State Aids Temporary Framework relating to current COVID-19 outbreak

Prepared by Andrea Lensi Orlandi, Manfredi de Vita and Flavia Caltagirone

With the aim of providing a common framework for action at EU level to ensure maximum flexibility in the application of State aid measures, on March 19, the European Commission adopted, by written procedure, the Communication C(2020) 1863, “Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak”.

It is not the first time for the European Commission to adopt such kind of resolutions: in 2009, for the purpose to response to the financial crisis, a Temporary Framework was issued to regulate interventions in compliance with the derogation provided for by in the Treaty on the Functioning of the European Union (“TFEU”), which allows the granting of aids to remedy a serious disturbance in the economy of member States.

Nowadays, the European Commission, stating that COVID-19 outbreak “is also a major shock to the global and Union’s economies and a coordinated economic response of Member States and EU institutions is crucial to mitigate these negative repercussions on the EU economy”, identifies in the Temporary Framework 5 categories of State aid that shall be compatible with the internal market as per Section 107(3)(b) TFEU.

In light of these provisions, applicable until December 31, 2020 (but it is possible to extend this deadline), shall be admissible:

  1. Aids in form of direct grants, repayable advances or tax advantages;
  2. Aids in the form of guarantees on loans;
  3. Aids in the form of subsidised interest rates for loans;
  4. Aids in the form of guarantees and loans channelled through credit institutions or other financial institutions;
  5. Short-term export credit insurance.

On April 3, the EU Commission further amended the text of the Temporary Framework, extending the measures approved on March 19 to allow member States to speed up research, testing and production of Coronavirus-related products and to protect jobs and further support the economy.

Therefore, 5 additional types of aid measures were included, which are:

  1. Aids for COVID-19 relevant research and development;
  2. Investment aids for testing and upscaling infrastructures;
  3. Investment aids for the production of COVID-19 relevant products;
  4. Aids in form of deferrals of tax and/or of social security contributions;
  5. Aids in form of wage subsidies for employees to avoid lay-offs during the COVID-19 outbreak.

Within this list – that the EU Commission may subsequently extend by virtue of further communications – it is worth focusing on the aid under 1. above, as per which it shall be permitted to grant economic support in a maximum amount of EUR 800,000(1) for each undertaking, before tax and other charges. Furthermore, as a result of the extension of April 3, the aid may also take the form of interest-free loans, guarantees on loans covering 100% of the risk or capital injections; moreover, “de minimis” aids (up to EUR 200,000 allowed) may also be granted, thus bringing the aid, per undertaking, to the value of EUR 1 million.

In light of all the above, it will be possible to meet the urgent liquidity needs of small and medium-sized undertakings.

Albeit this framework is represented in summary, readers may consider that aid categories covered by the Temporary Framework are those that, at a national level, governments of the member States are implementing. It appears clear, then, the intention of “harmonization” that the European Commission is trying to pursue in order to provide certain guidelines trough which every “local” government can move. In other words, while the Commission is not able to introduce brand new capital injections in the European system, it is intervening by decreasing common rules to extend the freedom of use of national resources.

On the other hand, there is also a need for the European institutions to curb the negative effects that a late intervention is likely to have on member States’ economies.

In this direction it must then be highlighted the commitment of the EU Commission to examine aid requests in a very short time (hours or days). Indeed, such obligation already led to the fast track authorization, as at April 8, 2020, to 30 aid schemes alleviating the consequences of COVID-19 outbreak in 18 member States.

([1]) Smaller thresholds are envisaged for undertakings operating in the fisheries and hydroculture sector (EUR 120,000) and for agricultural undertakings (EUR 100,000).

Let’s Talk

For a deeper discussion, please contact:

Andrea Lensi Orlandi

PwC TLS Avvocati e Commercialisti


Manfredi de Vita

PwC TLS Avvocati e Commercialisti

Of Counsel

Flavia Caltagirone

PwC TLS Avvocati e Commercialisti