European law report - Summer bonanza for SMEs!
A number of recent initiatives proposed by the European Commission will overhaul the current policies on state aid, industrial property rights and VAT in favour of small- and medium-sized enterprises (SMEs). At the heart of this reform process is the...
A number of recent initiatives proposed by the European Commission will overhaul the current policies on state aid, industrial property rights and VAT in favour of small- and medium-sized enterprises (SMEs). At the heart of this reform process is the Commission's constant support for SMEs which are considered to be the main driving force in the EU's ecomony.
One of the pillars of EU competition policy is the control of state aid. State aid generally runs counter to competition because aid granted by a state favours certain companies over others, and thus interferes with the level playing field that competition rules strive to achieve. In fact, the EU Treaty prohibits any aid granted by a member state in any form whatsoever. All state aid measures need to be notified to the Commission for its prior approval.
The new Block Exemption Regulation adopted by the Commission, which will come into force in the coming weeks, does away with the requirement of prior approval as it sanctions a range of aid measures that can be granted by member states without the need to seek such prior approval. The new rules authorise member states to grant aid when it is targeted at creating job opportunities, boosting competitiveness, and improving the environment. For instance, SME participation in fairs, training, and industrial property rights costs for SMEs can all be supported or subsidised by member states without any involvement by the EU as well as aid aimed to help women in setting up a business.
Excluded from the scope of the regulation are certain industrial sectors such as the fishery and aquaculture sectors, the agricultural sector, the coal sector, the shipbuilding sector, the steel sector and the synthetic fibres sector. Companies in financial difficulty do not benefit from an automatic right to state aid but have to go through the normal approval procedure by the Commission's state policy.
In addition to the state aid overhaul, the Commission in its recent draft communication aired its intention to strengthen the protection of patents and trademarks - an area particularly crucial for smaller companies. In its strategy, the Commission declared its objective to help SMEs exploit their property rights, and protect their rights by stepping up the fight against counterfeiting and piracy.
SMEs will be in a better position to protect their ideas with strong industrial property rights, such as patent and trademarks. Among the actions proposed by the Commission in the area of industrial property rights are the adoption of the community patent proposal and the creation of an integrated EU-wide jurisdiction for patents, ensuring high-quality industrial property rights in Europe that are accessible to all innovators, including SMEs, and facilitating exploitation by SMEs of industrial property rights.
In yet another different initiative, the Commission is also proposing changes to VAT rates applicable to certain services that are considered to be labour-intensive or locally supplied services. The standard minimum rate of VAT is 15 per cent, which the Commission proposes to reduce.
Labour-intensive services such as minor repairs of goods like shoes, clothes or watches, and all personal care services such as hairdressing or beauty services are being proposed as eligible for the reduction.
Services relating to the housing sector from construction to maintenance will also be eligible for reduced rates if such services aim at increasing energy-saving and efficiency.
This means that the installation of say a high performance double glazing can be eligible for a reduced rate of VAT. Services that are local in character will also be subject to lower VAT. Member states however will not be tied to apply the reduced rates and it will be up to them to assess whether a reduced rate should be introduced.
• Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.
One of the pillars of EU competition policy is the control of state aid. State aid generally runs counter to competition because aid granted by a state favours certain companies over others, and thus interferes with the level playing field that competition rules strive to achieve. In fact, the EU Treaty prohibits any aid granted by a member state in any form whatsoever. All state aid measures need to be notified to the Commission for its prior approval.
The new Block Exemption Regulation adopted by the Commission, which will come into force in the coming weeks, does away with the requirement of prior approval as it sanctions a range of aid measures that can be granted by member states without the need to seek such prior approval. The new rules authorise member states to grant aid when it is targeted at creating job opportunities, boosting competitiveness, and improving the environment. For instance, SME participation in fairs, training, and industrial property rights costs for SMEs can all be supported or subsidised by member states without any involvement by the EU as well as aid aimed to help women in setting up a business.
Excluded from the scope of the regulation are certain industrial sectors such as the fishery and aquaculture sectors, the agricultural sector, the coal sector, the shipbuilding sector, the steel sector and the synthetic fibres sector. Companies in financial difficulty do not benefit from an automatic right to state aid but have to go through the normal approval procedure by the Commission's state policy.
In addition to the state aid overhaul, the Commission in its recent draft communication aired its intention to strengthen the protection of patents and trademarks - an area particularly crucial for smaller companies. In its strategy, the Commission declared its objective to help SMEs exploit their property rights, and protect their rights by stepping up the fight against counterfeiting and piracy.
SMEs will be in a better position to protect their ideas with strong industrial property rights, such as patent and trademarks. Among the actions proposed by the Commission in the area of industrial property rights are the adoption of the community patent proposal and the creation of an integrated EU-wide jurisdiction for patents, ensuring high-quality industrial property rights in Europe that are accessible to all innovators, including SMEs, and facilitating exploitation by SMEs of industrial property rights.
In yet another different initiative, the Commission is also proposing changes to VAT rates applicable to certain services that are considered to be labour-intensive or locally supplied services. The standard minimum rate of VAT is 15 per cent, which the Commission proposes to reduce.
Labour-intensive services such as minor repairs of goods like shoes, clothes or watches, and all personal care services such as hairdressing or beauty services are being proposed as eligible for the reduction.
Services relating to the housing sector from construction to maintenance will also be eligible for reduced rates if such services aim at increasing energy-saving and efficiency.
This means that the installation of say a high performance double glazing can be eligible for a reduced rate of VAT. Services that are local in character will also be subject to lower VAT. Member states however will not be tied to apply the reduced rates and it will be up to them to assess whether a reduced rate should be introduced.
• Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.