and value of the payment entitlements shall be estab-
lished on the basis of the reference amount and number of hect-
ares relating to the transferred production units of the original
holding.

3. Where the cases referred to in the first or second subpara-
graph of Article 33(3) of Regulation (EC) No 1782/2003 occur in
the period between 1 January and the date for lodging an appli-
cation in the first year of application of the single payment
scheme, paragraph 1 or 2 of this Article shall apply respectively.

Article 16

Hardship cases

1.
In cases referred to in Article 40(5) of Regulation (EC)
No 1782/2003, where the agri-environmental commitments
referred to in that Article expire after the last date for lodging an
application for payment under the single payment scheme in its
first year of application, the Member State shall establish, in the
first year of application of the single payment scheme, reference
amounts
for each farmer concerned in accordance with
Article 40(1), (2), (3) or (5) second subparagraph of that Regula-
tion, provided that any double payment under those agri-
environmental commitments is excluded.

Amounts of less than EUR 10 per payment entitlement or less
than a total amount of EUR 100 per farmer shall not be consid-
ered a double payment.

Where the Member State concerned may not modify the amounts
to be paid under those agri-environmental commitments, the
farmer concerned may:

a)

receive a reduced reference amount and apply, under a pro-
gram to be established by the Member State according to
Article 42(5) of Regulation (EC) No 1782/2003, after the
expiry of his agri-environmental commitment, to adjust the
unit value of his payment entitlements by a date to be fixed
by the Member State but not later than, the latest date for
application under the single payment scheme in the follow-
ing year,

or alternatively

In the case referred to in the second subparagraph of
2.
Article 40(5) of Regulation (EC) No 1782/2003, the farmer shall
receive payment entitlements calculated by dividing a reference
amount, established by the Member State, in accordance with
objective criteria and in such a way as to ensure equal treatment
between farmers and to avoid market and competition distortion,
by a number of hectares not higher than the number of hectares
he declares in the first year of application of the single payment
scheme.

Article 17

Private contract clause in case of sale

1. Where a sales contract concluded or modified by the last
date for lodging an application under the single payment scheme
in its first year of application at the latest stipulates that all the
holding or part of the holding is sold, in full or in part, together
with the payment entitlements to be established in accordance
with Article 43 of Regulation (EC) No 1782/2003, in respect of
the hectares of the holding or part of the holding transferred, the
sales contract shall be considered as a transfer of the payment
entitlements with land within the meaning of Article 46 of that
Regulation subject to the conditions provided for in paragraph 2,
3 and 4 of this Article.

Articles 42(9) and 46(3) of Regulation (EC) No 1782/2003
2.
shall apply, where the case may be, to the payment entitlements
to be calculated on the basis of the production units and hectares
which were the object of the contract.

3.
The seller shall apply for the establishment of the payment
entitlements in accordance with Article 12, adding to his appli-
cation a copy of the sales contract and indicating the production
units and the number of hectares for which he intends to transfer
the payment entitlements.

A Member State may allow the buyer to apply on behalf of the
seller and with the explicit authorisation of the seller for the estab-
lishment of
the payment entitlements in accordance with
Article 12. In this case the Member State shall verify that the seller
fulfils the eligibility criteria provided for in Article 33 of Regula-
tion (EC) No 1782/2003 and in particular the condition referred
to in Article 12(5) of this Regulation.

4.
The buyer shall apply for payment under the single payment
scheme in accordance with Article 12, adding to his application a
copy of the sales contract.

b)

receive a full reference amount subject to the condition that
he accepts to modify the amounts to be paid under those
agri-environmental commitments.

5.
A Member State may require that the applications of the
buyer and of the seller are lodged together or that the second
application contains a reference to the first one.

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Section 3

Allocation of payment entitlements within the national
reserve

Article 20

Transfer of leased land

Article 18

General provisions for farmers in a special situation

1.
For the purposes of Article 42(4) of Regulation (EC)
No 1782/2003, ‘farmers in a special situation’ shall mean the
farmers referred to in Articles 19 to 23 of this Regulation.

