Ministr zahraninch vc - PDF document

1 Tomáš PETŘÍČEK Ministr zahraničn
Tomáš PETŘÍČEK Ministr zahraničních věcí Ministerstvo zahraničních věcí České republiky Loretánské náměstí 5 , 118 00 Praha 1 Česká Republika Commission européenne / Europese Commissie, B - 1049 Bruxelles / Brussel – Belgique / België – Telefon : +32 2 299. 11. 11. EUROPEAN COMMISSION Brussels, 26.4.2021 C( 20 2 1 ) 3038 final PUBLIC VERSION This document is made available for information purposes only. Subject: State Aid SA. 62477 (202 1 /N) – Czech ia COVID - 19: Programme of uncovered fixed costs Excellency , 1. P ROCEDURE (1) B y electronic notification of 2 4 March 202 1 , the Czech Republic notified aid in the form of support for uncovered fixed costs ( “ COVID - 19 – Programme of Uncovered Costs ” , the “ measure ” ) under the Temporary Framework for State aid measures to support the economy in the current COVID - 19 outbreak (the “ Temporary Framework ” ). 1 (2) Czechia exceptionally agrees to waive its rights deriv ing from Article 342 of the Treaty on the Functioning of the European Union (“ TFEU ”) , in conjunction with Article 3 of Regulation 1/1958 2 and to have this Decision adopted and notified in English. 1 C ommunication from the Commission - Temporary framework for State aid measures to support the economy in the current COVID - 19 outbreak (OJ C 91I, 20.3.2020, p. 1), as amended by Commission Communications C(2020) 2215 (OJ C 112I, 4.4.2020, p. 1), C(2020) 3156 (OJ C 164, 13.5.2020, p. 3), C(2020) 4509 (OJ C 218, 2.7 .2020, p. 3), C(2 020) 7127 (OJ C 340 I, 13.10.2020, p. 1) and C(2021 ) 564 (OJ C 34, 1.2.2021, p. 6) . 2 Regulation No 1 determining the languages to be used by the European Economic Community, OJ 17, 6.10.1958, p. 385 . 2 2. DESCRIPTION OF THE M EASURE (3) Czechia considers that the COVID - 19 outbreak affect s the real economy 3 . The measure forms part of an overall package of measures and aims to ensure that sufficient liquidity remains available in the market, to counter the liquidity shortage faced by undertakings because of the outbreak , to ensure that the disruptions caused by the outbreak do not undermine the viability of the undertakings and thereby to preserve the continuity of economic activity during and after the outbreak . (4) Czechia confirm s that the aid under the measure is not con ditioned on the relocation of a production activity or of another activity of the beneficiary from another country within the EEA to the territory of the Member State granting the aid. This is irrespective of the number of job losses actually occurred in t he initial establishment of the beneficiary in the EEA. (5) The compatibility assessment of the measure is based on Article 107(3)(b) TFEU, in light of

2 S ection s 2 and 3.1 2 of the Temp
S ection s 2 and 3.1 2 of the Temporary Framework . 2.1. The nature and form of aid (6) The measure constitutes an aid scheme and provides aid in the form of direct grants . 2.2. L egal basis (7) The legal base s for the measure are the following: (a) The Act No. 218/2000 Coll., On the Budgetary Rules and the Amendments to Certain Related Acts (Budgetary Rules), as ame nded . (b) The Act No. 110/1998 Coll., On the Security of the Czech Republic. (c) The Act No. 240/2000 Coll. On Crisis Management and on Amendments to Certain Acts (Crisis Act), as amended. (d) The Resolution of the Czech Government No. 278 of 8 March 2021 , which approves the “Programme Framework of the Ministry of Industry and Trade COVID – Uncovered Costs ” (hereafter “the Programme Framework”) . (8) The Czech authorities clarify that the Programme Framework lays down the principal requirements of the measure . Followin g the notification of the present decision to Czechia, the Ministry of Industry and Trade will publish individual 3 The Czech authorities submit that, based on researches and economic results for the year 2020, the overall economic output of the country decreased by 6.1%. The nominal GDP for 2020 is forecasted to decrease by 2.4%. In the first wave of COVID - 19, namely i n March 2020, the Czech authorities implemented multiple restrictive measures. Those measures were gradually lifted as of April and May 2020, but were implemented again, in a stricter manner, as of September 2020 along with the second wave of the pandemic. A state of emergency was declared on 5 October 2020 and has effectively remained into effect until April 2021. Due to the current health situation, the Czech authorities submit that the restriction measures are not expected to be lifted in the near future , thus prolonging the economically uncertain environment. 