Wise Finance Solutions: how can large and small companies in Romania benefit from state financial aid

Wise Finance Solutions, a company specialized in consulting services for accessing non-reimbursable financing, is carrying out an analysis of the two aid schemes managed by the Ministry of Public Finance. Through these, large, medium and small companies in Romania can access the necessary funds to develop their business or even expand their field of activity.

The two State aid schemes managed by the Ministry of Public Finances were extended until December 31st 2023. At the same time, certain conditions have been modified to make the process of accessing State aid more flexible and simpler for companies.

Foremost is the State aid scheme for investments established by GD 807/2014, with subsequent amendments and supplements it finances investments with a value of more than 1 million euro and is a program of great interest in particular among large companies that have no other options for non-reimbursable funds for investments that they can access. Next is the State aid scheme to support investments that promote regional development through job creation established by the GD 332/ 2014 with subsequent amendments and supplements.

In August, the Ministry of Public Finances adopted a series of changes to the two state aid schemes, for the benefit of applicants. The amendments were published in the Official Gazette and, subsequently, all of these were also transposed into the applicant’s guides for the respective State aid schemes.

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On the basis of the European Commission’s decision, the validity of the two State aid schemes was extended from 31.12.2020 to 31.12.2023. This will allow for financing agreements to be issued after the end of this year, i.e. until 31.12.2023, and for payments to be made to beneficiaries up to 2028, depending on the implementation period of each project.

The most important changes to the State aid scheme for initial investments established by GD 807/ 2014

• Elimination of the standard of cost (1.650 lei / mp, approx. eur 340/sqm) which was used prior to these changes in the determination of eligible expenditure for construction works. Thus, the eligible cost / sqm built will no longer be limited to any standard of cost. In these circumstances, certain types of investments, such as hospitals, clinics, hotels and other complex constructions, industrial or other type, which were disadvantaged by this standard of cost will be able to receive considerably higher state aid than if the standard of cost had been maintained.
• Change to the eligibility condition regarding turnover rentability > 0 and, implicitly, of having turned a profit in the year preceding the submission of the application for a financing agreement. In the new form, the condition will cover one of the last 3 completed financial years and not the last completed financial year. This change will help companies, especially since many of them have been affected this year by the pandemic and they may end 2020 at a loss, for example. Under the new condition, they will be able to submit applications for financing agreements in the following year even if they had a loss in 2020, only under the condition of having registered a profit in 2018 or 2019.
• The possibility of a 2-year extension to the 5 year period of project monitoring, with the approval of the Ministry of Public Finance, at the request of the company, exclusively due to the pandemic caused by the new coronavirus. This means an extension of up to 2 years to the period during which the company has to reach its assumed indicator regarding the value of contributions to regional development in the form of taxes and duties to the general consolidated budget of the State for the initial investment and the jobs created directly by it paid by the enterprise receiving state aid during the implementation and 5 years after the completion of the investment. The request can be sent to the Ministry of Public Finance by December 31st 2021.
• Extension of the time within which the companies are obliged to commence their investment, from 4 months to 6 months from the date of the financing agreement
• Elimination of the obligation to prove the source of co-financing for the project at the time of the application for the grant agreement. Such proof shall be presented within a maximum of 6 months after the issuance of the financing agreement. However, the source of co-financing must be mentioned in the business plan at the time of submission and cannot be changed after the financing agreement is issued
• Elimination of the obligation to prove, at the time of applying for the financing agreement, the legal situation of the location in which the investment is to be carried out. Supporting documents will be submitted within a maximum of 6 months after the issuance of the financing agreement. A different location than the one specified in the request for the financing agreement and in the business plan underlying the financing agreement will not be accepted.
• State aid intensity (the percentage of State aid in the amount of eligible expenditure, currently maximum 50% for most regions, except for the Western and Bucharest-Ilfov region) is likely to change between 2021 and 2023, even in the sense of being decreased for certain regions. The gross aid intensity from which an eligible enterprise can benefit through the scheme during the period 2021-2023, as compared with the eligible expenditure, shall be established by regional maps approved by the European Commission for this period

The State aid scheme GD 807 is currently open and the projects shall be submitted continuously.

The State aid scheme for regional development through the creation of jobs

It is established by GD 332/ 2014 and finances, at a maximum of 50%, the wage costs over a period of 2 consecutive years for jobs created as a result of an initial investment. The jobs must be created after submitting the application for the financing agreement and the commencement of the investment, but no later than 3 years after the date of its completion.

Main amendments

• Elimination of the limitation of the eligible wage cost to the economy average gross wage valid for the year of submission of the application for financing agreement. The salary costs with the new jobs created as a result of an initial investment will be considered fully eligible, regardless of their value, according to the company’s wage scale
• Change in the minimum number of jobs created as a result of the investment, from 10 to 100 jobs
• Possibility to also submit online applications for the financing agrements
• Introduction of the possibility for companies to commence the investment after submitting the request for the financing agreement, and not only after the financing agreement was issued, as it was up until now.
• Elimination of the two-stage submission and assessment of the documentation
• Elimination of the scoring grid
• Elimination of the requirement to submit tax certificates at the time of the application for the financing agreement, with the mention that they will have to be submitted at the time of the payment of the State aid and the company must not register outstanding debts to the state and local budgets
• The registration of requests for financing agreements will be carried out in a continuous session, unlike previous sessions when the submission was for a limited time.

The State aid scheme established by GD 332 is to be opened this year for the submission of applications for financing agreements.