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State aid: EU Commission approves €140 million Portuguese scheme to support investment in research, development, testing and production of coronavirus relevant products

The European Commission has approved a €140 million Portuguese aid scheme to support investment in research and development (R&D), testing and production of products that are relevant to the coronavirus outbreak, including vaccines, ventilators and personal protective equipment.

The scheme was approved under the State aid Temporary Framework adopted by the Commission on 19 March 2020, as amended on 3 April 2020.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Speeding up the development and production of products relevant to tackle the coronavirus outbreak, such as medicines, vaccines, ventilators and protective clothing, is of utmost importance to address the current health crisis.

This €140 million Portuguese scheme will support investments in research and development activities needed for the production of these crucial products. We continue to work closely with all Member States to find solutions to fight the pandemic, in line with EU rules.”

The Portuguese support measures

Portugal notified to the Commission under the Temporary Framework a scheme to support investments in R&D and production of coronavirus relevant products. The scheme will have a total budget of €140 million, of which €50 million will be devoted to coronavirus related R&D projects and testing facilities and €90 million will finance the production of coronavirus relevant products. The public support will take the form of direct grants.The scheme is open to all enterprises capable to carry out such activities in all sectors.

The aim of the scheme is to enhance and accelerate both the development and the production of products directly relevant to the coronavirus outbreak. These include medicinal products such as vaccines, hospital and medical equipment including ventilators, and protective clothing and equipment.

The Commission found that the Portuguese scheme is in line with the conditions set out in the Temporary Framework. In particular, the aid will cover a significant share of the investment costs necessary for the development and testing of innovative products and processes, as well as the costs of construction of new production facilities.

Furthermore, under the scheme, investment projects will have to be completed within six months after the date of granting the aid. The Commission therefore concluded that the aid scheme will contribute to the achievement of a common objective of crucial importance, is necessary, appropriate and proportionate to fight the health crisis, in line with Article 107(3)(c) TFEU and the conditions set out in the Temporary Framework. On this basis, the Commission approved the measure 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 2020, provides for the following types of aid, which can be granted by Member States:

(i) 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.

(ii) 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.

(iii) Subsidised public loans to companies with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.

(iv) 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.

(v) 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”.

(vi) 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.

(vii) 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.

(viii) 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.

(ix) 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.

(x) 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.

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. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended.

Arianna PODESTA