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Anna Smagowicz-Tokarz

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Article 13 of the European Commission Regulation (EU) No 651/2014 declaring certain categories of aid compatible with the internal market  stipulates that the regional aid rules do not apply to beneficiaries that have closed down the same or a similar activity in the EEA in the two years preceding their application for regional investment aid. This means that enterprises covered by that regulation cannot apply for regional aid on general principles and must apply directly to the European Commission for an approval of the regional aid.

Until recently, there were no clear-cut guidelines for the interpretation of the term "beneficiary that has closed down the same or a similar activity in the European Economic Area". The proper understanding of that term is key for those in-zone enterprises that plan to offshore their business, open a new establishment and close down an old one, or liquidate one of their establishments, and want to apply for regional aid. In May 2015 the European Commission published explanations in this matter on the ECN ET platform. We are elaborating on it below.

The concept of "closing down an activity"

According to the European Commission, "closing down an activity" means not only that the activity is fully (100%) closed at the establishment concerned, but also that the activity is partially closed when this results in substantial job losses meaning a job reduction of at least 50% of the workforce or job losses of at least 100 jobs. Therefore, if a beneficiary of state aid reduces his workforce in one of his establishments in an EEA member state by at least 50%, he will not be eligible for regional aid for opening another establishment in another EEA member state for two years after that event. 

Territorial scope

Article 13(d) of the Regulation applies to situations when an enterprise closes down a business in one EEA member state and opens it in another and wants to apply for the state aid there. Such an enterprise is covered by Article 13(d) and, consequently, cannot apply for regional aid on general principles. Therefore, closing down an establishment and opening another in the same EEA state does not disqualify from applying for regional aid. 

Is the European Commission's approval for regional aid necessary?

A beneficiary that has closed down an activity in one of the member states in the two years preceding its application for regional investment aid or which has concrete plans to close down the same or a similar activity in another EEA member state within a period of up to two years after the aided investment is completed is obliged to notify the European Commission of that fact and apply to the Commission for approval of the regional aid.

Summing up, offshoring an establishment within one member state of the EEA (moving an establishment within the same SEZ or to another SEZ in Poland) does not require the European Commission's approval of state aid.

In case of further questions, please do not hesitate to contact us. Our tax advisers in Rödl & Partner offices in Cracow, Gdansk, Gliwice, Poznan, Warsaw and Wroclaw will gladly review your documentation related to your investment in the Special Economic Zone in Poland and propose a solution to minimise your tax risks. We are also on hand to answer any other tax-related questions you may have. Our offices offer legal support in conducting business within a SEZ and in any other aspects of your operations.