Legal & Tax Alerts

State aid approved for COVID-19 outbreak

The European Commission has approved the first State aid measure related to the COVID-19 outbreak. The European Commission also established a dedicated contact point for the Member States in order to provide them with guidance on available legal measures to deal with the economic effects of the pandemic. Under EU State aid rules, governments can use their resources by introducing schemes to compensate businesses for the damages directly caused by exceptional occurrences.

State aid is an intervention by a State through a measure that gives the recipient an advantage on a selective basis, which may distort competition and affect trade between the Member States. Aid measures can only be implemented after approval by the European Commission. State aid is generally prohibited with some exceptions stipulated by the legislation, as is an extraordinary, unforeseeable event having a significant economic impact.

Denmark is the first state to notify the European Commission of a State aid measure related to the COVID-19 outbreak. The European Commission approved the measure on 12 March 2020, within 24 hours as of receiving the notification. Under the EUR 12 million scheme, Denmark will compensate operators for the damage incurred due to the COVID-19 outbreak as a consequence of the cancellation or postponement of large events, for more than 1,000 participants. The European Commission concluded that the outbreak qualifies as an exceptional occurrence and that the scheme is in line with EU State aid rules and does not distort the competition within the Internal Market.

The President of the European Commission, Ursula von der Leyen, has stated that the EU is providing  ”maximum flexibility” on state aid. In a statement, the Executive Vice-President of the European Commission, Margrethe Vestager, suggested that other measures, which do not involve the Commission’s approval under EU State aid rules (i.e. wage subsidies or extension of payment deadlines for corporate tax or VAT), should be implemented by the Member States. Member States are also encouraged to put in place schemes that provide liquidity to small and medium-sized companies. Nine Member States already have that sort of scheme in place.

As the effects of the outbreak continue to increase, more Member States might also notify the European Commission of State aid measures. Considering that many Romanian companies are already undergoing financial difficulties, it is likely for Romania to implement as well such measures.

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