3 calls for applications (“Calls”) , which will lay down the technical details and requirements for the submission of applications during a speci fic period of time (round of applications) covered by the Calls . 2.3. Administration of the measure (9) The Ministry of Industry and Trade is responsible for administering the measure . 2.4. Budget and duration of the measure (10) The estimated budget of the measure is around CZK 5 0 000 000 000 ( approximately EUR 1.9 bi llion 4 ) . This budget will be allocated to the Calls by decision of the Czech government . (11) Aid may be granted under the measure as from the notification of the Commission’s approval until no later than 31 December 2021 . 2.5. Beneficiaries (12) The beneficiaries of the measure are all undertakings, including natural, legal persons and self - employed individuals , irrespective of their size , which are regist

3 er ed in the Business Registry and /or T
er ed in the Business Registry and /or Trade Licensing Registry in Czechia . They must be entrepreneurs and perform business activities in accordance with Act No. 455/1991 on Trade Licensing, as amended, or in a similar manner. They must not have their trading license suspended or they must not have suspended their busi ness operations on the basis of the Trade Licensing Act or on the basis of any other law . Financial institutions are excluded as eligible beneficiaries of the measure. (13) The beneficiaries must not be in default for the payment of any of their obligations to certain institutions, which will be def ined in detail in the C alls and may include the Tax Office, the Czech Social Security Administration and others 5 . (14) The beneficiaries must not be in default with respect to any provider of aid under programmes co - finan ced by the budget of the European Union . (15) A id may not be granted under the measure to medium 6 and large enterprises that were already in difficulty within the meaning of the Block Exemption 4 According to the currency exchange ( EUR 1 = CZK 2 6.206 ) as published on the website of the European Central Bank on the date when the notification was filed, i.e . on 24 March 2021, available at: https://www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference_exchange_rates/html/euro fxref - graph - czk.en.ht ml 5 The Czech authorities submit that they envisage to include the following institutions in this condition: The medical insurance companies, the State Land Office, the Ministry of Finance, the legal successor of the National Property Fund, the State En vironmental Fund, the State Fund for Transport Infrastructure, the State Housing Development Fund, the Customs Administration of the Czech Republic, the State Culture Fund, the State Fund of the Czech Republic for Support and Development of Czech Cinematog raphy, the State Agricultural Intervention Fund, regions, municipal, and associations of municipalities . 6 As defined in Annex I to Commission Regulation (EU) No 651/2014 of 17 June 2014, OJ L 187, 26.6.2014, p. 1 – 78. 4 Regulation s (“GBER” , “ABER” and “FIBER” ) 7 on 31 December 2019 . Aid may be granted to micro and small enterprises that were in difficulty within the meaning of the GBER , ABER and FIBER on 31 December 2019, if those enterprises , at the moment of granting the aid, are not subject to collective insolvency procedure under national law and they have not received rescue aid 8 or restructuring aid . 9 2.6. Sectoral and regional scope of the measure (16) The measure is open to all sectors, w ith the exception of the financial sector. It applies to the whole territory of Czechia . 2.7. Basic eleme nts of the measure (17) The objective of the measure is to support u

4 ndertakings that have sustained signi
ndertakings that have sustained significant losses as a r esult of the COVID - 19 outbreak. In view of the duration of the crisis, the Czech authorities consider it necessary to support those undertakings by contributing to part of their uncovered fixed costs, thus enabling them to maintain their operations despite the unprecedented economic circumstances. Taking the uncertainty of the situation at a global level into account, the Czech a uthorities wish to put into effect a scheme that will lay down the principal requirements and elements of the measure, while at the same time allowing the administ rat ing authority to adjust the technical details and requirements in the course of the admini stration of the measure , in accordance with the evolving needs of the Czech economy and with the allocated budget . With the aim to provide targeted support for shorter periods of time, the administ rating