Compensation of Interest on Loans and Leasing Services for Financing of Investments
What are the benefits?
Part of the loan interest is compensated for economic operators that receive, from financial institutions, loans or leasing services for the financing of investments in the primary production of agricultural products, processing and/or production of agricultural products:
- Entities operating in rural areas;
- Agricultural co-operatives.
Who can apply?
Economic operators that have registered, according to a procedure prescribed by law, ownership of an agricultural holding in the Register of Agriculture and Rural Business of the Republic of Lithuania.
Part of the interest is compensated for if an entity operating in a rural area or an agricultural cooperative:
- Meets the criteria for a micro, small or medium undertaking;
- Is not an undertaking in difficulty;
- does not participate, and has not participated, in measure ‘Early retirement from agricultural production‘;
- has not received unlawful aid which has been recognised as unlawful by decision of the European Commission and is not compatible with internal market, or has already repaid the amount in full (including interest) according to a procedure prescribed by legal acts.
The application for the partial interest compensation is submitted together with the Guarantee Application Form:
From 21 June 2023, partial compensation of interest on loans and leasing services for the financing of investments is governed by the rules approved by Order of the Minister of Agriculture of 20 November 2014 No 3D-877 (the ‘Rules‘).
According to the Rules, a beneficiary can be compensated for interest paid under only one loan agreement or leasing agreement concluded on or after 1 July 2021.
State aid is provided to economic operators on the following terms and conditions:
- 80% of interest paid to the financial institution or leasing company is compensated;
- Interest for a period no longer than 36 months from the date of signature of the loan/leasing agreement is compensated;
- Maximum annual interest rate for the purposes of determination of the compensation: 4%;
- Limits of assistance per beneficiary per loan and limits of general investment assistance intensity apply.
How does it work?
State aid for the partial compensation of interest is provided only for eligible expenses incurred in the implementation of investment projects. Expenses incurred after the date of taking of INVEGA‘s decision to provide the individual guarantee are considered as eligible expenses.
Eligible expenses in the case of investments in primary agricultural production, processing of agricultural products when this results in an agricultural product, and trading in agricultural products include the following:
- construction, purchase or renovation of immovable assets including investments in passive electrical equipment inside the building or a structed cable system of data networks and, where necessary, additional part of the passive network in a private property beyond the boundaries of the building; land-related expenses can only be eligible for financing if they do not exceed 10% of total eligible expenditure of the investment project;
- expenses for acquisition of agricultural machinery and/or other production equipment not exceeding market value of the asset;
- general expenses – fees to architects, engineers and consultants, fees for consulting on environmental and economic sustainability including expenses for the acquisition, development or use of software, cloud solutions and similar solutions, expenses related to patent, license, copyright and trademark acquisition fees;
- restoration of agricultural potential that was lost due to natural disasters, dangerous meteorological phenomena equal to a natural disaster, animal diseases, crop pests or protected animal species to a state that existed prior to occurrence of relevant event (only for those engaged in primary agricultural production);
- investments in special-purpose preventive measures aimed at avoiding damage caused by natural disasters, dangerous meteorological phenomena equal to a natural disaster, animal diseases, crop pests or protected animal species to a state that existed prior to occurrence of relevant event (only for those engaged in primary agricultural production).
Eligible expenses in the case of investments in the processing of agricultural products when this results in a non-agricultural product include:
- Expenses for purchase of tangible assets - land, buildings, plant, machinery and equipment;
- Expenses for purchase of intangible assets – assets that do not have a physical form and are not financial assets (patent rights, licences, know-how or other intellectual property). An intangible asset must meet the following criteria: will be used within the entity only; depreciable asset; acquired in an arm‘s length transaction from a third party not related to the buyer; to be listed as the entity‘s asset for at least three years.
Purpose of investments in the acquisition of production installations and equipment:
- establishing a new entity;
- expanding an existing entity;
- diversification of production by adding new additional products;
- essential changes in the existing entity‘s production process.
State aid in the form of partial compensation of interest is provided to economic operators that purchase assets under financial lease (leasing) agreements and invest in:
- Primary production of agricultural products or processing of agricultural products when this results in another agricultural product, and/or
- processing of agricultural products when this results in a non-agricultural product – for the acquisition of production equipment and installations.
Compensation for part of interest is granted if the investment project has at least one of the following objectives:
- Improve general economic results and sustainability, in particular, by cutting production costs or by improving and reorientating production;
- Improve the natural environment, hygiene conditions or animal welfare standards;
- Establish and improve infrastructure related to agricultural development, adaptation and modernisation including access to farmland, land consolidation and improvement, energy efficiency, sustainable energy supply and water/energy savings;
- Restore production potential that was lost due to natural disasters, dangerous meteorological phenomena equal to a natural disaster, animal diseases, crop pests or protected animal species and seek to avoid damage caused by such events and factors; where the damage can be related to climate change, if necessary beneficiaries can include, in the restoration measures, also measures to adapt to climate change;
- Contribute to mitigation of the climate change effects and adaptation to climate change, in particular, by reducing greenhouse gas emissions and increasing carbon dioxide sequestration and thus promoting sustainable energy and energy efficiency;
- Contribute to sustainable circular bioeconomy and promote sustainable development and efficient management of natural resources such as water, soil and air, in particular, by reducing dependence on chemicals;
- Contribute to the prevention of destruction of biodiversity and to extending it, improving ecosystem services and protection of habitats and landscapes.
A beneficiary will be compensated for interest under only one loan agreement or leasing agreements concluded on or after 1 July 2021.
No partial interest compensation will be paid for loans taken from financial institutions for the financing of investments and/or asset purchases under leasing agreements if the entity has received assistance under the under the Lithuanian Rural Development Programme for 2014–2020 and/or the National Strategic Plan for Agricultural and Rural Development for 2023–2027.
The amount of the compensation for interest (assistance intensity) is calculated for the entire interest compensation period (no longer than 36 months). The compensation actually disbursed cannot exceed the assistance amount (in euros) determined at adoption of the decision for granting assistance.
The beneficiary will receive partial compensation on the interest amount paid. In the case of extension of the term of the loan / leasing agreement, the interest compensation term will not be extended. Interest and penalties charged by the credit institution or leasing company for overdue loan/leasing payments will not be compensated for.