In cases where a farmer in a special situation meets the con-
2.
dition for applying two or more of Articles 19 to 23 of this Regu-
lation or Articles 37(2), 40, 42(3) or 42(5) of Regulation (EC)
No 1782/2003, he shall receive a number of payment entitle-
ments not higher than the number of hectares he declares in the
first year of application of the single payment scheme and whose
value shall be the highest value he may obtain by applying sepa-
rately each of the Articles for which he meets the conditions.

Article 6 shall not apply to farmers in a special situation,

3.
except the third subparagraph of Article 6(3).

1.
A farmer who received, by transfer free of charge or by lease
for six or more years or by way of actual or anticipated inherit-
ance, a holding or part of a holding, that was leased to a third per-
son during the reference period, from a farmer who retired or died
before the date for lodging an application under the single pay-
ment scheme in its first year of application, shall receive payment
entitlements calculated by dividing a reference amount, estab-
lished by the Member State, in accordance with objective criteria
and in such a way as to ensure equal treatment between farmers
and to avoid market and competition distortion, by a number of
hectares not higher than the number of hectares of the holding or
part of the holding he received.

2.
Farmers referred to in paragraph 1 shall be any person who
may receive the holding or part or the holding referred to in para-
graph 1, by way of actual or anticipated inheritance.

Article 21

Investments

4.
In cases where the lease referred to in Articles 20 and 22 or
the programs referred to in Article 23 expire after the last date for
lodging an application under the single payment scheme in its
first year of application, the farmer concerned may apply for the
establishment of his payment entitlements, after the expiry of the
lease or program, by a date to be fixed by the Member States but
not later than the latest date for application under the single pay-
ment scheme in the following year.

A farmer who made investments in production capacity or
1.
purchased land in accordance with the conditions laid down in
paragraphs 2 to 6, by29 September 2003 at the latest, shall
receive payment entitlements calculated by dividing a reference
amount, established by the Member State, in accordance with
objective criteria and in such a way as to ensure equal treatment
between farmers and to avoid market and competition distortion,
by a number of hectares not higher than the number of hectares
he purchased.

5. Where,
law or well-
in accordance with their national
established usual practice, the definition of long term lease also
includes lease for five years, Member States may decide to apply
Articles 20, 21 and 22 to those lease.

2.
Investments shall be provided for in a plan or programme
whose implementation has already started by 29 September 2003
at the latest. The plan or programme shall be communicated by
the farmer to the competent authority of the Member State.

Article 19

Dairy farmers

Where no written plan or programs exists, Member Stats may
take account of other objective proof of the investment.

For the purpose of establishing the reference amount of a dairy
farmer finding himself in a situation referred to in Article 40 of
Regulation (EC) No 1782/2003 who leases, because of that situ-
ation, his individual reference quantity or part of it according to
Article 16 of Regulation (EC) No 1788/2003 during the twelve-
month period ending on 31 March of the first year of application
of the single payment scheme to the dairy premiums and addi-
tional payments, that individual reference quantity shall be
deemed to be available on the holding of that farmer for that cal-
endar year.

The increase in the production capacity shall concern only
3.
those sectors for which a direct payment listed in Annex VI to
Regulation (EC) No 1782/2003 would have been granted in the
reference period taking into account the application of the options
provided for in Articles 66 to 70 of that Regulation.

The purchase of land shall only concern the purchase of eligible
land within the meaning of Article 44(2) of Regulation (EC)
No 1782/2003.

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In any case, the part of the increase in production capacity and/or
the purchase of land for which the farmer is already entitled to be
allocated payment entitlements and/or reference amounts for the
reference period shall not be taken into account for the applica-
tion of this Article.

established by the Member State, in accordance with objective cri-
teria and in such a way as to ensure equal treatment between
farmers and to avoid market and competition distortion, by a
number of hectares not higher than the number of hectares he
declares in the first year of application of the single payment
scheme.

4.
Long term lease of six and more years started by 29 Sep-
tember 2003 at the latest shall be considered as a purchase of land
for the application of paragraph 1.

5. Where a farmer already owns payment entitlements, in case
of purchase or long term lease, the number of payment entitle-
ments shall be calculated on the basis of the hectares purchased
or rented and, in case of other investments, the total value of the
existing payment entitlements may be increased within the limit
of the reference amount referred to in paragraph 1.

