State Aid Compliance is a complex legal field governing the rules for granting financial or material benefits by the state to businesses. According to Georgia's competition legislation and the Association Agreement with the EU, the state is prohibited from granting aid that distorts competition or creates an advantage for a specific entity. State aid can be a direct grant, tax exemption, loan subsidy, privatization of state property at below-market prices, or debt write-off. If a company receives illegal state aid, it may have to repay the received amount (with interest), which spells financial disaster. Therefore, when benefiting from any state program, a business must assess in advance whether the benefit complies with the Law on Competition.
What does the State Aid Compliance service cover?
Our service helps companies and public agencies assess the legality of aid:
- Preliminary Audit: Analyzing a planned transaction or subsidy—is it "state aid" within the meaning of the law and does it fall under permitted exceptions.
- Notification Preparation: Preparing and submitting mandatory notifications to the National Competition Agency for aid exceeding the de minimis threshold.
- Contract Analysis: Checking privatization or investment agreements to rule out hidden subsidy elements (e.g., non-market pricing).
- Dispute Resolution: Defending the company's interests at the Competition Agency or in court if a competitor challenges the received aid.
- Consultation on Public Tenders: Identifying discriminatory or privileged conditions when participating in procurement.
Common Scenarios and Needs
State aid issues arise in the following cases: Cheap Land: The state transfers a land plot to an investor for a symbolic price (1 GEL) with an obligation to build a factory. This must be assessed as regional development aid. Tax Exemptions: Tax relief granted to a specific sector. Loan Subsidies: State programs (e.g., "Produce in Georgia") covering loan interest. Debt Forgiveness: Writing off old tax debts for a state-owned enterprise.
Georgian Legislation and Regulations
The field is regulated by the Law of Georgia on Competition (Articles 12-13). The law prohibits state aid that restricts competition but allows exceptions: promoting culture, alleviating natural disasters, regional development, etc. Control is exercised by the National Competition Agency. Also important is the Government Decree on "De Minimis State Aid", which exempts small amounts of aid (up to 400,000 GEL over 3 years) from notification obligations.
Step-by-Step Process
The process begins with identifying the aid. The lawyer checks if it meets four criteria: granted by the state, confers an economic advantage, is selective, and distorts competition. If yes, we look for a legal exception. If the aid exceeds the De Minimis threshold, a notification is prepared for the Competition Agency. The Agency issues an opinion on the admissibility of the aid. Aid granted without permission is illegal.
Why Legal.ge?
Violating state aid rules is risky for both businesses and public agencies. Legal.ge offers competition law experts familiar with European regulations and local practice. We will help you receive state support without facing the risk of repayment in the future. Secure your investment with Legal.ge.
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