State aid: Commission approves €7.6 billion Italian tax schemes to support companies and self-employed workers affected by coronavirus outbreak*
The European Commission has approved four Italian aid schemes to support companies and self-employed workers affected by the coronavirus outbreak. The four measures, which are part of a wider Italian support package included in the so-called “Decreto Rilancio”, were approved under the State aid Temporary Framework adopted by the Commission on 19 March 2020, as amended on 3 April and 8 May 2020.
Executive Vice President Margrethe Vestager, in charge of competition policy, said: “With this set of measures, with an overall budget of €7.6 billion, Italy will further support companies and self-employed workers that are severely affected by the coronavirus outbreak by easing their liquidity constraints through tax waivers and tax credits. The measures will also encourage the adaptation of production processes and work environments to the new sanitary requirements. We continue to work in close cooperation with Member States to find workable solutions to mitigate the economic impact of the coronavirus outbreak, in line with EU rules.”
The Italian support measures
Italy notified to the Commission under the Temporary Framework four aid schemes , with an overall estimated budget measures of €7.6 billion, waiving certain taxes for and providing tax credits to companies and self-employed workers affected by the coronavirus outbreak. The measures form part of a wider package to support the Italian economy in the context of the coronavirus outbreak set out in the so-called “Decreto Rilancio”.
Under the schemes, which will be open to companies and self-employed workers, support will take the form of:
- A partial waiver of the regional tax on production activities (IRAP) for companies and self-employed workers with revenues not exceeding €250 million in 2019 active in all sectors with some exceptions (such as banks and other financial institutions).
- An exemption from the municipal tax (IMU) in relation to touristic properties used for commercial operations, including SPAs and sea resorts;
- Tax credits to support the adaptation of production processes and work places to the new sanitary requirements;
- Tax credits for certain companies and self-employed workers depending on level of revenues in relation to rents and leases for non-residential properties and business leases for the period between March and June 2020.
The measures aim at (i) easing the liquidity constraints that companies and self-employed workers are experiencing due to the negative consequences of the coronavirus outbreak and the measures that the Italian government had to take to limit the spread of the virus and (ii) encouraging the adaption of production processes and work places to the new sanitary requirements.
The Commission found that the Italian measures are in line with the conditions of the Temporary Framework. In particular, (i) the aid amount per company will not exceed €100,000 per company active in the primary agricultural sector, €120,000 per company active in the fishery and aquaculture sector and €800,000 per a company active in all other sectors, as provided by the Temporary Framework; (ii) the aid will be granted only to companies which were not in difficulty on 31 December 2019; and (iii) the aid is limited in time and will only be granted until 31 December 2020.
The Commission concluded that the measures are necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework.
On this basis, the Commission approved the measures under EU State aid rules.
The Commission has adopted a Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework, as amended on 3 April and 8 May 2020, provides for the following types of aid, which can be granted by Member States:
- Direct grants, equity injections, selective tax advantages and advance payments of up to €100,000 to a company active in the primary agricultural sector, €120,000 to a company active in the fishery and aquaculture sector and €800,000 to a company active in all other sectors to address its urgent liquidity needs. Member States can also give, up to the nominal value of €800,000 per company zero-interest loans or guarantees on loans covering 100% of the risk, except in the primary agriculture sector and in the fishery and aquaculture sector, where the limits of €100,000 and €120,000 per company respectively, apply.
- State guarantees for loans taken by companies to ensure banks keep providing loans to the customers who need them. These state guarantees can cover up to 90% of risk on loans to help businesses cover immediate working capital and investment needs.
- Subsidised public loans to companies (senior and subordinated debt) with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.
- Safeguards for banks that channel State aid to the real economy that such aid is considered as direct aid to the banks’ customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.
- Public short-term export credit insurance for all countries, without the need for the Member State in question to demonstrate that the respective country is temporarily “non-marketable”.
- Support for coronavirus related research and development (R&D) to address the current health crisis in the form of direct grants, repayable advances or tax advantages. A bonus may be granted for cross-border cooperation projects between Member States.
- Support for the construction and upscaling of testing facilities to develop and test products (including vaccines, ventilators and protective clothing) useful to tackle the coronavirus outbreak, up to first industrial deployment. This can take the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.
- Support for the production of products relevant to tackle the coronavirus outbreak in the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.
- Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions for those sectors, regions or for types of companies that are hit the hardest by the outbreak.
- Targeted support in the form of wage subsidies for employees for those companies in sectors or regions that have suffered most from the coronavirus outbreak, and would otherwise have had to lay off personnel.
- Targeted recapitalisation aid to non-financial companies, if no other appropriate solution is available. Safeguards are in place to avoid undue distortions of competition in the Single Market: conditions on the necessity, appropriateness and size of intervention; conditions on the State’s entry in the capital of companies and remuneration; conditions regarding the exit of the State from the capital of the companies concerned; conditions regarding governance including dividend ban and remuneration caps for senior management; prohibition of cross-subsidisation and acquisition ban and additional measures to limit competition distortions; transparency and reporting requirements.
The Temporary Framework enables Member States to combine all support measures with each other, except for loans and guarantees for the same loan and exceeding the thresholds foreseen by the Temporary Framework. It also enables Member States to combine all support measures granted under the Temporary Framework with existing possibilities to grant de minimis to a company of up to €25,000 over three fiscal years for companies active in the primary agricultural sector, €30,000 over three fiscal years for companies active in the fishery and aquaculture sector and €200,000 over three fiscal years for companies active in all other sectors. At the same time, Member States have to commit to avoid undue cumulation of support measures for the same companies to limit support to meet their actual needs.
Furthermore, the Temporary Framework complements the many other possibilities already available to Member States to mitigate the socio-economic impact of the coronavirus outbreak, in line with EU State aid rules. On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities. For example, Member States can make generally applicable changes in favour of businesses (e.g. deferring taxes, or subsidising short-time work across all sectors), which fall outside State Aid rules. They can also grant compensation to companies for damage suffered due to and directly caused by the coronavirus outbreak.
The Temporary Framework will be in place until the end of December 2020. As solvency issues may materialise only at a later stage as this crisis evolves, for recapitalisation measures only the Commission has extended this period until the end of June 2021. With a view to ensuring legal certainty, the Commission will assess before those dates if it needs to be extended.
The non-confidential version of the decision will be made available under the case number SA.57429 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.
More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.