6. Where a farmer has no hectares or does not own any pay-
ment entitlements, the number of payment entitlements shall be
calculated by dividing the reference amount referred to in para-
graph 1 by a unit value that shall not be higher than EUR 5 000.

The value of each payment entitlement shall be that unit value.

The payment entitlements shall be subject to the conditions
referred to in Article 49 of Regulation (EC) No 1782/2003. The
50 % of the agricultural activity referred to in paragraph 2 of that
Article shall be established by the Member State in accordance
with objective criteria.

Article 22

Lease and purchase of leased land

1.
A farmer who leased, between the end of the reference
period and 29 September 2003 at the latest, for six or more years
a holding or part of it whose lease conditions may not be adjusted
shall receive payment entitlements calculated by dividing a refer-
ence amount, established by the Member State, in accordance
with objective criteria and in such a way as to ensure equal treat-
ment between farmers and to avoid market and competition dis-
tortion, by a number of hectares not higher than the number of
hectares he leased.

2.
Paragraph 1 shall apply to a farmer who bought, in the ref-
erence period or before, or by 29 September 2003 at the latest, a
holding or part of it whose land was under a lease during the ref-
erence period, with the intention to commence or expand his
agricultural activity within one year after the expiry of the lease.

Article 23

Reconversion of production

1.
A farmer who participated, in the reference period and by
29 September 2003 at the latest, in national programs of reori-
entation of production for which a direct payment under the
single payment scheme could have been granted, such as, in par-
ticular, programs of conversion of production, shall receive pay-
ment entitlements calculated by dividing a reference amount,

2.
Paragraph 1 shall apply to a farmer who converted during
the reference period and by 29 September 2003 at the latest, his
milk production into any other production of a sector referred to
in Annex VI of Regulation (EC) No 1782/2003.

CHAPTER 4

SPECIFIC PROVISIONS

Section 1

Declaration and transfer of payment entitlements

Article 24

Declaration and use of payment entitlements

Payment entitlements may only be declared for payment,
1.
once per year, by the farmer who holds them at the latest date for
lodging an application under the single payment scheme

2. Member States shall fix the beginning of the 10 month
period referred to in Article 44(3) of Regulation (EC)
No 1782/2003 for each individual farmer at a single date within
a period to be fixed between 1st September of the calendar year
preceding the year of lodging an application under the single pay-
ment scheme and 30 April of the following calendar year or leave
it at the farmer’s choice within the fixed period.

Article 25

Transfers of payment entitlements

Payment entitlements may be transferred at any time of the

1.
year.

2.
The transferor shall inform the competent authority of the
Member State of the transfer within a period to be established by
the Member State

3.
A Member State may require that the transferor shall com-
municate the transfer to the competent authority of the Member
State where the transfer will operate, within a time period to be
established by that Member State but not earlier than six weeks
before the transfer shall take place and taking into account the last
date for lodging an application under the single payment scheme.
The transfer shall take place six weeks after the day of communi-
cation unless the competent authority objects to the transfer and
notifies the transferor thereof within that period. The competent
authority may only object to a transfer where the latter is not in
accordance with provisions of Regulation (EC) No 1782/2003
and of this Regulation.

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Article 26

Regional limitation

1. Where a Member State makes use of the option provided
for in the third subparagraph of Article 46 (1) of Regulation (EC)
No 1782/2003, Member States shall define the region at the
appropriate territorial level in accordance with objective criteria
and in such a way as to ensure equal treatment between farmers
and to avoid market and competition distortion.

The lessor shall apply for the establishment of the payment
2.
entitlements in accordance with Article 12, adding to the appli-
cation a copy of the lease contract and indicating the number of
hectares for which he intends to lease the payment entitlements.
Where the case may be, Article 42(9) of Regulation (EC)
No 1782/2003 shall apply.

3.
The lessee shall apply for payment under the single payment
scheme in accordance with Article 12, adding to the application
a copy of the lease contract.

2.
The Member State shall define the region referred to in para-
graph 1 at the latest one month before the date of beginning of
the 10 month period referred to in Article 44(3) of Regulation
(EC) No 1782/2003.

4.
A Member State may require that the applications of the les-
see and of the lessor are lodged together or that the second appli-
cation contains a reference to the first one.

