Government Decision no 1165 from 26 September 2007 on stimulating economic growth by supporting investments *

OBJECTIV: regional development by stimulating investments and new job creation.

GENERAL DIRECTIONS OF PUBLIC FINANCES (GDPF): county GDPFs and the General Direction of Public Finances of Bucharest, together with the General Direction for the Administration of Big Taxpayers (DGAMC), through departments specialized on state aid matters, provide companies on-request assistance for drawing up and filling in the financing agreement–in-principle application form.

CONDITIONS REGARDING THE INVESTORS:

• are enterprises registered under the provisions of Law no. 31/1990 on commercial companies
• their headquarters are established and their activity is carried on in Romania
• do not belong to the category of firms in difficulty as provided for in the European guidelines on state aid for rescuing and restructuring firms in difficulty
• there are no state aid recouping decisions issued against them or, in case such decisions had been issued, they were executed, according to the law in force
• they are not newly created small-size enterprises, excepting the case when they apply for investment support or investment related consultancy
• there have been no state aid granting overlapping involving regional schemes of other state aid providers for the same eligible costs of the initial investment.

• initial investment project:

• the value of the investment is higher than RON equivalent of Euro 30 million
• the investment creates at least 300 new jobs
• works necessary to investment should not start prior to the agreement-in-principle issuing; if this condition is not complied with, the entire project will no longer be considered eligible for obtaining the aid
• the investment should be maintained for a minimum 5-year period for large companies and 3-year period for medium and small sized enterprises (SMEs), calculated from the date of the completion of the investment project. This condition does not impede replacing the equipment morally worn out within the 5-year or 3-year period for SMEs, due to swift technological change
• the new jobs must be created within 3 years from the completion of the works and maintained for at least 5 years from the date the post was first filled in the case of large companies and 3 years respectively in case of SMEs
• may be carried out in all sectors of activity, excepting those provided for in the Government Decision

Exceptions:

• fishery, aquaculture, coal industry, steel industry, transport, maritime ships building, synthetic fibers, primary production of the agricultural products in annex 1 to the Treaty establishing the European Community;
• export related activities, respectively activities directly related to the quantity exported, to setting up and operating a distribution network or other expenses export related activities.
  

STATE AID CONDITIONS:

• the aid does not favor the use of domestic products to the detriment of imported ones
• it is not an operating aid
• it is granted to enterprises within the limit of maximum allowable aid intensity
• it consists in granting non-refundable funds from the state budget, through the budget of the Ministry of Economy and Finance – General Actions
• the maximum state aid level an economic operator can beneficiate of according to the present Government Decision is RON equivalent of Euro 28.125 million, for investments and new jobs created as a result of an initial investment in whatever region of the country
• for investment and jobs created in the development region no. 8, Bucuresti-Ilfov, the maximum state aid level an economic operator can beneficiate of is RON equivalent of Euro 22.5 million
• regional investment aid is calculated in reference to either material and immaterial investment costs resulting from the initial investment project or estimated wage costs for jobs directly created by the investment project, taking into account the highest value of the eligible costs.

STATE AID INTENSITY:

• state aid ceiling applies to the total aid where assistance is granted concurrently under several regional schemes or in combination with an ad-hoc aid, whether the aid comes from local, regional, national or Community sources
• where aid calculated on the basis of material or immaterial investment costs is combined with aid calculated on the basis of wage costs, the intensity ceiling laid down for the region concerned must be respected
• where the costs eligible for regional aid are eligible in whole or in part for aid for other purposes, the common portion must be subject to the most favourable ceiling under the applicable rules
• regional investment aid cannot be cumulated with de minimis support in respect of the same eligible costs in order to circumvent the maximum aid intensities above mentioned
• the state aid intensity is expressed by the ratio between the aid updated gross value and the updated value of eligible costs. The eligible costs are updated to their value on the date of aid granting. Aids payable through installments are updated to the value held in the day of their being granted.
• for investments with eligible costs under Euro 50 million, the gross intensity of the regional aid for large companies can not be higher than 50% of the initial investment due expenses or the wage costs with the newly employed personnel calculated for a 2-year period
• for investments or jobs created in region no. 8, Bucharest – Ilfov, the maximum state aid intensity is 40%. Bonuses can be added to these levels of intensity - 20% for small and 10% for medium seized enterprises
• for big investment projects – eligible costs higher than RON equivalent of Euro 50 million – gross intensity is calculated by adjusting the regional ceiling, depending on the value of the eligible costs, regardless the beneficiary being a small, medium-sized or big enterprise.

Gross intensity is calculated as follows:

• for eligible costs not reaching the RON equivalent of EUR 50 million, the regional ceiling is applied;
• for installments from the eligible costs with a value situated between the RON equivalent of EUR 50 million and EUR 100 million, 50% from the regional ceiling is applied;
• for instalments of the eligible costs with a value exceeding the RON equivalent of EUR 100 million, 34% from the regional ceiling is granted;
• for investments higher than the RON equivalent of EUR 50 million, the total value of the state aid granted from all sources must not exceed 75% from the maximum state aid amount that could be received for an investment with eligible expenditure of EUR 100 million in RON equivalent, meaning the amount stipulated under art.10 of the present scheme;
• for processing and marketing agricultural products, the maximum intensity will be established according to provisions in art. 4 (10) of Regulation no. 1628/2006.
  

PROVIDER: The Ministry of Economy and Finance.

