The European Commission issued a release on 31 July 2020 announcing its approval of Italian tax credit and loan schemes to support SMEs affected by COVID-19.
State aid: Commission approves €6 billion Italian schemes to support SMEs affected by coronavirus outbreak
The European Commission has approved three Italian schemes, with an overall budget of €6 billion, mainly consisting of incentives to the recapitalisation by private investors of small and medium-sized enterprises ('SMEs') affected by the coronavirus outbreak. The three schemes were approved directly under Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU) and the State aid Temporary Framework, respectively.
The Italian support measures
Italy notified to the Commission under EU State aid rules, three schemes, with an overall budget of €6 billion, to facilitate the provision of capital and liquidity to companies affected by the coronavirus outbreak. The schemes, which are complementary among each other and designed to incentivise the mobilisation of private investments, consists in the following:
- Under the first scheme, a subsidy associated with a tax credit, where private investors injecting capital in the affected companies will be entitled to receive a tax credit of up to 20% of the invested amount. Under the scheme, the aid will therefore be granted both to the investor (that receives the tax advantage) and the investee company (that receives the investment).
- The second measure is a tax credit scheme, where the companies themselves would receive a tax credit of up to 30% of the amount of their capital increase.
- Finally, under the third scheme, the public support will take the form of subordinated loans.
All schemes will be accessible to companies that have faced a severe reduction of revenues in March and April 2020, provided they approve and execute a capital increase.
The schemes therefore aim at enhancing the access to external financing of those companies that are most severely affected by the economic impact of the coronavirus outbreak, thus helping them to ensure the continuation of their activities.
The Commission found that aid to the investees under the three schemes is in line with the conditions set out in the Temporary Framework. In particular, (i) under the first two schemes, the aid will not exceed €800,000 per company(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), and (ii) with respect to the third scheme, aid will not exceed 12.5% of the turnover of the beneficiary in 2019 as provided by the Temporary Framework. Under all three schemes, aid to the companies is limited in time and can be granted by the end of 2020.
As regards, the aid to the investors under the first scheme, the Commission assessed the measure under EU State aid rules, and in particular Article 107(3)(b) TFEU, which enables the Commission to approve State aid measures implemented by Member States to remedy a serious disturbance to their economy.
The Commission found that the aid is in line with the principles set out in the EU Treaty and the general principles set out in the Temporary Framework. It is well targeted to remedy a serious disturbance to the Italian economy. In this respect, the Commission considered that the aid will be merely granted to incentivise and facilitate private investment into investee companies, which have experienced a significant reduction of turnover as a result of a coronavirus crisis. The intermediation of the private investors is therefore indispensable to carrying out the investments.
The Commission concluded that the three schemes are necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework.
On this basis, the Commission approved the measures under EU State aid rules.