All State aid for research, development or innovation is granted within the framework of the amended law of 17 May 2017 on the promotion of research, development and innovation. This law is a transposition of the European Regulation 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty.
In addition to the specific terms and conditions associated with the various aid schemes, the issuing authority must ensure that the applicant company meets the following criteria:
Excluded sectors and aid measures
Financial aid can not be allocated in the case of an excluded sector, namely:
- the fishery and aquaculture sector, with the exception of aid for training, aid aimed at facilitating access to funding for SMEs, aid for research and development, aid for SME innovation and aid for disadvantaged and disabled employees;
- the primary agricultural production sector, with the exception of aid for consultancy services for SMEs, aid for risk financing, aid for research and development, aid for SME innovation, environmental aid, aid for training and aid for disadvantaged and disabled employees;
- the transformation and sale of agricultural products sector:
- when the amount of aid is fixed on the basis of the price or quantity of products of this type purchased from primary producers or put on the market by the companies concerned; or
- if the aid is conditional on being partly or entirely passed on to the primary producers.
The following types of aid are also excluded:
- aid for activities in relation with exports to third countries or Member States;
- aid granted on the condition that preference is given to the use of national products instead of imported products;
- aid to businesses in difficulty, with the exception of aid schemes granted to remedy the damages caused by natural disasters provided that the aid schemes do not treat businesses in difficulty more favourably than other businesses;
- aid granted to facilitate the closing of coal mines that are not competitive and falling under Decision 2010/787/EU
Employers who have been convicted for violating provisions prohibiting illegal work, or the employment of illegally resident third-country nationals, on at least 2 occasions in the 4 years prior to the ruling by the competent court, are excluded from benefiting from this law for a period of 3 years from the date of the ruling.
State aids which exceed a certain amount are subject to a notification procedure to the European Commission. The Luxembourg government has therefore decided not to grant any aid which exceeds the following thresholds:
- for aid for consultancy in favour of SMEs: EUR 2 million per undertaking, per project;
- for aid for start-ups: EUR 800,000 or EUR 1.2 million for beneficiaries established in assisted areas meeting the conditions of Article 107, paragraph 3, point c) of the Treaty;
- for aid for research and development:
- if the project is predominantly fundamental research: EUR 40 million per undertaking, per project. That is the case when more than half of the eligible costs of the project are incurred through activities which fall within the category of fundamental research;
- if the project is predominantly industrial research: EUR 20 million per undertaking, per project. That is the case when more than half of the eligible costs of the project are incurred through activities which fall within the category of industrial research or within the categories of industrial research and fundamental research taken together;
- if the project is predominantly experimental development: EUR 15 million per undertaking, per project. That is the case when more than half of the eligible costs of the project are incurred through activities which fall within the category of experimental development;
- if the project is a Eureka project or is implemented by a joint undertaking established on the basis of Article 185 or of Article 187 of the Treaty, the amounts referred to in points i) to iii) of the regulation are doubled;
- if the aid for research and development projects is granted in the form of repayable advances which, in the absence of an accepted methodology to calculate their gross grant equivalent, are expressed as a percentage of the eligible costs and the measure provides that in case of a successful outcome of the project, as defined on the basis of a reasonable and prudent hypothesis, the advances will be repaid with an interest rate at least equal to the discount rate applicable at the time of grant, the amounts referred to in points i) to iv) are increased by 50%;
- aid for feasibility studies in preparation for research activities; EUR 7.5 million per study;
- for investment aid for research infrastructures: EUR 20 million per infrastructure;
- for aid for innovation clusters: EUR 7.5 million per innovation cluster;
- innovation aid for SMEs: EUR 5 million per undertaking, per project;
- for aid for process and organisational innovation: EUR 7,5 million per undertaking, per project.
The above thresholds shall not be circumvented by artificially splitting up the aid schemes or aid projects.
The applicant company, in particular the single economic entity to which it belongs, has not been the subject of an outstanding recovery order, following a previous decision by the European Commission declaring aid illegal and incompatible with the internal market.
The incentive effect is satisfied when the company has submitted a full financial aid application to the issuing authority prior to the commencement of work on the project in question. To this end, the application for financial aid must contain at least the following information:
- the name and size of the company;
- a description of the project or programme, of the activity or investment, and of the related works and its innovative nature, including its start and end dates;
- a description of the economic valuation methods for the results of the project or programme, for the activity or the investment and the related operations, and its economic potential;
- the location of the project or programme, activity or investment and related operations;
- a list of the costs for the project or programme, activity or investment and related operations;
- a financing plan;
- the type and amount of aid necessary for the project or programme, activity or investment and related operations;
- for large businesses, any additional information of interest which can prove that the aid applied for has a positive impact on: the duration, scope or size of the project or programme, or on the activity or investment or on any related operations;
- any relevant information that will allow the competent ministers to assess the qualities or specific features of the project, programme, activity or investment, and related operations, and its incentive effect.
