State Aid Law

What is state aid law?

State aid law (German: Beihilferecht or Beihilfenrecht) refers to the rules of EU law that in principle prohibit state advantages for companies and determine when they are exceptionally permissible. The basis is Articles 107 to 109 of the Treaty on the Functioning of the European Union (TFEU) and the regulations of the European Commission based on them. Aid (German: Beihilfe) is the technical term for such a state advantage. The purpose is that no member state should use public money to give its companies a lead over competitors from other member states.

Every form of state support is covered: grants, low-interest loans, guarantees, tax advantages such as the research allowance and public-sector equity holdings on non-market terms. For companies, state aid law shows up in funding applications, which require declarations on aid received, on SME status and on the economic situation, and in the grant award notice, which names the legal basis under state aid law. In funding rounds and company acquisitions, it becomes relevant because unlawful aid must be recovered.

Prohibition of state aid under Article 107 TFEU and exceptions

Under Article 107(1) TFEU, aid exists if four features coincide:

• The measure is granted from state resources.
• It favours certain undertakings or branches of production.
• It distorts or threatens to distort competition.
• It is capable of affecting trade between member states.

Such aid is in principle incompatible with the internal market. New aid must be notified to the Commission and may be granted only after its approval (Article 108(3) TFEU).

There are two practically important exceptions to notification: minor aid under the de minimis regulation and aid that is exempted under the General Block Exemption Regulation (Allgemeine Gruppenfreistellungsverordnung, AGVO; GBER).

There is no aid if the state acts like a private market participant. If a public investment company participates on the same terms and with the same risk as private investors, there is generally no advantage. This explains why public investors in funding rounds often subscribe alongside private investors and on the same terms.

De minimis regulation and GBER

De minimis aid

Under the de minimis regulation (Regulation (EU) 2023/2831), aid up to a maximum amount is regarded as not relevant to competition. Since 1 January 2024, the de minimis ceiling is EUR 300,000 per single undertaking within three years (as of 2026); previously it was EUR 200,000. The period is calculated on a rolling basis backwards from each new award. Aid is deemed granted as soon as the legal entitlement to it arises, generally with the award, not only with payment. The regulation applies until the end of 2030.

The single undertaking comprises all companies that are linked to one another through a majority of voting rights, rights of appointment, domination agreements or voting agreements. The subsidy value is counted: for grants, the amount; for loans and guarantees, the gross grant equivalent. This is the advantage over market terms converted into euros, which the awarding body states. If a new aid would exceed the ceiling, it falls as a whole outside the regulation, not just with the exceeding part.

General Block Exemption Regulation

The GBER (Regulation (EU) No 651/2014) exempts certain categories of aid from the notification requirement. These include aid for research, development and innovation, investment aid for SMEs, regional aid, risk finance and aid for start-ups. For each category, the GBER sets out three things. These are the eligible costs, the permissible aid intensity (the share of the funding in these costs) and notification thresholds above which an aid must nevertheless be notified individually. For an R&D project, the intensity ranges from 25% of costs for experimental development to 100% for basic research, with supplements for small and medium-sized enterprises (as of 2026). The GBER applies in its extended version until 31 December 2026; a new version is to apply from 2027.

Aid under the GBER is permissible only if it has an incentive effect. The funding must therefore induce the company to undertake a project that it would otherwise not undertake, or would undertake on a smaller scale. For this, the application must in principle be submitted before work begins; the start of work is deemed to be the first legally binding commitment, such as an order. A separate rule applies to tax measures with a statutory entitlement such as the research allowance: it is sufficient that the law was in force before work began. This is why the allowance can also be applied for retroactively.

Cumulation of aid and grounds for exclusion

If a company receives several aids for the same eligible costs, they are added together. The total may not exceed the highest aid intensity or amount permissible under the GBER for those costs. Aid for different, separately identifiable costs, by contrast, can be granted side by side. De minimis aid, too, may be cumulated with exempted aid for the same costs only up to this maximum intensity.

Under the GBER and under many funding guidelines, undertakings in difficulty are excluded. For a GmbH (German limited liability company), such a case exists, among other things, if more than half of the subscribed capital has been lost as a result of accumulated losses. A premium (Agio) is counted towards the subscribed capital. Companies against which insolvency proceedings are under way, or for which the conditions for them are met at the creditors' request, are also regarded as undertakings in difficulty. For companies that are not SMEs, certain values for debt and interest coverage come on top. SMEs that have existed for less than three years are not subject to the loss criterion.

For growth companies that are older than three years and finance start-up losses from equity raised, this criterion must be checked regularly. Every capital increase and every further annual loss can change the classification. The assessment in each individual case lies with the tax adviser. Companies that have not complied with a recovery order from the Commission also receive no aid under the GBER.

Recovery and state aid law in transactions

Aid that was granted without notification and without exemption, or that does not meet the conditions of its legal basis, is unlawful. It must be recovered from the recipient, including interest for the period in which the funds were available to it. Under the case law of the Court of Justice of the European Union, the recipient can rely on legitimate expectations only in narrow exceptional cases. Incorrect de minimis or SME declarations can therefore lead to recovery even if the error was not intentional.

