COVID-19 has already had a material impact on companies and their business. Flights have been cancelled, restaurants are closed, and people are no longer using public transport. The European Commission has recognised the economic consequences of the pandemic and the measures being taken to contain it and indicated that it will use all tools at its disposal to make sure that "the European economy weathers this storm".
As the situation develops, the European Commission and the Dutch government are continually assessing, adding to or amending State Aid measures, as necessary. Our COVID-19 State Aid Tracker provides you with the latest updates on State Aid measures as they become available.
Please do not hesitate to contact us should you have any questions regarding any of these developments.
On 19 June, the Commission approved the provision of strategic transformation aid to undertakings in the Flemish Region for investments in COVID-19-related products, such as medicinal products, medical equipment and devices, protective clothing, disinfectants and intermediate disinfectants, chemicals necessary for their production, and data collection and processing tools. Due to a shortage of these products, the Belgian government wishes to incentivize companies to refocus their activities on their production. The estimated budget for this aid package is EUR 21 million.
Aid will take the form of direct grants, administered by Vlaio. All undertakings active in Flanders, with the exception of financial institutions, can apply, provided they were not in financial difficulty prior to the start of the crisis. The direct grant will be paid in two instalments: (i) 50% upon issuance of the decision to award the aid, provided the investment project has already started, and (ii) 50% upon completion of the project. The project should have started by 1 June 2020 and should be completed within six months from the date of grant of the aid. The maximum aid is set at 50% of eligible costs. It should be noted that this type of aid may be combined with certain other aid measures.
In May 2020, the European Commission approved four more measures notified by the Belgian government.
- On 5 May, the Commission approved a loan scheme of EUR 250 million to support undertakings, in particular start-ups, scale-ups and SMEs, active in the Flemish region. These undertakings will be able to benefit from subordinated loans of up to EUR 800,000 per undertaking, depending on the sector in which it is active, to cover immediate liquidity needs.
- On 12 May, the Commission approved a EUR 25 million aid scheme to support R&D projects relevant to the coronavirus outbreak in Wallonia. Aid will take the form of direct grants and repayable advances and will cover 80% of relevant R&D costs, for SMEs, and 60% for large undertakings.
- On 14 May, the Commission approved a EUR 500 million loan guarantee scheme, complementing the loan portfolio guarantee scheme approved on 11 April 2020. This scheme will be administered by the Belgian Export Credit Agency (Delcredere/Ducroire) and can be applied for until 25 September 2020. All undertakings active in Belgium and conducting international operations, except for those active in the financial sector, can apply. The measure covers both new investments and working capital loans to eligible undertakings.
- On 15 May the Commission approved a reinsurance scheme for short-term credit and surety risks in order to ensure the continued availability of trade credit and surety insurance. The maximum budget for this measure is EUR 903.2 million, corresponding to the Belgian government’s exposure limit. Undertakings can apply for the programme until 31 December 2020. The scheme will be open to all private credit insurers operating in Belgium that have extended trade credit to companies incorporated in Belgium or companies incorporated outside Belgium acting through a Belgian subsidiary or branch. It will cover both domestic and export risks.
On 30 April, the European Commission approved a guarantee scheme for the Walloon Region under the Temporary Framework. The aid package, consisting of four sub-measures, aims to help businesses that are having difficulty servicing existing loans and obtaining additional credit meet their liquidity needs for the next twelve to eighteen months. The aid takes the form of guarantees for loans extended by commercial credit institutions and financial institutions acting as financial intermediaries and will be administered by four entities designated by the Walloon government (SOWALFIN S.A., GELIGAR S.A., SOGEPA S.A. and WALLONIE SANTE S.A).
This scheme is open to all undertakings, with the exception of those active in the banking, financial and insurance sectors, provided they were not in financial difficulty prior to the start of the crisis. Undertakings can apply for one of the four measures, depending on their size, economic condition and sector of activity.
The European Commission approves a fourth Belgian aid measure. In addition to a €50 billion federal loan guarantee scheme, a €3 billion loan guarantee scheme financed by the Flemish Region, and a deferral of concession fees for Walloon airports, a €4 million Belgian R&D support scheme has been approved by the European Commission under the Temporary Framework for State Aid.
The scheme provides for a €4 million direct grant to the Brussels-Capital Region to help fund coronavirus-related R&D projects and will be accessible to SMEs and large undertakings in all sectors. The idea is to provide financial support for the development of innovative solutions to the coronavirus pandemic, such as vaccines, drugs and treatments, medical devices, and hospital and medical products and equipment. The scheme will support 80% of the eligible costs for the duration of a project, with research organisations benefitting from a 15% bonus for cross-border collaboration.
The European Commission approved three Belgian aid measures notified following the COVID-19 crisis: a €50 billion federal loan guarantee scheme, a €3 billion loan guarantee scheme financed by the Flemish Region, and a deferral of concession fees for Walloon airports.