A farmer, whose holding is situated in the region concerned, may
not transfer or use outside that region his payment entitlements
corresponding to the number of hectares which he declares in the
first year of application of the option provided for in the third
subparagraph of Article 46(1) of Regulation (EC) No 1782/2003.

A farmer, whose holding is partly situated in the region con-
cerned, may not transfer or use outside that region his payment
entitlements corresponding to the number of hectares, situated in
that region, which he declares in the first year of application of the
option.

3.
The limitation to the transfer of payment entitlements
referred to in the third subparagraph of Article 46(1) of Regula-
tion (EC) No 1782/2003 shall not apply in case of actual or antici-
pated inheritance of payment entitlements without an equivalent
number of eligible hectares.

A Member State may decide to apply the limitation to the
4.
transfer of payment entitlements referred to in the third subpara-
graph of Article 46 (1) of Regulation (EC) No 1782/2003 only to
set-aside payment entitlements.

Article 27

Private contract clause in case of lease

1.
Subject to paragraphs 2 and 3, a clause in a lease contract
providing for the transfer of a number of entitlements not higher
than the number of hectares leased shall be considered as a lease
of the payment entitlements with land within the meaning of
Article 46 of Regulation (EC) No 1782/2003, in cases where:

(a) a farmer has leased to another farmer his holding or part of
it no later than the date for lodging an application under the
single payment scheme in its first year of application,

(b)

the lease contract expires later than the last date for lodging
an application under the single payment scheme,

and

Section 2

Other specific provisions

Article 28

Forage area

For the purposes of Article 43(2)
(b) of Regulation (EC)
No 1782/2003, a Member State may decide to use the forage area
declared by the farmer in the area aid application for 2004 or in
the year preceding the first year of application of the single pay-
ment scheme unless the farmer proves, at the satisfaction of the
competent authority, that his forage area in the reference period
was lower.

Article 29

Production of hemp

For the purposes of Article 52 of Regulation (EC) No 1782/2003,
the payment of the entitlements for areas on hemp shall be sub-
ject to the use of seed of the varieties listed in Annex II to Regu-
lation (EC) No 795/2004 in the version applicable for the year in
respect of which the payment is granted. In the case of hemp
grown for fibre, the seed shall be certified in accordance with
Council Directive 2002/57/EC (1) and in particular Article 12
thereof.

Article 30

Entitlements subject to special conditions

1.
For the purposes of calculating the agricultural activity
expressed in livestock units (LU) referred to in Article 49(2) of
Regulation (EC) No 1782/2003, the conversion table provided for
in Article 131(2) (a) of that Regulation shall apply to the number
of animals for which a direct payment referred to in Annex VI of
that Regulation was granted in the reference period.

2. Male and female bovine animals of less than six months
shall be converted in LU by using the coefficient 0,2.

(c) he decides to lease his payment entitlements to the farmer to

whom he leased the holding or part of it.

(1) OJ L 193, 20.7.2002, p. 74.

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In order to check that the minimum agricultural activity
3.
expressed in livestock units in accordance with paragraph 1 is
respected, Member States shall determine the number of animals
in accordance with one of the following methods:

(a) Member States shall ask each producer to declare, on the
basis of his farm register, prior to a date to be determined by
the Member State but not later than the date of payment, the
number of LUs;

and/or

(b) Member States shall use the computerised database set up in
accordance with Council Directive 92/102/EEC (1) and Regu-
lation (EC) No 1760/2000 of the European Parliament and of
the Council (2) to determine the number of LUs on condition
that the database offers, to the satisfaction of the Member
State, adequate assurances as to the accuracy of the data it
contains for the purposes of the single payment scheme.

The minimum agricultural activity requirement shall be
4.
deemed to be respected when the number of LUs reaches 50 %
during a period or at certain dates to be determined by the Mem-
ber States. All the animals sold or slaughtered during the calendar
year concerned shall be taken into account.

5. Member States shall take the measures necessary to apply
Article 29 of Regulation (EC) No 1782/2003 in the case of pro-
ducers who, by means of abnormally low numbers of LUs during
part of the year, artificially create the conditions required to
respect the minimum agricultural activity.