authority will publish Calls for each round of appli cations, always remaining within the limits and requirements of the measure . (18) The measure covers part of the uncovered fixed costs incurred during a period between 1 March 2020 to 31 December 2021 , in which a turnover decline of at least 30% per undertaking will need to be substantiated (“eligible period”). The Calls define the period for each round of applications. The period specified in the Calls will always be within the limits of the eligible period and will always cover a period of time that has elapsed by the date of publication of the Call . For instance, if a Call is published in April 2021, it may concern a part of the eligible period until March 2021 at the latest. (19) In order to eligible, undertakings must have suffered a turnover decli ne of at least 30% during the period covered by each Call, as explained in recital (18) 7 As defined in Article 2(18) of Commi ssion Regulation (EU) No 651/2014 , Article 2(14) of Commission Regulation (EU) No 702/2014 of 25 June 2014 declaring certain categories of aid in the agricultural and forestry sectors and in rural areas compatible with the internal market in application of Articles 107 and 108 of the T reaty, OJ L 193, 1.7.2014, p. 1 and Article 3(5) of Commission Regulation (EU) No 1388/2014 of 16 December 2014 declaring certain categories of aid to undertakings active in the production, processing and marketing of fishery and aquaculture products compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ L 369, 24.12.2014, p. 37 . 8 Alternatively, if they have received rescue aid, they have reimbursed the loan or terminated the guarantee at the moment of granting of the aid under the notified measure . 9 Alternatively, if they have received restructuring aid, they are no longer subject to a restructuring plan at the moment of granti

5 ng of the aid under the notified measu
ng of the aid under the notified measure . 5 compared to the same period before the COVID - 19 outbreak. The comparison will take place on a “period - by - period” basis. T he comparison shall be made with the respective period of 2019. The turnover decline must be substantiated and confirmed by the applicant upon the submission of the application for aid , in accordance with the tech nical and administrative details that will be laid down in the Calls. (20) The Czech authorities explain that the purpose of the measure is to provide targeted support to undertakings for the period between 1 March 2020 to 31 December 2021 , while ke eping the economic environment, as well as the availability and the levels of interest expressed by the beneficiaries under constant review. Taking this into account, the Czech government will be responsible for allocating the budget to each Call (recital (10) ), while the administrating authority will be responsible for managing the allocated budget in the most efficient manner, in order to provide support to the und ertakings most affected by the crisis. Against this background, the administ rat ing authority may adjust the technical details for each round of applications in the Calls . For example , it may provide technical information as to the submission of application s . I t may also adjust certain elements of the measure in accordance with the develop ment of the economic situation and the needs of the Czech economy. In particular , the administering authority may adjust the condition of turnover decline ( recital (19) ) fro m at least 30% to at least 50% in Calls, if that is necessary due to budgetary constraints and while taking into account the economic conditions and the interest expressed on behalf of potential beneficiaries . (21) Uncovered fixed costs are the fixed costs incurred by undertakings during the eligible period, which are not covered by the profit con tribution (i.e. revenue minus variable costs 10 ) during the same period and which are not covered by any other sources, such as insurance, temporary aid measures or support from other sources . The losses deriving from the profit and loss statements of the un dertakings during the period covered by the Calls 11 will constitute the uncovered fixed costs of eligible undertakings . Given that the period covered by the Calls will always be an elapsed period of time , those financial statements will be drawn up on the b asis of actual economic data and will not be based on forecasts. (22) The profit and loss statements of the undertakings for the specific period s covered by the Calls will be drawn up in accordance with the national accounting legislation ( Act. No. 563/1991 Coll. on Accounting ), while also applying all relevant adjustments required by national tax legislation (e.g. , provisions and allo