- The first scheme is a €50 billion aid package to provide government-backed guarantees for new short-term loans. The funds will be channeled through credit institutions and available to all viable (non-financial) undertakings, including SMEs and self-employed traders. However, the scheme only applies to short term (maximum maturity of one year) investment or working capital loans granted in the period between 1 April and 30 September 2020.
This measure was approved under the State Aid framework on the basis that it is intended to remedy a serious disturbance in the economy of a Member State as it was not considered to be fully in line with the Temporary Framework, having regard, for example, to the fact that the guarantee scheme applies on a portfolio basis rather than to individual loans. The rules on the allocation of losses are as follows: credit institutions will bear the first 3% of losses on their reference portfolio; losses between 3% and 5% will be borne equally by the credit institution and the federal government; and the federal government will bear 80% of losses in excess of 5% on the reference portfolio.
- Under the second scheme, the Flemish Region will provide a guarantee for working capital and investment loans to viable undertakings active in Flanders, with the exception of financial intermediaries. This scheme covers both new loans and existing loans restructured with the borrower’s consent. There is no specified limit on the maturity of the loan.
This aid measure is in line with the Temporary Framework. The underlying loan amount per undertaking is limited to what is needed to cover its liquidity needs for the near future and guarantees will only be granted until 31 December 2020. This scheme is, however, a second line instrument and is only available to undertakings whose loans are ineligible for the abovementioned federal loan guarantee scheme.
- The third aid measure allows the Charleroi and Liege airports to defer the payment of concession fees that would normally be due for 2020 in order to temporarily reduce the liquidity pressure caused by the coronavirus outbreak. The European Commission recognizes that airport operators have been hit hard by the crisis, resulting in liquidity concerns. This is the first (of multiple) schemes notified to the European Commission intended to address the harm caused to airport operators.
The European Commission considers the scheme in line with the Temporary Framework. The payment deferral is only granted until the end of this year, will not exceed six years, and involves minimum remuneration.
The Commission consults with Member States on further expansion of the Temporary Framework. The Commission now proposes further extending the scope of the Temporary Framework to enable Member States to provide recapitalisation to companies in need. Since such public intervention could have a significant impact on competition in the Single Market, these measures should be used as a last resort. Moreover, they will be subject to clear conditions as regards the Member State's compensation and entry to and exit from the companies concerned, strict governance provisions, and appropriate measures to limit potential distortions of competition.
The European Commission extends the Temporary Framework to enable Member States to accelerate research, testing and production of coronavirus-relevant products, to protect jobs and to further support the economy during the coronavirus outbreak. The five additional types of measures are:
(i) More support for coronavirus-related research and development: The Commission wishes to incentivize funding to address the current health crisis.
(ii) More support for the construction and upgrading of testing facilities;
(iii) More support for the production of products relevant to tackle the coronavirus outbreak: Governments can provide incentives for companies to invest in testing facilities for products relevant to tackling the coronavirus outbreak, such as vaccines, medical equipment or devices, protective material and disinfectants. Support can include a no-loss guarantee.
(iv) Targeted support in the form of a deferral of tax payments and/or suspension of employer's social security contributions; and
(v) Targeted support in the form of wage subsidies for employees: The purpose of such subsidies is to avoid lay-offs due to the coronavirus crisis in the specific regions or sectors hardest hit by the outbreak.
The Temporary Framework is also updated to expand the possibilities of direct support to a company of up to EUR 800,000 through zero-interest loans, guarantees on loans covering 100% of the risk, and the provision of equity.
The European Commission introduces SURE: Europe-supported short-time work. Under SURE, the Commission will provide loans to Member States to strengthen their short-time work schemes. SURE will provide up to €100 billion in loans to countries that need them in order to ensure that workers receive income and businesses keep their staff. All Member States will be able to make use of this scheme, but it will be of particular importance to those hardest hit.
The European Commission introduces the Coronavirus Response Initiative Plus (CRII+). This package complements CRII by introducing extraordinary flexibility to allow non-utilised support from the European Structural and Investment Funds to be mobilised to the fullest. Flexibility is enhanced through: transfer possibilities across the three cohesion policy funds (the European Regional Development Fund, European Social Fund and Cohesion Fund), transfers between the various categories of regions, and more options when it comes to thematic concentration. There will also be the possibility for a 100% EU co-financing rate for cohesion policy programmes for accounting year 2020-2021, allowing Member States to benefit from full EU financing for crisis-related measures. CRII+ also simplifies the procedural steps linked to programme implementation and the use of financial instruments and audit.
The European Commission has decided to temporarily remove all countries from the list of “marketable risk" countries under the Short-term export-credit insurance Communication. The amendment to the Annex to the Short-term export-credit insurance Communication further expands the flexibility on how to demonstrate that certain countries were not-marketable provided in the Temporary Framework of 19 March.
