The Norwegian financial aid scheme – compensation for unavoidable, fixed costs

On 2 April the Norwegian Government presented its latest proposal for an aid scheme to compensate companies who have suffered a significant loss of turnover due to the coronavirus pandemic. The proposal was debated in Parliament for the first time on 7 April, and approved with only minor amendments from the Government's proposal.

Parliament is expected to finally pass the Act on 14 April, with supplementary regulations to be presented by the Ministry of Finance before 17 April 2020, when the aid scheme is intended to go live.

The main features of the aid scheme can be summarized as follows:

1. The aid scheme will seek to compensate companies with a minimum loss of turnover of 30%. For the month of March, a fall of turnover of 20% is sufficient, as the measures to prevent the pandemic were introduced on 12 March 2020.

The loss of turnover will be measured as a percentage based on turnover in the relevant months compared to turnover in a comparable period. Further information on the calculation of loss of turnover is excepted in the regulations, and will also appear in the online application portal.

Turnover primarily covers revenue from the sale of goods and services. Income or returns from capital, real estate or other financial assets are not considered as turnover in this regard. However, other government grants received and revenue assurance provided in connection with the pandemic shall be included in the monthly turnover. This will be further specified in the regulations.

Please note that the aid scheme is not intended to apply to companies that were in financial distress prior to the outbreak of the virus.

2. It is envisaged that the online portal will go live and be ready for applications for support as of Friday 17 April.

3. The scheme will initially apply for the months of March, April and May 2020.

4. The costs included in the definition of "unavoidable fixed costs" will be specified in more detail in the regulations. Presently, the following has been suggested:

Rental of premises, lighting and heating, water and sewerage, insurance, rental of equipment and means of transport and net interest costs. Regarding renting rental of premises and debt rates, the ministry is considering setting a maximum limit.

5. The following costs are suggested excluded from the compensation scheme:

Costs for fixed-term assignments, deliveries, etc. The current proposal explicitly mentions short-term rental of equipment in connection with ongoing assignments.

6. Specifically on labour costs:

Companies that have been ordered to close, but are not able to lay-off staff (e.g. for animal welfare reasons) may consider wages and the employer's contributions/payroll tax as unavoidable fixed costs.

It will also be considered whether unavoidable labour costs incurred by companies who need a certain necessary basic staffing should be included.

7. Payment will be made in arrears based on actual turnover in the respective months.

8. For companies that have been ordered to close the state will cover up to 90% of the qualifying costs.The compensation will be calculated as follows:

Decline in turnover (in %) * unavoidable fixed costs * adjustment factor of 90%.

9. Companies that are not ordered to close, but still experience a 30% loss of turnover (20% in March) can receive up to 80% of the qualifying costs. The compensation will be calculated as follows (please note the NOK 10,000 deductible):

Decline in turnover (in %) * (unavoidable fixed costs - NOK 10,000) * adjustment factor of 80%

10. The lower limit for compensation is NOK 5 000. The Government envisages an upper limit of NOK 30 million per month per company and a higher upper limit for corporate groups.

11. The application process is to be largely automated using an online service under development where the company shall report the turnover for the month it is applying for, as well as its turnover in the same month the year before and unavoidable fixed costs. Applicants must be able to document their figures at a later date, and have an accountant’s or auditor’s confirmation that the stated amounts are correct.

The scheme is to be administered by the Norwegian Tax Administration.

12. The scheme will apply to all taxable registered enterprises in Norway that have been registered in the Register of Business Enterprises before 1 March 2020. Branches of foreign companies must have operations in Norway and be taxable here to be included, whilst for companies based on partnerships the partners must be taxable to Norway in order for the income from the company to be covered by the scheme.

The following businesses are excluded:

• The financial industry
• Production, transmission and distribution of electricity and water supply
• Oil and gas extraction
• Companies without employees (excluding sole proprietorships for which the enterprise is the proprietor’s main source of income and ANS where at least one of the participants has the income from the company as its main source of income)
• Companies without activity or undergoing bankruptcy proceedings

13. Although debated, companies granted support will not by law or regulations be prohibited from paying  dividends to their shareholder(s). However, the authorities stress that this is a national "dugnad" (where everyone must do their part) and call for moderation. It is expected that the compensation will not contribute to bonuses, salary growth for senior executives or dividends beyond what is used for ordinary wages and taxes.

14. There will be no prohibition on dismissing employees whilst receiving support, however, companies using the scheme are expected to secure the employment level and avoid unnecessary redundancies, as is also facilitated by the changes in the employment legislation in particular for temporary lay-offs.

A PDF of the summary is available for download below.

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