Article 31

Dairy premium and additional payments

1. Where a Member State makes use of the option provided
for in the first paragraph of Article 62 of Regulation (EC)
No 1782/2003 in 2005 or, in case of application of Article 71 of
Regulation (EC) No 1782/2003, in the first year of application of
the single payment scheme:

(a)

in the case where a dairy farmer received other direct pay-
ments in the reference period:

— if he had hectares in the reference period, the payment
entitlements shall be calculated,
in accordance with
Article 43 of Regulation (EC) No 1782/2003, on the
basis of all the hectares which in the reference period
gave right to those direct payments including the forage
area;

— if he had no hectares in the reference period, he shall
receive payment entitlements subject to special condi-
tions calculated in accordance with Article 48 of Regu-
lation (EC) No 1782/2003;

(b)

in the case where a dairy farmer did not receive other direct
payments in the reference period:

— if he has hectares, the payment entitlements shall be cal-
culated by dividing the amount to be granted under
Articles 95 and 96 of Regulation (EC) No 1782/2003 by
the hectares he owns in 2005 or, in case of application
of Article 71 of Regulation (EC) No 1782/2003, in the
first year of application of the single payment scheme;

— If he has no hectares, he shall receive payment entitle-
ments subject to special conditions calculated in accor-
dance with Article 48 of Regulation (EC) No 1782/2003.

2. Where a Member State makes use of the option provided
for in the first subparagraph of Article 62 of Regulation (EC)
No 1782/2003 in 2006, Article 50 of that Regulation shall apply.

CHAPTER 5

SET-ASIDE

Article 32

Conditions for set aside

1.
Areas set aside must so remain for a period commencing on
15 January at the latest and ending on 31 August at the earliest.
However, Member States shall lay down the conditions under
which producers may be authorised to sow seed from 15 July for
harvesting in the following year and the conditions to be met for
grazing to be authorised from 15 July or, in case of exceptional
climatic condition, from 15 of June in Member States where tran-
shumance is practised traditionally.

2. Member States shall apply suitable measures compatible
with the specific situation of areas set aside in order to ensure they
are maintained in good agricultural and environmental condition
and that the environment is protected.

Such measures may involve green cover. In that case, the mea-
sures shall ensure that the green cover cannot be used for seed
production and that it cannot be used for agricultural purposes
before 31 August or, before 15 January thereafter, to produce
crops for marketing.

3.
Paragraph 2 shall not apply to areas set aside or afforested
pursuant to Articles 22, 23, 24 and 31 of Council Regulation (EC)
No 1257/1999 (3) and counting for the purposes of compulsory
set-aside, where the measures referred to in paragraph 2 prove to
be incompatible with the environmental or afforestation require-
ments laid down in those Articles.

(1) OJ L 355, 5.12.1992, p. 32.
(2) OJ L 204, 11.8.2000, p. 1.

(3) OJ L 160, 26.6.1999, p. 80.

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Article 33

CHAPTER 6

Exchange of eligible land for set-aside

REGIONAL AND OPTIONAL IMPLEMENTATION

For the purpose of applying Article 54(5) of Regulation (EC)
No 1782/2003, Member States may derogate from the first sub
paragraph of paragraph 2 of that Article only under the follow-
ing situations and conditions:

Section 1

Regional implementation

Article 35

General provisions

(a) For areas subject to a restructuring programme, defined as a
‘change to the structure and/or eligible area of a holding
imposed by the public authorities’,

Where a Member State makes use of the options provided for in
Articles 58(1) and 59(1) of Regulation (EC) No 1782/2003, save
as otherwise provided for in this Section, the other provisions of
this Regulation shall apply.

(b)

In case of one or other form of public intervention, where
such intervention results in a farmer setting-aside land pre-
viously regarded as ineligible in order to continue his normal
agricultural activity and the intervention in question means
that land originally eligible ceases to be so with,

(c) Where farmers are able to give relevant and objective reasons
for exchanging ineligible land for eligible land on their
holdings,

In these cases, Member States shall take action to prevent any sig-
nificant increase in the total area eligible to set aside entitlements.
This may in particular involve deeming previously eligible areas
ineligible as an offsetting measure. Areas newly declared eligible
by the Member States must not exceed the area newly declared
ineligible by more than 5 %. The Member States may provide for
a system for the prior notification and approval of such
exchanges.