DURATION OF THE STATE AID SCHEME: 5 years, respectively the period 2007-2011, with the possibility of extension.

MAXIMUM AID SCHEME BUDGET: Euro 500 million, in the limit of the annual budget ceilings of the 5-year period.

ELIGIBLE EXPENSES:

1. Eligible Expenses on the Basis of Investment Costs:

• expenses for investments in immaterial assets include those costs related to the acquisition of land, buildings and equipments
• for SMEs, the costs of preparatory studies and consultancy costs linked to the investment may also be taken into account up to an aid intensity of 50% from the actual costs incurred
• costs correlated to the acquisition of material assets, other than land and buildings, under lease can be considered eligible only if the lease takes the form of financial leasing and contains the beneficiary’s obligation to purchase the assets at the expiry of the term of lease. In case the lands and buildings are purchased in lease system, the lease contract must continue validity for at least 5 years after the anticipated date of completion of the investment project for large companies, and 3 years for SMEs
• excepting the cases of SMEs and takeovers, the assets acquired should be new
• in the case of takeovers, the assets for the purchase of which aid was already granted before the acquisition are deducted
• expenses afferent to investments in immaterial assets include those costs related to the transfer of technology through the acquisition of patent rights, licenses, know-how or unpatented technical knowledge. These costs cannot exceed 50% of the total eligible investment expenditure if the state aid beneficiary is a large company. In case the state aid beneficiary is a SME, the expenses can be covered completely
• in case the aid is calculated based on the costs of jobs created as a result of an initial investment project, the eligible costs are considered to be the wage costs of the newly employed personnel, calculated for a of 2-year period
• beneficiary’s financial contribution to the investment must cover at least 25% from the eligible costs; the form of this contribution must not fall under any other public aid.

2. Eligible Expenses on the Basis of Wage Costs:

• include the gross wage and the contributions to compulsory social insurance
• job creation means the net increase of the number of employees directly employed by the enterprise beneficiary of state aid, compared to the average of the last 12 months
• jobs lost during that 12 months period must be deducted from the apparent number of jobs created within the same period
• jobs are created directly through the investment project.

GRANTING PROCEDURE:

Eligibility criteria: must be met cumulatively, when applying.

Eligibilirty criteria:

• enterprises are registred according to Law no 31/1990 on trading companies republished, with subsequent modifications and completions; their headquarters are established and their activity is carried on in Romania;
• enterprises intend to implement investments with a value exceeding the RON equivalent of EUR 30 million and create at least 300 new jobs, as a result of the initial investment;
• enterprises have no unpaid debts to the funds of the general consolidated budget;
• enterprises are not subject to compulsory execution, bankruptcy, insolvency, juridical reorganization, dissolution, operational closing, liquidation or other situations regulated by the law;
• do not belong to the category of firms in difficulty;
• there had been no state aid recouping decisions issued against them or, in case there had been, such decisions were executed according to the law in force;
• submit an investment plan when applying for state aid;
• the investment and job creation the state aid is applied for under provisions of the present scheme are not carried on in the following sectors of activity: fishery, aquaculture, coal industry, steel industry, transport, maritime ships building, synthetic fibers, primary production of agricultural products, comprised in Annex no.1 to the Treaty establishing the European Community.

Method of granting: allocation of non-refundable funds from the state budget through the budget of the Ministry of Economy and Finance.

Granting procedure for specific individual allocation:

I. Agreement-in-principle for financing:

• in order to obtain the agreement-in-principle for financing, the applicant submits an agreement-in-principle application form together with the justificatory documents stipulated in the Government Decision at the Ministry of Economy and Finance, Str. Apolodor, nr.17, sector 4, Bucharest
• the applications will be analyzed and selected, in the limit of the scheme annual budget, considering the date and registration number of the documents
• the legal term provided for evaluating the application form is of maximum 30 working days from the registration day
• following the evaluation of the agreement-in-principle application form, the Ministry of Economy and Finance sends the solution to the applicant enterprises.

Solution:

• a financing agreement-in-principle for applicant enterprises selected for financing;
• a notice to the applicant specifying that the application for receiving the financing agreement-in-principle is incomplete, does not contain correct information, the accompanying documentation is incomplete or the provided information is not accurate. The applicant enterprise has to complete the required documentation in maximum 10 working days after receiving the notice;
• a rejection letter to the applicant for financing agreement-in-principle in case:
        - criteria specified in the Government Decision are not met;
        - applications were submitted after the date the annual budget granted for the scheme had been consumed at;
        - the term for completing the documentation was not respected.

II. Granting specific individual allocations:

• specific individual allocations are granted to selected applicants, after carrying out the partial or total eligible expenses of the investment project for which the financing agreement-in-principle was issued
• specific individual allocations are granted following a non-refundable funds granting application; the deduction form, justificatory documents and inventory of the documents handed in must come with the application
• the non-refundable installment is awarded by the Ministry of Economy and Finance, after examining on the spot the reality, legality and conformity of the financial-economic operations financing is applied for
• applicant enterprises must begin the investment project the financing was applied for in maximum 4 months from the date when the financing agreement-in-principle was issued
• in case the applicant enterprises did not begin the investment project within this period, the agreement-in-principle is repealed
• the application for being awarded the first installment will be handed in after a period of maximum 3 months from the beginning of the investment project
• the actual transfer of installments is made by the Ministry of Economy and Finance within maximum 30 working days from the registration of the application for non-refundable funds.