In due diligence, investors and buyers request an overview of all aid received with date, legal basis and subsidy value, together with the declarations submitted. After an acquisition or a merger, the de minimis aid of the companies involved is added together for future awards; aid lawfully granted remains lawful. In the purchase agreement, funding and aid are usually covered by warranties and, where risks have been identified, by indemnities.

Worked example: checking the de minimis ceiling in a group of companies

A software GmbH holds all the shares in a subsidiary; together they form a single undertaking within the meaning of the de minimis regulation. In October 2026, a grant of EUR 120,000 is to be awarded as de minimis aid. In the three years before, the following were awarded:

• March 2024: consulting grant to the parent company of EUR 40,000
• November 2024: low-interest development loan to the parent company of EUR 500,000 with a stated gross grant equivalent of EUR 22,000
• June 2025: grant to the subsidiary of EUR 150,000

The check of the ceiling:

• Aid counted: 40,000 + 22,000 + 150,000 = EUR 212,000; the loan counts only at its subsidy value
• Remaining headroom: 300,000 minus 212,000 = EUR 88,000
• The grant of EUR 120,000 exceeds the headroom and cannot be granted as de minimis aid at all. An award of at most EUR 88,000 is possible, or funding on another basis, for example under the GBER.
• If the new grant is awarded only after March 2027, the consulting grant lies more than three years back and drops out of the period. The headroom rises to 300,000 minus 172,000 = EUR 128,000, and a grant of EUR 120,000 would then be possible.

Without the subsidiary, the parent company would have had only EUR 62,000 counted and would have assumed headroom of EUR 238,000. The calculation shows why the declaration must be given for the entire group and why a development loan appears at its subsidy value, not at the loan amount.

Distinctions: state aid law, grant law and competition law

• Grant law (Zuwendungsrecht): the national budget and administrative law under which the federal government and the states award funding, with grant award notice, ancillary provisions and proof of use. State aid law sets the European framework within which this funding is permissible.
• Competition law: is aimed at companies and prohibits anti-competitive agreements and the abuse of market power. State aid law is aimed at the member states but acts directly on the recipients through recovery.
• De minimis threshold in company acquisitions (de minimis threshold): has a similar name but has nothing to do with aid. In the purchase agreement, it determines from what amount an individual warranty claim of the buyer counts.
• Beihilfe for civil servants: the same German name but a different area of law. Through it, the federal government and the states reimburse their civil servants for part of the costs of illness, care and childbirth, for federal civil servants under the Federal Ordinance on Medical Allowances (Bundesbeihilfeverordnung), in the states under their own rules.

Common mistakes

• Period calculated by calendar years. The three-year period of the de minimis regulation is calculated backwards from each new award, not by calendar or financial years.
• Group companies forgotten. The declaration concerns the single undertaking; aid to subsidiaries or sister companies counts.
• Loan amount used instead of subsidy value. This overstates the aid received and reduces the headroom for further funding on paper.
• Applied for after the project started. For aid under the GBER, the incentive effect is then missing; the error cannot be remedied afterwards.
• Cost items not allocated. Without a clear allocation of each item to one funding source, the permissible aid intensity is easily exceeded.
• Loss criterion not checked. Older growth companies with high loss carry-forwards can count as undertakings in difficulty even though their liquidity is secure.

Frequently asked questions

What is the de minimis ceiling?

EUR 300,000 per single undertaking within three years, under Regulation (EU) 2023/2831, which applies from 1 January 2024 to the end of 2030. Agriculture and fisheries have their own regulations.

What is state aid approval?

The decision of the European Commission that a notified aid or funding scheme is compatible with the internal market. Until then, the aid may not be granted (Article 108(3) TFEU). Many programmes need no separate approval because they fall under the GBER or the de minimis regulation; the grant award notice names the basis.

What happens if a ceiling is exceeded?

Where no exemption applies, the aid is unlawful and must be recovered, generally with interest. A de minimis aid that would exceed the ceiling loses the exemption entirely.

Is the research allowance state aid?

Yes. The German Research Allowance Act (Forschungszulagengesetz) expressly relies on the GBER (Sections 9 and 16 FZulG). The exclusion of undertakings in difficulty and the prohibition of funding the same expenses twice therefore apply. For the own work of sole proprietors, the de minimis ceiling also applies.

The Roemer Capital view

For clients that use funding, an overview of all awarded aid with date, legal basis and subsidy value is among the documents that should be available before a process starts. It shows investors and buyers which recovery risks exist and how much headroom remains for future funding.

We do not carry out the state aid assessment itself. Whether a company is in difficulty and would therefore be excluded from many programmes is assessed by the tax adviser and, where necessary, the law firm. In our timelines, this check comes before the financial planning. In the financial model, we include further funding only to the extent that the state aid ceilings still allow according to the overview.