All general aid measures for SMEs are based on the law of 9 August 2018 on the aid scheme for SMEs. This law implements some of the provisions of Commission Regulation (EU) No. 651/2014 of 17 June 2014 declaring certain categories of aid as being compatible with the internal market in application of Articles 107 and 108 of the Treaty (GBER).
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, aid and activities
Financial aid measures cannot apply to excluded sectors/aids, such as:
- the fishery and aquaculture sector, with the exception of aid for training, aid intended to facilitate SME access to funding, aid for research and development, aid for SMEs for the purpose of innovation, and aid for disadvantaged and disabled employees;
- the primary agriculture sector, with the exception of aid for SMEs for consulting services, and aid for SMEs for the purpose of innovation;
- 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;
- 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 granted to remedy the damages caused by natural disasters and aid for young startups, provided that these aid schemes do not treat businesses in difficulty more favourably than other businesses;
- financial aid granted in the processing and marketing of agricultural products sector, in the following cases:
- when the amount of aid is fixed on the basis of the price or quantity of products purchased of this type from primary producers or put on the market by companies; or
- when the aid is conditional on being partly or entirely passed on to the primary producers.
And finally, the Grand ducal regulation of 12 October 2018 excludes the following activities:
- shopping centres or commercial sales areas exceeding of 400 m2;
- specialised stores with a sales area exceeding 400 m2, with the exception of furniture stores;
- stores in shopping centres with the exception of businesses with a sales area of less than 400 m2;
- transport auxiliaries;
- cable operators;
- training centres and institutes;
- wellness centres, sauna and solarium centres;
- cinemas and businesses active in the production of cinematographic works;
- security companies;
- businesses in the forestry sector;
- taxi companies and car rental companies with driver;
- businesses whose activity is controlled by state concessions;
- liquidation companies following bankruptcies;
- event organisers of any kind;
- exhibition rooms for motor vehicles, with the exception of a maximum amount of aid of EUR 200,000 on condition that the value of the workshop is greater than the value of the exhibition room;
- complementary food services;
- piercing and tattoo shops;
- retail stores for pornographic material;
- establishments showing erotic shows;
- retail stores selling mainly tobacco or electronic cigarettes;
- fuel businesses;
- transport companies;
- property developers, condominium management agencies, real estate management companies, real estate agencies;
- accountant, chartered accountant and counselling agencies, and fiduciaries;
- liberal professions, with the exception of architects and engineers, up to a maximum amount of EUR 200,000.
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.
Whenever any State aid exceeds a certain threshold, the European Commission must be notified. The thresholds in force are:
- EUR 7.5 million per undertaking per investment project;
- EUR 2 million per undertaking, per project for aid for consultancy in favour of SMEs;
- EUR 2 million per undertaking, per year, for SMEs participating in trade fairs;
- EUR 400,000 per undertaking for aid for young businesses.
The above threshold cannot be circumvented by artificially splitting up the aid schemes or aid projects.
The Deggendorf Principle states that the payment of a new aid which has been declared compatible as such, may, in certain circumstances, be suspended until the illegally obtained previous aid to the same company has been reimbursed, except in the case of aid schemes intended to remedy the damages caused by natural disasters.
The incentive effect is satisfied when the company has submitted a full application for aid to the granting 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 (small or medium-sized) of the business;
- a description of the investment project, including its start and end dates;
- the location of the investment;
- a list of the costs associated with the investment;
- a financing plan;
- the type of aid (capital subsidy, etc.) and the amount of aid required for the investment;
- 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;
- NACELUX Rev. 2 group activity sector;
- the aid element, the amount of aid expressed in local currency;
- financial aid instrument;
- date on which the aid is granted;
- purpose of the aid;
- the granting authority.
Single economic entity
The applicant company must indicate whether it is a partner company or a company affiliated with one or more other businesses, in accordance with Appendix I of the General Block Exemption Regulation (GBER). Together, these companies form a 'single economic entity'.
Businesses in difficulty
An undertaking that can be considered as a business in difficulty is not eligible under the financial aid schemes, with the exception of aid schemes granted to remedy the damages caused by natural disasters and aid schemes for young businesses. A "business in difficulty" refers to any undertaking that fulfils at least one of the following conditions:
- if it is a limited liability company, a public limited-liability company or a partnership limited by shares, other than an SME that has been in existence for less than 3 years, when over half of its subscribed share capital has been lost due to cumulative 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 (partnerships or limited partnerships) other than an SME that has been in existence for less than 3 years, where more than half of its own capital as shown in the company accounts has vanished as a result of accumulated losses;
- where the business 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 business 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.
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.
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 ascertain whether an applicant company qualifies for 'SME' status, the following should be checked:
Number of staff
Annual turnover or
< EUR 10 million
< EUR 50 million
Annual balance sheet
< EUR 10 million
< EUR 43 million
Only one of the two criteria 'Annual turnover' and 'Annual balance sheet' need be fulfilled. Consideration should be given to the number of staff and annual turnover/balance sheet not only of the applicant company, but also to those of any other economic entity with which the applicant company forms a 'single economic entity'.
Sanctions, repayment and criminal law provisions
The beneficiary will forfeit their entitlement if they:
- abandon or transfer to third parties, for no objective reason, all or part of the projects;
- dispose of the investments 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 for their intended purpose;
- are 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 of the competent court. 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.
Entitlement to aid will not be forfeited if the disposal, abandonment or change in purpose have been approved in advance by the competent ministers, and are the result of force majeure or circumstances beyond the beneficiary’s control.
Persons who have received financial aid by providing incomplete or inaccurate information or who do not respect the conditions under which the aid was granted, run the risk of being sentenced to the following sanctions, without prejudice to the restitution of the aid granted and the decision of exclusion:
- a prison term of between 4 months and 5 years; and
- a fine of between EUR 251 and EUR 30,000.
The beneficiary may also be sentenced to a ban.