It is important to note that no binding commitment in respect of the project for which State aid is being sought may be made before the aid application is submitted.
A project may not accumulate different forms of State aid for the same costs unless the aid intensity cap for the relevant schemes continues to be observed.
Disclosure of the financial aid
Each individual aid measure exceeding the EUR 500,000 cap must be published on the transparency website of the European Commission. More specifically, the authorities granting aid are required to publish the following information on individual aid measures which exceed the above-mentioned cap:
- name of the beneficiary;
- ID (VAT/identification number) of the beneficiary;
- company type (SME/large business) at the time of granting (signature of the agreement) the financial aid;
- the beneficiary's region under NUTS II;
- NACE group activity sector;
- amount of aid expressed in local currency, with no decimal point;
- financial aid instrument;
- date on which the aid is granted;
- purpose of the aid;
- granting authority;
- financial aid measure number.
Single economic entity - group notion
The applying business must indicate whether it belongs, de jure or de facto, to a business group, i.e. it has a relationship of influence with other businesses. Together, these companies form a "single economic entitiy" with regard to state aid.
Definition of an SME
Given the difficulties encountered by SMEs, such as access to capital or a lack of human resources, certain categories of aid under the GBER provide for an increase in the intensity of aid available to them.
To verify whether an applicant company qualifies for "SME" status, the following should be checked:
Number of staff
< EUR 10 million
< EUR 50 million
Annual balance sheet
< EUR 10 million
< EUR 43 million
Both the number of staff and annual turnover/balance sheet of the company and that of any other company with which the applicant company forms a "single economic entity" should be taken into account.
Businesses in difficulty
An undertaking that can be considered an undertaking in difficulty is not eligible under the financial aid schemes. A "business in difficulty" refers to any undertaking that fulfils at least one of the following conditions:
- in the case of a limited liability company (other than an SME that has existed for less than 3 years), where more than half of its subscribed share capital has disappeared as a result of accumulated losses. This is the case when deduction of accumulated losses from reserves (and all other elements generally considered as part of the own funds of the company) leads to a negative cumulative amount that exceeds half of the subscribed share capital;
- in the case of a company where at least some members have unlimited liability for the debt of the company (other than an SME that has existed for less than 3 years), where more than half of its capital as shown in the company accounts has disappeared as a result of accumulated losses;
- where the undertaking is subject to collective insolvency proceedings or fulfils the criteria under its domestic law for being placed in collective insolvency proceedings at the request of its creditors;
- when the undertaking has received rescue aid and has not yet reimbursed the loan or terminated the guarantee, or has received restructuring aid and is still subject to a restructuring plan;
- in the case of an undertaking that is not an SME, where, for the past two years:
- the undertaking's book debt to equity ratio has been greater than 7.5;
- the undertaking's EBITDA interest coverage ratio has been below 1.0.
The analysis is made at the level of the single economic entity ("group").
The law of 19 December 2020 amending this aid scheme provides for an exception, for the period between 1 January 2020 and 30 June 2021, for aid to businesses in difficulty which were not in difficulty on 31 December 2019, provided they were not subject to collective insolvency proceedings or do not meet, under the national law to which they are subject, the conditions for being placed under a collective insolvency proceeding at the request of their creditors.
Sanctions, repayment and criminal law provisions
The beneficiary will forfeit their entitlement if they:
- provide false or incomplete information, or do not respect the conditions under which the aid was granted;
- abandon or transfer to third parties, for no objective reason, all or part of the programmes or projects;
- manage the projects or programmes in an improper or inappropriate way;
- make fundamental changes to the objectives and methods of such projects, programmes or operations;
- dispose of the investments and operations for which the aid was granted before the end of a 5-year period from the payment of the financial aid in full;
- do not use or cease to use such investments and operations for their intended purpose;
- are convicted on at least 2 occasions for contravening provisions prohibiting illegal work or provisions prohibiting the employment of illegally residing third-country nationals during the 4 years preceding the decision of the competent jurisdiction. The beneficiary is excluded from the aid measure for 3 years from the date of the judgement.
In all of these cases, the beneficiary must repay the amount of aid paid, plus interest, within 3 months of the decision to that effect.
Any person who has received financial aid on the basis of incorrect or incomplete information may be punished:
- by a prison term of between 4 months and 5 years;
- a fine of between EUR 251 and EUR 30,000.