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Coronavirus: New Act to extend the compensation scheme for fixed costs

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Legal news
calendar 20 December 2020
globus Norway

Many companies are still struggling to stay afloat in the present economic climate. Due to the second wave of the coronavirus, the Norwegian government has decided to extend the compensation scheme for fixed costs, which was discontinued in August 2020, from 1 September 2020 to 28 February 2021. The scheme is intended to compensate companies for their fixed and inevitable costs that the company can document. The scheme will not compensate for employees’ salary.

Pursuant to the new Act, compensation will be calculated for two months at a time and based on the following formula: the company’s fixed costs * percentage in loss of turnover * the adjustment factor. The adjustment factor will be 0,7 for September and October, 0,85 for November and December and 0,8 for January and February.

Companies can apply for compensation on 18 January 2021 for the periods from September to December 2020. Applications for January and February 2021 can be submitted in March 2021.

What conditions must companies satisfy to be eligible for compensation?

The conditions for receiving compensation will not change with the new Act. Just as previously, companies must:

  • Be registered and taxable in Norway before 20 March 2020
  • Have employees
  • Have a loss in revenue of minimum 30 % due to the coronavirus
  • Only conduct legal activities
  • Not be in bankruptcy proceedings
  • Have paid taxes, fees and withholding tax due before 29 February 2020
  • Deliver tax return for wealth, income tax and annual accounts, as well as other reporting obligations, before the deadline
  • Have a bank account number linked to the banks' common account and address register
  • Must have provided requested documentation in connection with previous applications
  • Not have completed a demerger after 1 January 2020

Companies must be aware that the condition that it cannot be in bankruptcy proceedings entails that the company can neither have filed for bankruptcy nor be registered under liquidation in Foretaksregisteret (the Norwegian business index). It also includes that management cannot be subject to a bankruptcy quarantine and that the company’s creditors cannot have any preferential right to payments from the company’s accounts that would restrict the compensation from going to its intended purpose.

In addition, there are several businesses that are not entitled to compensation, such as airlines with a Norwegian operating license.

Once the scheme opens for applications in January 2021, companies can apply submit applications online to Brønnøysundregistrene. Before submitting an application, companies must use an approved accountant or auditor to confirm the application before it is submitted. In connection to this, companies have to document the complete ownership structure of the company.

We have previously taken a closer look at the Norwegian aid packages for companies affected by coronavirus here.

IUNO’s opinion

IUNO recommends that companies prepare for their application in advance. With the extension of the scheme, compensation will only be paid out after thorough assessment and control. In order to receive compensation quicker, companies should therefore contact an approved accountant or auditor and begin collecting the necessary documentation now.

Companies should therefore thoroughly read through the different conditions for applying for compensation scheme to avoid any claims for repayment or sanctions.

[The Norwegian Act on subsidies for companies with a large loss in revenue after August 2020 of 14 December 2020]

Pursuant to the new Act, compensation will be calculated for two months at a time and based on the following formula: the company’s fixed costs * percentage in loss of turnover * the adjustment factor. The adjustment factor will be 0,7 for September and October, 0,85 for November and December and 0,8 for January and February.

Companies can apply for compensation on 18 January 2021 for the periods from September to December 2020. Applications for January and February 2021 can be submitted in March 2021.

What conditions must companies satisfy to be eligible for compensation?

The conditions for receiving compensation will not change with the new Act. Just as previously, companies must:

  • Be registered and taxable in Norway before 20 March 2020
  • Have employees
  • Have a loss in revenue of minimum 30 % due to the coronavirus
  • Only conduct legal activities
  • Not be in bankruptcy proceedings
  • Have paid taxes, fees and withholding tax due before 29 February 2020
  • Deliver tax return for wealth, income tax and annual accounts, as well as other reporting obligations, before the deadline
  • Have a bank account number linked to the banks' common account and address register
  • Must have provided requested documentation in connection with previous applications
  • Not have completed a demerger after 1 January 2020

Companies must be aware that the condition that it cannot be in bankruptcy proceedings entails that the company can neither have filed for bankruptcy nor be registered under liquidation in Foretaksregisteret (the Norwegian business index). It also includes that management cannot be subject to a bankruptcy quarantine and that the company’s creditors cannot have any preferential right to payments from the company’s accounts that would restrict the compensation from going to its intended purpose.

In addition, there are several businesses that are not entitled to compensation, such as airlines with a Norwegian operating license.

Once the scheme opens for applications in January 2021, companies can apply submit applications online to Brønnøysundregistrene. Before submitting an application, companies must use an approved accountant or auditor to confirm the application before it is submitted. In connection to this, companies have to document the complete ownership structure of the company.

We have previously taken a closer look at the Norwegian aid packages for companies affected by coronavirus here.

IUNO’s opinion

IUNO recommends that companies prepare for their application in advance. With the extension of the scheme, compensation will only be paid out after thorough assessment and control. In order to receive compensation quicker, companies should therefore contact an approved accountant or auditor and begin collecting the necessary documentation now.

Companies should therefore thoroughly read through the different conditions for applying for compensation scheme to avoid any claims for repayment or sanctions.

[The Norwegian Act on subsidies for companies with a large loss in revenue after August 2020 of 14 December 2020]

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Anders

Etgen Reitz

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Sofie

Aurora Braut Bache

Associate

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