There are four basic questions that need to be asked when assessing whether State aid is present in your policy/scheme/project. For State aid to be present, the answer to all four questions must be ‘YES’.
1. Is the assistance granted by the State or through State resources to undertakings?
- 'Granted by the State' means awarded by any public authority or private body controlled by the State (in Northern Ireland, this means national or local government).
- The definition of ‘State resources’ is broad and includes, for example, grants, loans, tax exemptions, State services provided free or at reduced cost, relief from charges the recipient may otherwise have to bear, Lottery funding and funding made available through EU Structural and Investment Funds (over which the State has significant control).
- An ‘undertaking’ is any organisation engaged in an economic activity (i.e. putting goods or services on a market). This is about activity rather than the legal form of the organisation, so non-profit organisations, charities and public bodies can all be undertakings, depending on the activities they are involved in.
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Support to an organisation engaged in a non-economic activity isn’t State aid, e.g. energy efficiency grants to households or individuals is not State aid.
2. Does the assistance give a selective advantage to one or more undertakings over others?
- When assessing advantage you need to examine all undertakings that may benefit directly or indirectly from the assistance. Remember that an undertaking can also include operators and ‘middlemen’ if they benefit from assistance. For example, in infrastructure projects, undertakings may be involved at three levels: Construction, Operation and Use.
- ‘Economic activity’ means putting goods or services on a market. It is not necessary to make a profit to be engaged in economic activity: if others in the market offer the same good or service, it is an economic activity.
- An 'advantage' is any economic benefit which an undertaking would not have obtained under normal market conditions. An advantage can take many forms: not just a grant, loan or tax break, but also use of a State asset for free or at less than the market price, e.g. providing one-to-one mentoring with a business consultant for free or at less than the usual rate, or providing State guarantees.
- In Northern Ireland, most measures would be considered 'selective' because they target particular businesses, sectors and/or locations.
3. Does the assistance distort, or have the potential to distort, competition?
- If the assistance strengthens the recipient relative to its competitors then the answer is likely to be ‘yes’.
- The ‘potential to distort competition’ does not have to be substantial or significant: it may include relatively small amounts of financial support and firms with modest market share.
4. Does the assistance affect trade between member states?
- The interpretation of this question is extremely broad and the possibility that assistance will affect trade between member states should not be dismissed without careful consideration. It is enough that a product or service is tradable between member states, even if the recipient does not itself export to other EU markets.
- In certain circumstances, it may be possible to argue that aid will have a purely local impact, but making this determination requires careful consideration and expert advice.
The four criteria above are cumulative, not alternative. This means that if your answer to all four questions is ’yes‘, your assistance is almost certainly State aid, but if any of your answers are ’no‘, or if you are unsure, it might not be State aid. In all such cases, you should seek advice (e.g. If you wish to argue purely local impact).
Further information
- What do i do if its State aid?
- De minimis aid
- Services of General Economic Interest - (SGEI)
- General Block Exemption Regulation - (GBER)
- Full Notification
For further advice on whether State aid is present, please contact the Subsidy Control Advice Unit.