6 wances permitted under tax law, tax depr
wances permitted under tax law, tax depreciation , etc. ). For the purposes of the measure , in case where the uncovered fixed co sts exceed CZK 5 million (approximately EUR 190 000) , the profit and loss statements will be certified by an external independent auditor before their submission to the competent authority along with the application for aid 12 . The Czech authorities submit t hat 10 Costs refer to fi xed and variable costs: the former are incurred independently of the level of output, while the latter are incurred depending on the level o f output. 11 One - off impairment losses are not included in the calculation of losses under the measure. 12 The Czech authorities submit that they will require this certification to take place in accordance with the auditing norm ISAE 3000. 6 the threshold of CZK 5 million is considered an averagely low figure and it is expected that, in practice, the majority of applicants will exceed it, thus falling under the obligation to have their statements certified by an external independent audito r. (23) The aid intensity will be laid down in each Call and will be indicated as a percentage of the uncovered fixed costs incurred by the undertakings during the period covered by that Call . The Czech authorities commit that u nder no circumstances will the a id intensity exceed 70 % of the uncovered fixed costs incurred during the relevant period. F or micro and small enterprises, the aid intensity will not exceed 90% of the uncovered fixed costs incurred in the same period. The administrat ing authority may lowe r the aid intensity in Calls below the maximum aid intensities in line with the elements outlined in recital (20) . (24) The overall aid amount per undertaking will not exceed EUR 10 million. All figures used are gross, that is, before any deduction of tax or other charges. 2.8. Cumulation (25) The Czech authorities confirm that aid granted under the measure may be cumulated with aid under de minimis Regulation s 13 or the Block Exemption Regulation s 14 provided the provisions and cumulation rules of those Regulations are respected. (26) The Czech authorities confi rm that aid under the notified measure may be cumulated with other forms of Union financing, provided that the maximum aid intensities indicated in the relevant Guidelines or Regulations are respected. (27) The Czech authorities confirm that aid granted under the measure may be cumulated with aid granted under other measures approved by the Commission under other sections of the Temporary Framework provided the provisions in those specific sections are respected. (28) The Czech authorities confirm that if the undertaking receives aid on several occasions or in several forms under the measure or aid under other measures appr

7 oved by the Commission under section 3.1
oved by the Commission under section 3.12 of the Temporary Framework, the overall maximum cap per undertaking, as set out in point 87(d) of that framework, will be respected . (29) The Czech authorities confirm that aid granted under the measure shall not be cumulated with other aid for the same eligible costs. 13 Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid (OJ L 352, 24.12.2013, p. 1) , Commission Regulation (EU) No 1408/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimi s aid in the agriculture sector (OJ L 352, 24.12.2013 p. 9), Commission Regulation (EU) No 717/2014 of 27 June 2014 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid in the fishery and aquac ulture sector (OJ L 190, 28.6.2014, p. 45) and Commission Regulation (EU) No 360/2012 of 25 April 2012 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid granted to undertakings providing ser vices of general economic interest (OJ L 114, 26.4.2012, p. 8). 14 GBER , ABER and FIBER (see footnote 7). 7 2.9. Monitoring and reporting (30) The Czech authorities confirm that the y will respect the monitoring and reporting obligations laid down in s ection 4 of the Temporary Framework (including the obligation t o publish relevant information on each individual aid above EUR 100 000 granted under the measure and EUR 10 000 in the primary agriculture a nd in the fisheries sectors on the comprehensive national State aid website or Commission’s IT tool within 12 months from the moment of granting 15 ). 3. A SSESSMENT 3.1. Lawfulness of the measure (31) By notifying the measure before putting it into effect, the Czech authorities have respected their obligations under Article 108(3) TFEU . 