Article 34

Organic production

1.
The exemption from set-aside provided for in Article 55 (a)
of Regulation (EC) No 1782/2003 shall apply for a number of
hectares not higher than the number of set-aside entitlements
which a farmer received in the first year of application of the
single payment scheme.

Article 36

Calculation of the regional ceiling

1. Where a Member State makes use of the option provided
for in Articles 58(1) and 59(1) of Regulation (EC) No 1782/2003,
in case of farmers whose holdings are partly situated in the region
concerned, and without prejudice to Article 58(3) of that Regu-
lation, the regional ceiling shall be calculated on the basis of the
reference amount corresponding to the production units which
gave right to direct payments in the reference period situated in
the region concerned, or in accordance with objective criteria
established by the Member State.

2.
In the case referred to in paragraph 1, the individual refer-
ence amount referred to in Article 59(3) second subparagraph of
Regulation (EC) No 1782/2003 shall be that which corresponds
to the production units which gave right to direct payments in the
reference period situated in the region concerned or established
according to objective criteria established by the Member State.

3.

Article 26 (2) shall apply mutatis mutandis.

Article 37

Establishment of the national reserve

Where a Member State makes use of the option provided for in
Articles 58 and 59 of Regulation (EC) No 1782/2003, for the pur-
pose of establishing the national reserve, the reduction referred to
in Article 42(1) of that Regulation shall be applied to the ceiling
referred to in Annex VIII of that Regulation and, where the case
may be, adjusted before the definitive establishment of the pay-
ment entitlements as referred to in Article 38(3) of this Regulation.

Article 38

Initial allocation of payment entitlements

2.
In case of transfer of set-aside entitlements with land, para-
graph 1 shall not apply under the condition that Article 55 (a) of
Regulation (EC) No 1782/2003 is respected.

1.
For the purposes of Article 59(2) and (3) of Regulation (EC)
No 1782/2003, Member States shall establish the number of eli-
gible hectares referred to in those paragraphs including the

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grassland by using the number of hectares declared for the estab-
lishment of the payment entitlements in the first year of applica-
tion of the single payment scheme.

By way of derogation from paragraph 1, Member States
2.
may establish the number of eligible hectares referred to in
Article 59(2) and (3) of Regulation (EC) No 1782/2003 including
the grassland by using the number of hectares declared in the area
aid declarations for 2004 or for the year preceding the first year
of application of the single payment scheme. In cases where the
number of eligible hectares declared by farmers in the first year of
application of the single payment scheme is lower than the num-
ber of eligible hectares established in accordance with the first
subparagraph, a Member State may reallocate, in part or in full,
the amounts corresponding to the hectares which have not been
declared as a supplement to each payment entitlement allocated
in the first year of application of the single payment scheme. The
supplement shall be calculated by dividing the amount concerned
by the number of payment entitlements allocated.

3.
The value and number of the payment entitlements allo-
cated on the basis of the farmers’ declarations for the establish-
ment of the payment entitlements in the first year of application
of the single payment scheme shall be provisional. The definitive
value and number shall be established, by 31 December of the
first year of application of the single payment scheme at the lat-
est, after the checks made pursuant to Commission Regulation
(EC) No 795/2004 are carried out.

allocation of payment entitlements in accordance with that
Article 7, the number of payment entitlements to which an autho-
rization as referred to in Article 60 of Regulation (EC) No
1782/2003 is linked shall be equal to the initial number of pay-
ment entitlements with the authorisation and, where the case may
be, no higher than the number of payment entitlements allocated.

Article 41

Establishment and transfer of payment entitlements with
authorisation

1. Where a Member State makes use of the option provided
for in Article 59(1) of Regulation (EC) No 1782/2003, the autho-
risations established according to Article 60 of that Regulation
shall be linked to each individual payment entitlement to be allo-
cated to the farmer concerned.

2.
In case the number of authorisation is lower that the num-
ber of payment entitlements, the authorisation shall be linked to
the payment entitlements starting from those with the highest
unit value. In case of transfer of the payment entitlements, the
authorisation shall follow the payment entitlement to which it is
linked.

3.
A Member State may authorize, on farmer’s request, the
transfer of an authorization linked to a set-aside entitlement to a
payment entitlement.

