E.U. & Antitrust Newsletter Portugal
It should be taken into consideration that any State aid is, in principle, prohibited, unless considered compatible with the internal market by the EC. This prohibition aims to prevent public contributions from selectively benefiting certain companies (whether these are, inter alia, tax-related, subsidies, guarantees or subsidized loans) to the detriment of others, thus distorting healthy competition on the internal market.
However, in these times of crisis, the rules on State aid have temporarily undergone certain alterations, and will now function as the main tool in order to overcome the inactivity in certain sectors of the economy. Thus, Portugal has some room for directly mitigating the burden suffered by companies using an EC-approved aid package for the amount of EUR 3,000,000,000 (three billion euros), for assisting SMEs and midcaps.
Under EC authorization, Portugal can still:
- Grant direct support (or tax benefits) up to 800 thousand euros per company, within a temporary framework (click here) which is predicted to last until the end of this year (with the possibility of an extension). This measure aims to address extreme liquidity needs and to support companies which, due to COVID-19, are on the verge of insolvency. Despite this flexibility, the EC emphasizes that the main source of this direct support should come from the States.
- Grant compensation to those companies suffering damage caused by these extraordinary circumstances.
- Grant aid attempting to remedy a serious disturbance in the economy of a Member State. In Italy, for example, the EC based itself on indicators such as the expected contraction of the GDP, the burden on the national health service, public measures imposed (such as the closure of schools, prohibition of public events, restrictions on movement, etc.) to authorize the Italian State to grant State aid to certain companies.