FAQ

The concept of state aid is derived from Article 107 (1) of the Treaty on the Functioning of the European Union, which, however, does not provide a precise definition for state aid. 4 criteria (sometimes 5 or 6) for state aid are derived from Article 107 (1), all of which must be met simultaneously in order for a grant or advantage to be considered as state aid.

If the answer to the next four questions is 'yes', it is almost certainly state aid:

1. Is the aid granted by the state, or through state resources?
   • The state means both the state directly and the local government.
   • State resources mean, for example, a state-controlled institution or organisation. It is also state aid if the aid that is granted is in the form of a tax incentive, or a structural instrument.

2. Does the aid confer an economic advantage on the recipient compared with other undertakings?
   • It must first be ascertained whether it is an undertaking, i.e., whether the beneficiary is engaged in an economic activity. An economic activity is any activity consisting in offering goods and services on a market. The legal form, the form of ownership, or the making of a profit by the beneficiary is irrelevant - a sports club, an entity of a local authority, or a non-profit association may also engage in an economic activity if it provides goods or services. If an entity engages in both economic and non-economic activities, it is considered as an undertaking only in connection with its economic activities.
   • An advantage is any economic benefit that the undertaking would not have obtained under normal market conditions, i.e., without state intervention. The advantage is, for example, not only a grant, but also the provision of a soft loan, or the use of state assets below the market price, etc. The advantage is ruled out if the state acts as a similar market operator would.

3. Is the aid selective?
   • Selectivity refers to the fact that the aid is limited to certain undertakings (e.g., only small enterprises), or a group of undertakings (e.g., enterprises in one sector), or only to undertakings in one region. It is also selective when the aid is granted on a discretionary basis, and not automatically (for example, where an application is required for a grant and the application is granted if certain conditions are met).

4. Does the aid distort or threaten to distort competition and affect trade between Member States?
   • If the aid strengthens or improves the position of the beneficiary compared to its competitors, it is likely to even potentially distort competition. For practical reasons, it is presumed that if the state confers a financial advantage on an undertaking in a liberalised sector where there is or may be competition, it is considered as a distortion of competition. The fact that the recipient undertaking, or that the amount of aid granted, is small, does not in itself preclude any risk of distortion of competition between Member States.
   • The aid may affect trade between Member States even if the beneficiary is not directly involved in cross-border trade, as it may make it more difficult for undertakings from other Member States to enter the market.
   • However, the European Commission has on several occasions found that certain activities only have a local impact and therefore support for such activities does not affect trade between Member States. Examples of Commission decisions where the Commission found that the aid was not liable to affect trade between Member States, and therefore did not constitute as state aid, are set out in point 197 of the Notice on the notion of State aid.

The European Commission has thoroughly explained all the 4 criteria in its document Notice on the notion of State aid (2016).

Use the control questions below to identify state aid:

If a grant, or advantage, etc. qualifies as State aid, the aid must comply with the European Union State aid rules.

If you have any questions, please contact the Public Procurement and State Aid Department of the Ministry of Finance at [email protected].

The minimis aid is small-scale aid which does not affect competition and trade between Member States.

De minimis aid may be granted up to a maximum of EUR 200,000 per undertaking for three consecutive financial years. It should be noted that the ceiling of EUR 200,000 applies to de minimis aid from all of the different sources combined. For example, if an undertaking has received de minimis aid from the Enterprise Estonia, the Environmental Investment Centre and the Estonian Unemployment Insurance Fund, the total amount of these aids may not exceed EUR 200,000.

The de minimis aid ceiling for road transport undertakings is EUR 100,000 per undertaking for three consecutive financial years.

Different de minimis aid ceilings apply to agricultural production and to fisheries undertakings (EUR 25,000 and EUR 30,000 per undertaking for three years, respectively).

Read more about de minimis aid on the Ministry of Finance website: https://riigihanked-riigiabi-osalused-kinnisvara/riigiabi/vahese-tahtsusega-abi/

The amount of de minimis aid received by the undertaking and the amount of such aid that it would still be able to receive (the free limit of the de minimis aid of the undertaking) can be checked on the Ministry of Finance website: https://riigihanked-riigiabi-osalused-kinnisvara/riigiabi/

The national procedural rules for granting de minimis aid are set out in § 33 of the Competition Act.

When designing an aid measure, it is necessary to analyse in advance whether the measure may contain state aid (see FAQ question 1).

If the answer is "yes, the measure involves or may involve the granting of state aid", it is necessary to determine for which objective, i.e., under which European Commission guidelines, frameworks, notices or block exemption regulations, the aid could be granted.

A distinction must be made between state aid that meets the conditions of the European Commission's General Block Exemption Regulation, and state aid subject to prior authorisation by the European Commission.

It is not necessary to apply for an authorization for state aid covered by the block exemption, instead a block exemption notification must be made to the European Commission no later than 20 working days after the implementation of the measure (i.e., 20 working days after the entry into force of the Ministerial Decree). The procedural rules related to the submission of a block exemption notification are provided in § 342 of the Competition Act.

