FAQ’s: All the important things you need to know about the NextGen EU funds

€140 billion. Of the €750 billion that the EU is planning to distribute in the 2021-2026 period under the EU Recovery and Resilience Facility (RRF), around €140 billion have been allocated to Spain.

Of that sum, the Recovery, Transformation and Resilience Plan (RTRP) approved by the Government charts that €70 billion will be spent on non-refundable grants, which are mostly to be allocated between 2021 and 2023. The remaining €70 billion is to be spent on soft loans which the RTRP postpones until after 2023.

Any projects aspiring to receive NextGen EU funding must contribute to the achievement of targets relating to the 4 main focuses defined in the RTRP: (i) green transition, (ii) digital transition, (iii) social and regional cohesion, and (iv) gender balance. These 4 main focuses are divided into 10 policy levers and 30 components, each directed at the undertaking of certain reforms and the making of specific investments classified by areas, with the achievement of their milestones having to be evidenced to the European Commission every six months.

The General State Budget Law for 2021 set out a €27 billion allocation out of NextGen funds. After obtaining the Commission’s favorable assessment, the Recovery, Transformation and Resilience Plan was approved by ECOFIN on July 13, 2021. The government received the first €9 billion in August and a further €10 billion last December (totaling 70% of the funds allocated in the Budget for this year) following the issuing by the Commission in early December of the preliminary positive assessment of the first 52 milestones committed to by Spain under the Recovery, Transformation and Resilience Plan.

Since the second quarter of 2021, when calls for applications started to be published, the pace of publication has been gathering speed to the point where we are able to see calls for applications for grants and aid directly or indirectly linked to these funds almost daily in the various official gazettes.

Although the eligible costs for each particular project will be determined in the relevant terms and conditions and calls for applications for grants, generally the NextGen EU aid will only fund justifiable costs incurred by beneficiaries to perform projects determined to be eligible for funding. Because the RTRP covers a wide range of investments in human capital (education, training, health, social welfare, etc.), and in fixed capital (infrastructure, R&D&I, etc.) or natural capital (sources of natural renewable energy, protection and restoration of the environment, mitigation and adaptation in relation to climate change, etc.), the eligible expenses or costs may vary depending on the type of investment itself and the goals of the subsidy.

Although the specific amounts and percentages of funding that projects will be eligible to receive in the form of grants will be determined in the terms and conditions and calls for applications for aid, what we can say is that, in the calls for applications for NextGen grants that have already been published, the highest amounts of funding for each project appear to range, generally, between 20% and 50% of eligible project costs (this percentage could be higher for small and medium-sized companies, although this is not usually the case). In any case, those percentages are not allowed to go above the aid intensity percentages determined by the EU State aid rules, which graduates them by reference to the type of project, type of activity and especially, to the type of applicant entity nature and its size.

That depends on the specific compatibility rules applicable to the aid, which will generally be determined in the terms and conditions or calls for applications for each type of aid. Most calls for applications for grants published to date appear to allow other aid from other public authorities to be requested and obtained for the same purpose, although they cannot fall on the same cost.

Generally speaking, if they are compatible with other types of aid regard is needed to the following limits: (i) any determined in the call for applications for each specific project; (ii) the caps on the aid to be received in each case (% of eligible costs for funding), to make sure that the aggregate amount of grants for the same project obtained in different calls for applications does not go above them, and (iii) the additional limit determined in the General Subsidies Law which states that alone or together with other aid, grants cannot exceed the cost of the funded activity.

It depends on the requirements in the terms and conditions or call for applications for each type of aid. Due to the necessary incentive effect, however, which is generally required for government aid for it to be found compatible with EU rules, it is usually stipulated that the project must not have started before the filing date of the application for the grant concerned. For example, a few of the calls for applications already published for the NextGen funds specify that they must be for “new business projects” or state that “only expenses entered into after the grant had been approved will be treated as eligible”.

The key issue is what the “start” of the project means for these purposes, because, depending on how requirements are worded in the various terms and conditions and calls for applications, it might be allowed for the applicant to carry out a few preparatory activities which do not mean that the investments have begun strictly speaking (examples may include the conduct of viability studies or the application for licenses or permissions for the project).

Outside these circumstances, any activity (and particularly, the existence of payments linked to the performance of the project) carried out before the application date for the grant could be interpreted by the authorities to be an indication that the project had already started at that time, which could give rise to forfeiture of the chance to try for the grant and, if it has already been received, for a refund of the grant plus late-payment interest.