3.2. Existence of State aid (32) For a measure to be categorised as aid within the meaning of Article 107(1) TFEU, all the conditions set out in that provision must be fulfilled. First, the meas ure must be imputable to the State and financed through State resources. Second, it must confer an advantage on its recipients. Third, that advantage must be selective in nature. Fourth, the measure must distort or threaten to distort competition and affec t trade between Member States. (33) The measure is imputable to the State, since it is administered by the Ministry of Industry and Trade (recital (9) ) and it is based on the legal basis identified in recital (7) . It is financed through State resources, since it is financed by public funds (recitals (9) and (10) ). (34) The measure confers an

8 advantage on its beneficiaries in the f
advantage on its beneficiaries in the form of direct grants (recita l (6) ). The measure thus confers an advantage on those beneficiaries, which they would not have had under normal market conditions. (35) The advantage granted by the meas ure is selective, since it is awarded only to certain undertakings that fulfil the criteria described in recitals (12) to (15) , while excluding the financial sector . (36) The measure is liable to distort competition, since it strengthens the competitive position of its beneficiaries. It also affects trade between Member States, since those beneficiaries are active in sectors in which intra - Union trade exists. (37) In view of the above, the Commission concludes that the measure constitutes aid within the meaning of Article 107(1) TFEU. The Czech authorities do not contest that conclusion. 3.3. Compatibility (38) Since the measure involves aid within the meaning of Article 107(1) TFEU, it is necessary to consider whether t hat measure is compatible with the internal market. 15 Referring to information required in Annex III to the GBER , ABER and FIBER (see footnote 7) . 8 (39) Pursuant to Article 107(3)(b) TFEU the Commission may declare compatible with the internal market aid “ to remedy a serious disturbance in the economy of a Member State ”. (40) By adopting the Temporary Framework on 19 March 2020, the Commission acknowledged (in section 2) that “ the COVID - 19 outbreak affects all Member States and that the containment measures taken by Member States impact undertakings ”. The Commission concluded that “ State aid is justified and can be declared compatible with the internal market on the basis of Article 107(3)(b) TFEU, for a limited period, to remedy the liq uidity shortage faced by undertakings and ensure that the disruptions caused by the COVID - 19 outbreak do not undermine their viability, especially of SMEs ”. (41) The measure aims at ensuring continuity of business activity at a time when the normal functioning of markets is severely disturbed by the COVID - 19 outbreak and that outbreak is affecting the wider economy and leading to severe disturbances of the real economy of Member States. (42) The measure is one of a series of measures conceived at national level by t he Czech authorities to remedy a serious disturbance in their economy , in particular to support the undertakings that have sustained a significant decline in their turnover and significant losses throughout the COVID - 19 outbreak . The importance of the meas ure to preserve employment and economic continuity is widely accepted by economic commentators and the measure is of a scale that can be reasonably anticipated to produce effects across the entire Czech economy. Furthermore, the measure has been designed t o meet the requirements of a spec

9 ific category of aid (“ Aid in the for
ific category of aid (“ Aid in the form of uncovered fixed costs ”) described in section 3.12 of the Temporary Framework. (43) The Commission accordingly considers that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State and meets all the conditions of the Temporary Framework. In particular: (a) Aid is granted under the measure no later than 31 December 2021 and covers uncovered fixed costs incurred during the period between 1 March 2020 to 3 1 December 202 1 , including such costs incurred in part of that period (recitals (11) and (18) ). The measure therefore complies with point 87(a) of the Temporary Framework. (b) Aid is gra nted under the measure on the basis of a scheme (recital (6 ) ) to undertakings that suffer a decline in turnover during the eligible period of at least 30% compared t o the same period in 2019 (recital (19) ). The Commission notes the commitment of the Czech authorities that, even in the event