Article 39

Initial allocation of set-aside entitlements

Article 42

Dairy premium and additional payments

For the purposes of Article 63(2) 3rd subparagraph of Regu-
1.
lation (EC) No 1782/2003, Member States shall establish the set-
aside rate by using the data available related to the land concerned.

2.
The number of hectares corresponding to the set-aside
entitlements allocated in the first year of application of the single
payment scheme shall not vary by a margin of more than 5 % of
the average number of hectares set aside in the reference period.

Where the margin referred to in the first subparagraph is
exceeded, the number of hectares shall be adjusted by 1 August
of the first year of application of the single payment scheme at the
latest. However, the set-aside obligation related to the new set-
aside payment entitlements shall apply to the farmer concerned
only starting from the following year.

Article 40

Application of Article 42(5) of Regulation (EC)
No 1782/2003 in case of fewer hectares than payment
entitlements

Where a Member State makes use of the option provided for in
Article 59 of Regulation (EC) No 1782/2003, and it decides to
apply Article 7 of this Regulation, for the purpose of the

1. Where a Member State making use of the option provided
for in Article 59(1) of Regulation (EC) No 1782/2003 decides to
make use of the option provided for in the first subparagraph of
Article 62 of that Regulation in 2005 or, in case of application of
Article 71 of Regulation (EC) No 1782/2003, in the first year of
application of the single payment scheme, Articles 59(2) and (3)
of that Regulation shall apply respectively.

2. Where a farmer has no hectares, he shall receive payment
entitlements subject to special conditions calculated in accordance
with Article 48 of Regulation (EC) No 1782/2003

3. Where a Member State making use of the option provided
for in Article 59(1) of Regulation (EC) No 1782/2003 decides to
make use of the option provided for in the first paragraph of
Article 62 in 2006 or 2007, Articles 48, 49 and 50 of that Regu-
lation shall apply mutatis mutandis.

Article 43

Set-aside

1. Where a Member State makes use of the option provided
for in Article 59(1) of Regulation (EC) No 1782/2003, it shall
establish and communicate to farmers the set-aside rate referred
to in the third subparagraph of Article 63(2) of that Regulation by
1 August of the year preceding the first year of application of the
single payment scheme.

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In case of farmers whose holding is partly situated in the
2.
region concerned by the application of Article 59 of Regulation
(EC) No 1782/2003, the set aside rate shall apply to the farmer’s
eligible land, referred to in Article 63(2) second subparagraph of
that Regulation, situated in the region concerned.

Article 48

Implementation of Article 69 of Regulation (EC)
No 1782/2003

Article 44

Retention on sale of payment entitlements

Where a Member State making use of the option provided for in
Article 59(1) of Regulation (EC) No 1782/2003 decides to make
use of the option provided for in Article 46(3) of that Regulation,
the percentages of reduction provided for in Article 9 of this
Regulation shall apply after deduction from the value of the pay-
ment entitlements of a franchise equal to the regional unit value
calculated in accordance with Article 59(2) or (3) of Regulation
(EC) No 1782/2003.

Article 45

Windfall profit clause

Where a Member State making use of the option provided for in
Article 59(1) of Regulation (EC) No 1782/2003 decides to make
use of the option provided for in Article 42(9) of that Regulation,
the percentages of reduction provided for in Article 10 of this
Regulation shall apply to the value of each payment entitlement
and/or to the equivalent amount expressed in number of payment
entitlements to be allocated.

Article 46

Private contract clause

Where a Member State makes use of the option provided for in
Article 59(1) of Regulation (EC) No 1782/2003, for the purposes
of Article 17 of this Regulation, the reference amount calculated
for the production units which have been transferred shall be
taken into account for the establishment of the value of all the
payment entitlements of the buyer.

Article 27 shall not apply.

Section 2

Optional implementation

Article 47

Overrun of the ceilings

1.
The additional payment provided for Article 69 of Regula-
tion (EC) No 1782/2003 shall be granted, without prejudice to
Article 37(3) of Regulation (EC) No 1257/1999 and its imple-
menting rules, under the conditions provided for in paragraphs 2
to 6 of this Article.

