Under European Union competition law the term has a legal meaning, being any measure that demonstrates all the characteristics in Article 107 TFEU. Measures which fall within the definition of state aid are unlawful unless provided under an exemption or notified.
The first chapter of the law defines what is not allowed to be done with state aid and the second chapter defines actions that can be done within legal limits.
1. Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.
In other words, in order to avoid favouring a certain company or commercial group, an EU member state should not provide support in the means of lesser taxation or other ways to a party that does normal commercial business.
State aid however, can be given to parties involved in charity or "to promote culture and heritage conservation"