The EU Commission approves €2.9 billion Polish scheme to support micro, small and medium-sized enterprises due to the Covid-19 pandemic

State aid: Commission approves €2.9 billion Polish scheme to support micro, small and medium-sized enterprises in context of coronavirus outbreak*

The European Commission has approved an approximately €2.9 billion (PLN 13 billion) Polish State aid scheme to support micro, small and medium-sized enterprises active in certain sectors, including the retail, hospitality, leisure and transport ones, affected by the coronavirus outbreak. The scheme was approved under the State aid Temporary Framework.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Many companies in Poland, as in the rest of Europe, have seen their revenues significantly decline because of the national emergency measures necessary to limit the spread of the coronavirus. This Polish scheme will help these micro, small and medium-sized companies face their fixed costs that are not covered by revenues during these difficult times. 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 Polish support measure

Poland notified to the Commission a scheme called “Financial Shield for SME 2.0”, which will provide support to companies operating in sectors such as retail, hospitality, leisure and transport, among others, affected by the measures introduced by the Polish government in November 2020 to limit the spread of the coronavirus.

The scheme consists of two measures: (i) limited amounts of aid for micro-enterprises; and (ii) support for uncovered fixed costs for small and medium-sized companies. Under the scheme, Poland plans to provide economic assistance to help micro, small and medium-sized companies face their liquidity shortages related to the coronavirus outbreak. The total estimated budget of the scheme is approximately €2.9 billion (PLN 13 billion).

Under the scheme, support will take the form of repayable advances. The beneficiaries of the aid must record a minimum of 30% reduction of turnover from 1 April 2020 until 31 December 2020, or a part of it, as compared to the same periods in 2019. Limited amounts of aid for micro-enterprises will amount up to approximately €73,000 (PLN 324,000) per company, depending on the number of employees. The aid to small and medium-sized companies will be limited to 70% of the uncovered fixed costs incurred during the period from 1 November 2020 until 31 March 2021, and will not exceed approximately €780,000 (PLN 3.5 million) per company.

The Commission found that the Polish scheme is in line with the conditions set out in the Temporary Framework. With regard to the limited amounts of aid for micro-enterprises, the overall nominal value of the aid shall not exceed €800,000 per undertaking. With regard to the support for uncovered fixed costs for small and medium-sized companies, the amount of the aid will not exceed 70% of the uncovered fixed costs incurred during the period from 1 November 2020 until 31 March 2021, and will not exceed €3 million per undertaking. For all beneficiaries, the support will be granted until no later than 30 June 2021 and only to companies that were not considered to be in difficulty on 31 December 2019, with the exception of micro and small companies that are eligible even if already in difficulty on 31 December 2019. Finally, Poland will ensure that the rules for cumulation of aid provided under the Temporary Framework are respected across all measures.

The Commission concluded that the aid measures under the scheme 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 aid measures under EU State aid rules.

Background

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, 8 May, 29 June and 13 October 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.

- Support for uncovered fixed costs for companies facing a decline in turnover during the eligible period of at least 30% compared to the same period of 2019 in the context of the coronavirus outbreak. The support will contribute to a part of the beneficiaries’ fixed costs that are not covered by their revenues, up to a maximum amount of €3 million per undertaking.

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 June 2021. 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 September 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.59763 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.

*This is the original title of the press release. The title above has been amended in order to match the e-Competitions format. Individual authors are welcome to provide original independent commentaries on the case law. Articles are subject to approval by the Board of e-Competitions Bulletin before publication based on the Editorial Policy (click here).

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European Commission, The EU Commission approves €2.9 billion Polish scheme to support micro, small and medium-sized enterprises due to the Covid-19 pandemic, 23 December 2020, e-Competitions Competition Law & Covid-19, Art. N° 98533

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