1. Most important aid measures
The Belgian federal and regional authorities recently adopted a number of aid measures to help businesses suffering from the COVID-19 crisis. The most important measures to mitigate the economic impact of the crisis are listed below.
- Companies that are obliged to close can receive a fixed one-time compensation of EUR 4,000 (Flemish and Brussels companies) or EUR 5,000 (Walloon companies). The Flemish government has already announced that companies required to stay closed after 5 April 2020 may qualify for additional compensation of EUR 160 per day.
- Several measures are being taken to maintain or increase the liquidity of undertakings through the grant of public guarantees for bank loans, thereby extending or supplementing existing public guarantees.
- Undertakings able to demonstrate that they suffered directly from the COVID-19 crisis can request the payment by installment of payroll taxes, VAT, personal income tax, corporate tax and the tax on legal entities. Undertakings can also request an exemption from late payment interest and a reduction in the fine for non-payment.
- Furthermore, various funds have been set up to help the health, social, employment, agricultural and tourism sectors, in the form inter alia of guarantees, exceptional budgets or the retention of subsidies despite a reduction in activity.
2. Temporary State Aid Frame Work
On 19 March, the Commission adopted a temporary state aid framework (the "Temporary Framework") to enable Member States to support their economies during the COVID-19 outbreak. The Temporary Framework recognizes that the EU economy as a whole is experiencing a "serious disturbance" which justifies an exemption under the State aid rules. Main goal of the Temporary Framework is to ensure that sufficient liquidity re-mains available to companies.
The Temporary Framework provides for five types of aid:
(i) Direct grants, selective tax advantages and advance payments: Member States can set up schemes to grant up to EUR 800,000 per company to address urgent liquidity needs.
(ii) State guarantees for bank loans to companies: Member States can provide state-backed guarantees against favourable premiums to ensure that banks continue to extend loans to corporate customers that need them. The guarantee may relate to both investment and working capital loans.
(iii) Subsidised public loans to companies: Member states can grant loans at subsidised inter-est rates to companies to cover immediate working capital and investment needs.
(iv) Safeguards for banks used to channel State aid to the economy: When banks are used to channel financial support to businesses, such aid is considered direct aid to the banks' customers, not to the banks themselves. The Temporary Framework provides guidance on how to ensure minimal distortion of competition between banks.
(v) Short-term export credit insurance: The Temporary Framework introduces additional flexibility on how to demonstrate that certain countries are not-marketable risks, thereby enabling short-term export credit insurance to be provided by the government, where needed.
The aid measures mentioned under point (i) may be combined with those described under points (ii), (iii) or (v). However, subsidised public loans (iii) and State guarantees (ii) are mutually exclusive.
The Temporary Framework supplements the many other possibilities already available to Member States under the existing EU State Aid rules. The Temporary Framework will be in place until the end of 2020, with the possibility of an extension should this prove necessary. The full text of the Temporary Framework as well as the requirements state aid measures must meet in order to fall under the framework can be found here.
3. State Aid in the event of exceptional occurrences
The current State Aid framework provides for an exemption for measures that aim to remedy a serious disturbance in the economy. The European Commission has established that the situation with respect to COVID-19 qualifies as such a 'serious disturbance'.
The current framework also allows Member States to take state aid measures to make good damage caused by natural disasters or exceptional occurrences. Accordingly, if the Dutch government decides to provide relief to businesses suffering from the COVID-19 crisis, it is likely that such measures would be classified as falling under one of these exemptions.
The mere fact that a State Aid measure is covered by an exemption, however, does not mean that the European Commission need not be notified. Before a government can grant financial relief, the individual measure or the scheme must be submitted to and approved by the European Commission.
4. Expedited notification procedure
For State Aid measures requiring notification, the Commission has set up a special mailbox and telephone number which Member States can use to discuss their plans. In addition, the notification procedure for State Aid has been significantly expedited. For example, a Danish government proposal to compensate a large-scale events organiser for the cancellation of several events was approved within 24 hours. Competition Commissioner Vestager has stated that the Commission will work just as quickly with any Member State that wishes to implement arrangements to compensate businesses for damage caused by COVID-19.
5. Freeing up funding: Corona Response Investment Initiative
In order to be able to incentivise their economies, Member States will need funding. Given the limited size of the EU budget, the European Commission indicated that the main response will need to come from Member States' national budgets. However, the Commission is proposing an investment package of EUR 37 billion to finance aid in areas such as short-term work measures, the health care sector, labour market measures, and sectors particularly affected by the current circumstances. The relief measures financed by this investment package and other sources will be implemented by the Member State governments through State Aid programmes, which can be set up quickly thanks to the abovementioned fast-track approval procedure.
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