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March 20, 2020
On March 19, 2020, following consultation with EU Member States, the European Commission adopted a Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak. The Framework sets out temporary State aid measures that the European Commission considers compatible with the EU internal market and that can be approved rapidly upon notification by each Member State.
On March 16, 2020, the European Commission announced that it had sent for consultation to Member States a draft proposal for a State aid Temporary Framework (the Framework) to support the economy in the context of the COVID-19 outbreak (please refer to Euro Tax Flash issue 427 for details). The Framework is based on Article 107(3)(b) of the Treaty of the Functioning of the European Union (TFEU), which allows measures to be taken to remedy a serious disturbance in the economy of a Member State.
Following consultation with EU Member States, on March 19, 2020, the European Commission adopted and published a Communication (PDF 119 KB) on the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak – C(2020) 1863 final (the Communication).
The Commission notes in its Communication that this derogation from EU State aid rules should be interpreted strictly and in light of rulings from the European Union courts, according to which the disturbance must affect the whole or an important part of the economy of the Member State concerned. The Commission further notes that the COVID-19 outbreak affects all Member States and that containment measures adopted by Member States are having a negative impact on businesses. Therefore, the Commission considers that State aid is justified and can be declared compatible with the EU internal market on the basis of Article 107(3)(b) TFEU, for a limited period, with the aim of mitigating the liquidity shortage faced by businesses.
The Commission sets out the compatibility conditions that it will apply to aid granted by Member States under Article 107(3)(b) TFEU. Member States are required to notify any aid granted under this provision to the European Commission and to show that the measures are necessary, appropriate and proportionate to remedy a serious disturbance in the economy and that all the conditions set out in the Communication are respected.
The Framework provides for five types of aid:
Any aid granted under the Framework must comply with the following conditions:
Further conditions must be satisfied in relation to aid granted to businesses active in the processing and marketing of agricultural products. Specific provisions for the primary agricultural and the fishery and aquaculture sectors are set out separately.
The Commission will apply the Communication between March 19, 2020 and December 31, 2020 – subject to review on the basis of important competition policy or economic considerations.
The Framework adopted by the European Commission provides for a more extensive list of measures than previously announced, with an increase in the maximum amount of aid in the form of direct grants or tax advantages from EUR 500,000 to EUR 800,000 and the addition of short-term export credit insurance to the list of types of compatible aid. Individual Member States continue to introduce targeted measures, included related to the application of interest on late payments of tax, extensions to the deadlines for filing of tax returns and for tax remittances. See KPMG's reports of tax developments in response to the Coronavirus (COVID-19). For an overview of Tax & Legal Services considerations related to the impact of COVID-19, please refer to the dedicated KPMG page.
KPMG is hosting a webcast on Tuesday, March 24, 2020 on effective management of a tax or legal function through a crisis situation, considering the current environment in light of the impacts of the Novel Coronavirus (COVID-19). See the details of the webcast.
Should you have any queries, please do not hesitate to contact KPMG’s EU Tax Centre (mailto:firstname.lastname@example.org), or, as appropriate, your local KPMG tax advisor.