Enterprises with at least 30 % fall in revenue may receive compensation

‘The compensation scheme will assist those that are financially hard hit by the virus outbreak and help to ensure that viable companies make it through the crisis. This measure is needed to avert unnecessary bankruptcies and preserve jobs so people still have a job and go to when we all take back our everyday lives,’ said Minister of Finance Jan Tore Sanner (Conservative Party).

‘It is important that the scheme’s impact is both solid and wide-reaching. That is why all taxable enterprises registered in Norway that are severely affected by the coronavirus will be able to apply for compensation. But we are mindful that those ordered to close by the state will be hurt the most, so they will receive the highest compensation,’ said Minster of Trade and Industry Iselin Nybø (Liberal Party).

On Friday 27 March the Government proposed principles for the compensation scheme and announced it would supply details of a framework and limitations for the scheme this week. The Storting endorsed the proposal on Tuesday 31 March.

On Friday 3 April the Government planned to propose the following in a Proposition to the Storting:

Companies with at least a 30 % drop in revenue compared to the same month the year before will be covered by the compensation scheme. For March, the rate will be 20 %, since Norway’s strict infection control measures were first introduced on 12 March.

The scheme will initially apply to March, April and May, and payments will be made after the fact, based on actual revenues during the months in question.

A two-part model for calculating compensation is envisaged:

1. Enterprises ordered by the central government to shut down will have up to 90 % of their unavoidable fixed costs per month covered. Calculated as follows:
   Reduction in revenue x unavoidable fixed costs x adjustment factor of 90 %
2. Companies not required to close but which still have a revenue reduction of 30% or more (20 % in March) will receive compensation calculated as follows:
   Reduction in revenue x (avoidable fixed costs – own share of NOK 10 000) x adjustment factor of 80 %

The lower limit for compensation is NOK 5 000. We envisage an upper limit of NOK 30 million per month per enterprise and a higher upper limit for corporate groups, provided such an arrangement can be approved by the EFTA Surveillance Authority (ESA). The Government will propose determining the final limits later, in specific regulations.

‘The adjustment factors of 90 % and 80 % are a clear signal to building owners, landlords and others who collect the costs from the companies that they too must assume part of the bill,’ said the Minister of Finance.

The scheme will be administered by the Norwegian Tax Administration. The application process is to be largely automated using a digital service under development in collaboration with Finance Norway. The enterprises themselves report revenue for the month they are applying for as well as their revenue in the same month the year before and unavoidable fixed costs. The digital service will have a built-in control system to verify the applicant and the amount being sought against a variety of register-based data and cross checks. If all criteria are met, a determination will be made within the system and payment will be made automatically. There will also be a manual processing system for eligible applications that do not go through the automatic procedure.

‘We have underscored that the scheme is to be simple, and that compensation for March should be able to arrive in the companies’ accounts in April. We know the urgency many of them feel,’ Mr Sanner said.

In addition to automatic controls and cross-checks during the application process, there will be subsequent audits to detect cheating and fraud. Applicants must be able to document their figures at a later date, and to have an accountant’s or auditor’s confirmation that the stated amounts are correct.

‘This will not be a treasure trove for unprincipled actors. Reviews will be conducted later that can lead to sanctions for anyone who tries to cheat,’ said Ms Nybø.

The Confederation of Norwegian Enterprise, the Enterprise Federation of Norway, the Norwegian Confederation of Trade Unions, Finance Norway and SMB Norway have cooperated in the preparation of the scheme. The goal has been to quickly introduce a simple scheme with wide-ranging effect while acknowledging a risk that guaranteeing fairness to the last millimetre may be impossible. Accordingly, after the first payment is made in April, an assessment will be made of the need to adjust the scheme before the next round.

‘But thanks to close, constructive cooperation between all the parties involved, we are confident that this scheme will help many of the companies that are now struggling to make ends meet,’ Ms Nybø said. 

The proposal is to be submitted to the Storting on Friday 3 April. It must then be considered by the Storting and approved by the ESA. Technical work will proceed in the meantime on the application portal. The scheme thus has not been implemented yet, and no application form is available at present.