Community Research and Development Information Service - CORDIS

Framework programme


Official Journal Reference

L 63 of 2004-02-28

Legislative Reference

(EC) No 364/2004 of 2004-02-28
The main purpose of this Regulation is to exempt state aid for research and development (R&D) activities for small and medium-sized companies (SMEs) below certain thresholds or ceilings from the requirement of prior notification by the national authorities. Moreover, the Regulation introduces a new definition of SMEs.


State aid is normally banned in the EU as it is seen as being incompatible with the principles of the common market (Art. 87 and 88 of the EC Treaty). However, there are exceptions to this rule. In these cases, the Commission must be notified in advance in order to take a decision on the matter.

In 2001, the EU adopted a Regulation exempting certain forms of state aid to SMEs from the notification requirement. In 2004, this Regulation was amended by including state aid for R&D and a new and broader definition of SMEs into the list of exemptions. This should make it easier for national governments to grant state aid to SMEs carrying out activities in the area of research and development without having to notify the Commission.

State aid for R&D can be exempt from the notification requirement in the following cases:

- it remains below certain thresholds or ceilings;
- it is carried out in collaboration between the public and private sector;
- it falls in the categories 'fundamental research', 'industrial research' or 'pre-competitive development'.

Moreover, aid covering eligible costs, patenting costs and feasibility studies can be exempt.


Aid for research and development

The exemption from the notification requirement for state aid granted for R&D applies for research in the following areas:

_"Fundamental research": an activity designed to broaden scientific and technical knowledge not linked to industrial or commercial objectives; the gross aid intensity, which is calculated on the basis of the eligible costs for the project, shall not exceed 100% in this area.
_"Industrial research": planned research or critical investigation aimed at the acquisition of new knowledge which may be useful in developing or improving products, processes or services; the gross aid intensity shall not exceed 60 per cent in this area.
_"Pre-competitive development": shaping of the results of industrial research into a plan for new or improved products, processes or services, whether they are intended to be sold or used, including the creation of an initial prototype which could not be used commercially; the gross aid intensity shall not exceed 35 per cent in this area.

These ceilings may be increased in the following cases:

- the project takes place in an area which qualifies for EU regional aid;
- the project aims at carrying out research with potential multi-sectoral application in accordance with the objectives of the EU Research Framework Programme or Eureka;
- the project involves cross-border co-operation between at least two partners in two Member States or between a company and a public research body;
- the results of the project are widely disseminated through conferences or specialist journals.

Eligible costs can include personnel costs, costs of instruments and equipment, costs for buildings and land, cost of consultancy as well as additional overheads and operating expenses.

Aid for technical feasibility studies

Aid for technical feasibility studies in preparation to industrial research activities or pre-competitive development activities will be exempt from the notification requirement provided that the gross aid intensity, as calculated on the basis of study costs, does not exceed 75%.

Aid for patenting costs

Aid for the costs associated with obtaining and validating patents and other industrial property rights will be exempt from the notification requirement up to the same level of aid as would have qualified as R&D aid in respect of the research activities which first led to the industrial property rights concerned.

Eligible costs here include the costs preceding the grant of the right, translation costs and the costs of defending the validity of the right.

Large individual grants

The Regulation does not necessarily exempt individual aid grants, especially if they exceed 15 million euro.

New definition of small and medium-sized enterprises (SMEs)

The category of SMEs is made up of enterprises which employ fewer than 250 people and have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro.

Within the SME category, a small enterprise is defined as an enterprise which employs fewer than 50 people and whose annual turnover and/or annual balance sheet total does not exceed 10 million euro. A micro-enterprise is defined as an enterprise which employs fewer than 10 people and whose annual turnover and/or annual balance sheet total does not exceed EUR 2 million.

An enterprise is considered to be any entity engaged in an economic activity, irrespective of its legal form.


The decision of granting state aid that is exempt from the notification requirement is with the national Member States. They shall compile an annual report on the application of the Regulation. Member States shall provide the Commission with such report no later than three months after the expiry of the period to which the report relates.
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