The payment shall be made only to farmers within the
2.
meaning of Article 2(a) of Regulation (EC) No 1782/2003, irre-
spective whether they have applied or not to the single payment
scheme or they hold payment entitlements.

3.
‘In the sector or sectors concerned by the retention’ shall
mean that the payment may be claimed, in principle, by all the
farmers producing, at the time for lodging an application for the
additional payment and under the conditions provided for by this
Article, the products covered by the sector or sectors referred to
in Annex VI to Regulation (EC) No 1782/2003.

4.
In case the payment covers types of farming or quality and
marketing measures for which no specific production is identi-
fied or the production is not directly covered by a sector, payment
may be provided for under the condition that the retention is
done in all the sectors referred to in Annex VI to Regulation (EC)
No 1782/2003 and only the farmers belonging to any of the sec-
tors referred to in that Annex shall participate to the scheme.

5.
In case of application of Article 69 of Regulation (EC)
No 1782/2003 at regional level, the retention shall be calculated
on the basis of the component of the payments of the sectors con-
cerned in the region concerned.

Member States shall define the region at the appropriate territo-
rial level in accordance with objective criteria and in such a way
as to ensure equal treatment between farmers and to avoid mar-
ket and competition distortion.

6. Member States concerned shall communicate the details of
the payment they intend to grant and, in particular, the eligibility
conditions and the sectors concerned by 1 August of the year pre-
ceding the first year of application of the single payment scheme
at the latest.

Where the sum of the amounts to be paid under each of the
schemes provided for in Articles 66 to 69 exceeds the ceiling fixed
in accordance with Article 64(2) of Regulation (EC)
No 1782/2003, the amount to be paid shall be reduced propor-
tionately in the year concerned.

Any change to the communication referred to in the first subpara-
graph shall be done by 1 August of a given year at the latest and
shall apply to the following year. It shall be immediately commu-
nicated to the Commission accompanied by the objective criteria
justifying such changes. However, a Member State may not
modify the sectors concerned nor the percentage of retention.

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CHAPTER 7

COMMUNICATIONS

Article 49

Regionalisation

Where a Member State makes use of the option provided for in
Article 59(1) of Regulation (EC) No 1782/2003, it shall commu-
nicate to the Commission, by 1 August of the year preceding the
first year of application of the single payment scheme at the lat-
est, the justification and objective criteria on the basis of which
the decision of applying that option has been taken and, where
necessary, justification of the application of that Article only in a
given region, or justification of the partial division provided for
in paragraph 3 of that Article.

Article 50

Payments data

1. Member States shall communicate, by electronic means, to
the Commission each year:

(a) by 15 September of the first year of application of the single
payment scheme at the latest and, in the following years, by
31 August at the latest, the total number of applications
under the single payment scheme for the current year,
together with the corresponding total amount of the pay-
ment entitlements giving right to payment and the total
number of accompanying eligible hectares, as well as the
total sum of the amounts remaining in the national reserve;

(b) by 15 September at the latest, definitive data on the total
number of applications under the single payment scheme
accepted for the preceding year and the corresponding total
amount of the payments which have been granted, after
application, as the case may be, of the measures referred to
in Articles 6, 10, 11, 24 and 25 of Regulation (EC)
No 1782/2003.

2.
In case of regional implementation of the single payment
scheme as provided for in Article 58 of Regulation (EC)
No 1782/2003, Member States shall communicate the informa-
tion referred to in paragraph 1 (a) and (b) for each of the regions
concerned, and, by 1 August of the first year of application of the
single payment scheme at the latest, the corresponding part of the
ceiling established in accordance with Article 58(3) of Regulation
(EC) No 1782/2003.

For the first year of application of the single payment scheme, the
information referred to in paragraph 1 (a) shall be based on the
provisional payment entitlements. The same information based
on the definitive payment entitlements shall be communicated by
1st March of the following year.

Chapter 8

Final provisions

Article 51

Entry into force

This Regulation shall enter into force on the seventh day follow-
ing that of its publication in the Official Journal of the European
Union.

It shall apply from1 January 2005 except Article 12(1) and (2)
which shall apply from 1st January 2004.

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

Done at Brussels, 21 april 2004

For the Commission
Franz FISCHLER
Member of the Commission