Spanish Strategic Projects for Recovery and Economic Transformation, known as PERTEs after the acronym for their name in Spanish, are a new public-private partnership mechanism defined in Royal Decree-Law 36/2020, of December 30, 2020 (RDL 36/2020). They are strategic projects that have considerable potential for kickstarting the Spanish economy and require the partnering up of several players, including public authorities, companies and research organizations.

In principle, PERTEs may be formed by all types of companies (large companies and small and medium sized companies and startups) which will contribute through a number of joint investment initiatives, to having an impact on the whole value chain in a certain area. In this respect, the RTRP has identified on a preliminary basis 6 potential PERTEs to drive structural reform processes across the whole value chain in the following areas: (i) the green and connected automotive industry, (ii) the green hydrogen industry, (iii) the aerospace industry, (iv) sustainable and efficient agriculture, (v) use of Spanish in artificial intelligence, (vi) or development of an advanced National Health System.

Royal Decree-Law 36/2020 created the central government register of entities interested in PERTEs ("REPERTE"), for the registration of entities wishing to invest in a PERTE, pursuant to the provisions of Ministerial Order HFP/168/2022, of March 7, 2022, regulating their functioning and structure.

Any entity (public or private and irrespective of its legal form, regional base or type of incorporation) that the corresponding Ministry has accredited as being interested in a PERTE in its area of expertise can seek entry in the register, which is divided into sections for each approved PERTE. The specific accreditation procedure will be established by each particular Ministry. The REPERTE will: (i) publish the administrative acts accrediting those entities interested in PERTEs; (ii) guarantee a common structure for the data gathered; (iii) provide public access to such data; and, most importantly, (iv) certify the effective ministerial accreditation of each entity featured on the registry.

  • PERTE for the development of electric and connected vehicles (PERTE VEC), (July 13, 2021), aimed at creating the necessary ecosystem in Spain for developing and manufacturing electric and connected vehicles and making Spain into the European electromobility hub.
  • PERTE for avant garde health, (November 30, 2021), with the following goals: fostering fair implementation of personalized precision medicine, promoting the development of advanced therapies and other innovative or emerging drugs, developing an innovative data system and driving a digital transformation in healthcare.
  • PERTE for renewable energy, renewable hydrogen and storage, (December 14, 2021), with the goal of developing technology, know-how, industrial capabilities and new business that will strengthen the country’s leading position in the field of clean energy. 
  • PERTE for the agro-food sector, (February 8, 2022), aiming to strengthen this industry through financing and tools that drive its modernization and digitalization, and contribute to sustainable, competitive and resilient agro-food production, as well as to job creation and to addressing the demographic challenge.
  • PERTE for the new language economy, (March 1, 2022), seeking to mobilize the public and private investments to maximize the value of the Spanish language and the co-official languages within the global digital transformation process to ensure that, as a priority, artificial intelligence “thinks” in Spanish and that Spanish-speaking companies and people will play a leading role in growth and creation of quality employment.
  • PERTE for the circular economy, (March 8, 2022), to accelerate the transition toward a more efficient and sustainable productive system in the use of raw materials so as to boost the competitiveness of industrial sectors and companies, as well as to ensure greater strategic autonomy of the country.
  • PERTE for the shipbuilding industry, (March 8, 2022), focusing on transformation of the value chain in the shipbuilding industry through diversification toward renewable marine energies and low-emission vessels, promoting digitalization of the industry, enhanced environmental sustainability and employee training.
  • PERTE for aerospace, (March 22, 2022), aiming to address the new challenges facing the industry (climate change, global security and the digital transition), becoming a key player in the opportunities arising from the industry transformation, both within Spain and internationally.
  • PERTE for the digitalization of the water cycle (March 22, 2022), with the aim of facilitating the transformation and modernization of water management systems (urban water, irrigation and industry) by supporting new technologies, improving governance and transparency in the integrated water cycle, boosting its efficiency and reducing waste in supply networks, while making progress toward environmental goals.

The PERTE linked to the care economy is in an advanced phase of study, with the aim of boosting and consolidating alliances between research centers, organizations, co-ops and entities working in the social economy throughout Spain, and a focus on values such as environmental protection, social cohesion and gender equality.

In view of the accelerated pace of publications of calls for applications for NextGen grants, it would be recommendable for any interested companies to carry out a review of the investment projects they plan to carry out in the short to medium term to assess whether they fit the criteria for NextGen funding under the RTRP and, if needed and possible, to adapt them). All of this, with the goal of being ready in time for the publication of calls for applications for this funding and therefore preparing the documents that will need to be filed with the application forms (i.e. technical report, economic report, corporate information, solemn declarations, etc.), within the time period that will be set in each call for applications (although these times periods vary from one call to the next, they do not usually go over a month).