If the aid measure does not fall under the General Block Exemption Regulation, a State aid notification must be submitted to the European Commission. The procedural rules related to the State aid notification are provided in § 341 of the Competition Act. It must be taken into account that obtaining a state aid permit is a long process that can take about a year. Aid may not be granted before authorisation has been granted.

State aid and block exemption notifications are submitted electronically via the European Commission's online system SANI2. More information is available on the State Aid website of the Ministry of Finance at link: https://riigihanked-riigiabi-osalused-kinnisvara/riigiabi/riigiabi-teatiste-esitamise-kord-ja-vormid/.

The concept of an aid scheme is defined in Article 1 (d) of Council Regulation (EU) 2015/1589:

An “aid scheme”– any act on the basis of which, without further implementing measures being required, individual aid awards may be made to undertakings defined within the act in a general and abstract manner and any act on the basis of which aid which is not linked to a specific project may be awarded to one, or several undertakings for an indefinite period of time and/or for an indefinite amount.

In the Estonian context, aid schemes are usually, for example, a regulation, a directive, a financing procedure, but also a law under which, under certain conditions, state aid or de minimis aid may be granted to several undertakings.

Individual aid is defined in Article 1 (e) of Council Regulation (EU) 2015/1589:

“individual aid”– aid that is not awarded on the basis of an aid scheme and notifiable awards of aid on the basis of an aid scheme.

Individual aid is usually granted on the basis of a contract.

The following criteria must be taken into account when defining small and medium-sized enterprises:

The European Commission considers a small and medium-sized enterprise (SME) to be a company that meets the following criteria:

Medium - sized enterprise

• less than 250 employees;
• the annual turnover does not exceed 50 million euro or the annual balance sheet total does not exceed 43 million euro
• the company is autonomous*

A small enterprise

• less than 50 employees;
• the annual turnover does not exceed 10 million euro, or the annual balance sheet total does not exceed 10 million euro;
• the company is autonomous *

* An autonomous enterprise means that it is either fully independent (i.e., it has no shareholding in other enterprises and no other enterprise has a shareholding in it) or its participation in another enterprise or in another enterprise’s shareholding in this company is less than 25%.

If it is not an autonomous enterprise, the data of the linked enterprise and/ or partner enterprise must also be taken into account when determining the SME:

• the company data must be supplemented with the data of a 100% subsidiary or parent company (linked company);
• if the linked company in turn has linked companies, their data must also be taken into account 100%;
• if the linked company has partner companies, the linked company data must also be added to its partner’s data according to the shareholding;
• if the company has partner companies (participation 25-50%), the data of the partner company must be included according to the shareholding;
• if the partner company in turn has linked companies (shareholding> 50%), the data of the partner company and its linked company must be combined in advance;
• the data of any partner companies of the partner company do not have to be taken into account in the calculation.

For more information on the definition of an SME, see the User guide to the SME definition.

No, the granting of export aid is prohibited under WTO rules.

Export aid is defined as aid granted for activities linked to exports to third countries or Member States, namely aid directly linked to the quantities exported, to the establishment and operation of a distribution network or to other current expenditure linked to the export activity (see, for example, Article 1 (1) (d) of the Commission Regulation No 1407/2013). Aid contingent upon the use of domestic over imported goods is also prohibited (see also Article 1 (1) (e)).

Export aid refers to, for example, aid in financing the establishment and operation of a distribution network in other Member States, or in third countries, as well as to cover the salary costs of the export manager.

Aid towards the cost of participating in trade fairs, or of studies or consultancy services needed for the launch of a new or existing product on a new market in another Member State, or a third country shall not normally be considered to be export aid. Nor is investment aid to an exporting undertaking considered to be export aid if the granting of such aid is not linked to the quantities exported (see Judgement C-518/16 of the Court of Justice).

Aid from Structural Funds is also a state resource, as the public authorities can use it at their own discretion (especially with regard to the choice of beneficiaries). Therefore, state aid rules must also be taken into account in the case of aid from Structural Funds.

Grants awarded directly from the European Union programs such as Horizon 2020, COSME or the European Investment Bank and the European Investment Fund are not considered to be state resources, as national authorities do not have any discretion in granting them. Therefore, the above-mentioned subsidies do not constitute state aid.

However, if the state co-finances a project received under Horizon 2020, for example, the national co-financing is considered state aid.

State aid must not be granted if the aid does not have an incentive effect. This means that the applicant may not start project activities (including concluding contracts, making binding commitments, etc.) before submitting an aid application to the grantor of the aid.

If, after the application has been submitted, and the grant decision has been made by the grantor, it appears that the project costs have increased (e.g., as a result of a public procurement), the grantor should not increase the grant as the (new) aid does not have an incentive effect according to the European Commission.

If there is a possibility that the costs of the project may increase compared to what was originally requested, this should be reflected in the original application and the grantor must provide for this possibility in the aid granting decision (including the maximum possible aid amount and, if applicable, the maximum proportion of the aid).