The Government of the Republic of Serbia passed a new Regulation on rules and terms for granting state aid of small value (de minimis aid), which was published in the Official Gazette under no. 23/2021 (“Regulation”).
By entry into force of the Regulation on March, 24 2021, the provisions which prescribed that de minimis aid should be granted under the Regulation on rules for granting state aid, and provisions prescribing the requirements therefore, ceased to be in force.
State aid of small value – de minimis aid is defined as aid that does not significantly affect market competition and trade between the Republic of Serbia and European Union member states and therefore, granting the de minimis aid does not require the approval of the Commission for State Aid Control, but its justification is instead estimated by the grantor itself (municipality, city, ministry, autonomous province).
However, having in mind that the Commission for State Aid Control performs control over funds assigned to entities in the market of the Republic of Serbia, the grantor shall still be obliged to notify to the Commission for State Aid Control on the assignment of de minimis aid.
What is new compared to the Regulation on rules for granting state aid is the reduced number of cases where de minimis aid shall not be granted. The new Regulation stipulates that the aid must not be granted only for stimulation of export or for prioritizing domestic products compared to imported goods, however, the aid can be granted for covering the costs of participating in fairs or for reimbursing the costs required for introduction of new or existing products in new market in another state.
Before the adoption of the new Regulation, the awarding of de minimis aid was not possible for coal excavation activities and for economic entities facing difficulties.
1. Ceiling for de minimis aid
Grantor may award de minimis aid to one legal entity in the amount not higher than RSD 23 million at any moment in a period of three consecutive fiscal years, whereas this three-year period covers the current and preceding two fiscal years.
Legal entity or entrepreneur in the sector of road cargo transport can receive up to RSD 11.5 million of this type of aid at any moment within three consecutive fiscal years, however the aid must not be used for vehicle purchase.
The market participant which, in addition to road cargo transport, performs other activities, can receive up to RSD 23 million of de minimis aid if the grantor ensures, by separation of activities or costs, that the amount to be assigned for road transport will not exceed RSD 11.5 million in three consecutive fiscal years.
Also, it should be noted that the ceiling for de minimis aid will be applied regardless of the instrument, intention or grantor itself and that de minimis aid shall be considered granted at the moment when the market participant has acquired the legal right to receive the aid, regardless of the moment of aid payment.
2. Transparency of de minimis aid
De minimis aid shall be considered transparent if the exact gross amount of money counter-value of the aid can be calculated in advance, without need for a risk assessment.
In accordance with the Regulation, the following forms of de minimis aid meet the transparency criteria:
- Subsidies and subsidised interest rate for loans;
- measures of risk financing in form of equity capital or in form of capital similar to equity;
- other instruments.
It is important to note that loans and guarantees, as forms of de minimis aid, do not meet transparency criteria as the abovementioned forms of aid, therefore the Regulation stipulates conditions for their transparency and calculation of gross amount of money counter-value.
3. Calculation of gross amount of money counter-value of de minimis aid
In order for de minimis aid in form of loan to be granted and considered transparent, a legal entity must not be in bankruptcy or liquidation procedure nor may fulfil the requirements for initiation of bankruptcy or liquidation procedure upon the request of its creditors. Gross amount of money counter-value of de minimis aid contained in loan is calculated in one of the following ways:
- based on reference interest rate that is applied at the moment of granting de minimis aid or
- as proportionate part of the ceiling of de minimis aid if the loan is ensured by the insurance instrument covering minimum 50% of loan amount.
If we opt for the calculation of gross amount of money counter-value in a way provided in item 2, the amount of de minimis aid equals the ceiling of de minimis aid if loan is RSD 115 million, with five-year repayment period, or RSD 57,500,000 with ten-year repayment period.
For market participants in the sector of road cargo transport, the defined amount of loan is half less – RSD 57.5 million with five-year repayment period, or RSD 28,750,000 with ten-year repayment period.
In order for de minimis aid in form of guarantee to be granted and in order for this type of aid to be considered transparent, a legal entity shall not be in bankruptcy or liquidation procedure nor may fulfil the requirements for initiation of bankruptcy or liquidation procedure upon the request of its creditors.
Gross amount of money counter-value of de minimis aid contained in guarantees is calculated in one of the following ways:
- based on “safe harbour premium” and other acceptable methodology in accordance with the provisions regulating requirements and criteria for compliance of state aid granted in form of state guarantees or
- as proportionate part de minimis aid ceiling.
If we opt for the calculation of gross amount of money counter-value in a way provided in item 2, the amount of de minimis aid equals the ceiling of de minimis aid if the guarantee does not exceed 80% of the subject loan and amounts to RSD 172.5 million (i.e. RSD 86.25 million for market participants operating in the field of road cargo transport), for the period of guarantee up to five years or RSD 86.25 million (i.e. RSD 43.12 million for market participants operating in the field of road cargo transport), for ten-year guarantees.
The adoption of Regulation that specifies in detail the requirements and criteria for granting de minimis aid, as one of the forms of state aid, is another step towards the establishment of the system for state aid control.
By establishing the system for state aid control, creating the clear state aid schemes, strengthening capacities of state aid grantors, as well as the authorities that supervise its granting, the ultimate benefit will be on the side of the legal entities operating in the market of the Republic of Serbia, having in mind that adequate state aid control enables the strengthening of free competition, establishes better conditions for business and regulates the manner of subsidisation and granting of other forms of aid.
This is a way to prevent placing individual legal entities in favourable position and create equal business conditions for all market participants, which will also stimulate the survival of legal entities and strengthening the market competition.
This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.
By Sara Necic, Senior Associate, PR Legal