of adjusting the threshold of turnover decline in accordance with recital (20) , under no circumstances will that threshold be lower than 30%. T he measure therefore complies with point 87(b) of the Temporary Framework. (c) The aid intensity under the measure will not exceed 7 0% of the uncovered fixed costs defined in point 87(c) of the Temporary Framework except for micro and small companies, where the aid intensity will not exceed 90% of the uncovered fixed costs (recital (23) ). Uncovered fixed costs will be determined on the basis of realised economic figures ( and not on the basis 9 of forecasts ) and will be proved by profit and loss statements, drawn up in compliance with Czech tax and a ccounting legislation (recitals (21) , (22) ). In addition, the Commission notes the explanation of the Czech authorities that the condition of certifying those financial figures by an external independent auditor as described in recital (22) will in practice apply to the vast majority of cases, since the threshold of CZK 5 million (around EUR 190 000) is an average ly low figure, which can easily be met by many potential beneficiaries (recital (22) ) . Taking this into account, the Commission considers that the amounts of uncovered fixed costs and of the aid grante d under the measure will be determined with a high level of accuracy and they are not expected to differ compared with the final annual and tax accounts of the undertakings . The measure therefore complies with point 87( c ) of the Temporary Framework. (d) The aid takes the form of direct grants (recital (6) ). The overall nominal value of the measure will not exceed EUR 10 million per undertaking; all f igures are used gross, that is, before any deduction of tax or other charges (recital (24) ) . The measure therefore complies with point 87(d) of the Temporary Framewo

10 rk. (e) The aid under the measure s
rk. (e) The aid under the measure shall not be cumulated with other aid for the same eligible costs (recital (29) ). The measure therefore complies with point 87(e) of the Temporary Framework. (f) Aid may not be granted under the measure to medium 16 and large enterprises that were already in difficulty on 31 December 2019 (recital (15) ). Aid may be granted to micro and small enterprises that were in difficulty on 31 December 2019, if those enterprises , at the moment of granting the aid, are not subject to collective insolvency procedure under national law and they have not received rescue aid 17 or restructuring aid 18 (recital (15) ). The measure therefore complies with point 87(f) of the Temporary Framework. (44) The Czech authorities confirm that the aid und er the measure is not conditioned on the relocation of a production activity or of another activity of the beneficiary from another country within the EEA to the territory of the Member State granting the aid. This is irrespective of the number of job loss es actually occurred in the initial establishment of the beneficiary in the EEA (recital (4) ). The measure therefore complies with point 16ter of the Temporary Framework. (45) The Czech authorities confirm that the monitoring and reporting rules laid down in section 4 of the Temporary Framework will be respected (recital (30) ). The Czech authorities further confirm that the aid under the measure may only be cumulated with other aid, provided the specific provisions in the sections of the Temporary Framework and the cumulation rules of the relevant Regulations are respected (recitals (25) to (29) ). 16 As defined in Annex I to Commission Regulation (EU) No 651/2014. 17 Alternatively, if they have received rescue aid, they have reimbursed the loan or terminated the guarantee at the moment of granting of the aid under the notified measure . 18 Alternatively, if they have received restructuring aid, they are no longer subject to a restructuring plan at the moment of granting of the aid under the notified measure . 10 (46) The Commission therefore consider s that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State pursuant to Article 107(3)(b) TFEU since it meets all the relevant conditions of the Temporary Framework. 4. C ONCLUSION The Commiss ion has accordingly decided not to raise objections to the aid on the grounds that it is compatible with the internal market pursuant to Article 107(3)(b) of the Treaty on the Functioning of the European Union. The decision is based on non - confidential inf ormation and is therefore published in full on the Inte rnet site: http://ec.europa.eu/competition/elojade/isef/index.cfm . Yours faithfully, For the Commission Margrethe VESTAGER Executive Vice - Pres