The cash support scheme for businesses - what does it involve and how is it used?

Most companies in Norway have, to varying degrees, experienced a drop in turnover due to the corona pandemic. The government has therefore introduced a cash support scheme for all taxable registered companies in Norway that have had/have a drop in turnover of more than 30 % due to the corona pandemic or the imposed infection control measures. The scheme means that the state covers a certain proportion of the company's fixed costs, so that the company will also be viable after the corona pandemic. To a certain extent, this will ensure that unnecessary bankruptcies and redundancies do not occur.

The cash support scheme is initially intended to apply to March, April and May 2020, but may be extended if appropriate. The first payment will be made already in April.

The minimum limit for payment per month will be NOK. 5,000, while the upper limit per month will be NOK 80 million. Any compensation the company is entitled to up to NOK 30 million will be paid in full. If the company is entitled to compensation in excess of NOK 30 million, the excess amount will be reduced by 50 %. The company can still receive a maximum of NOK 80 million.

If a group applies for support through the scheme, a joint application must be submitted for the companies in the group that need support if more than
NOK 30 million. If, on the other hand, the Group as a whole wishes to apply for support totalling less than NOK 30 million, each company in the Group may apply for support for its own part. This means that each company in the group should finalise its own application before the group can decide whether or not to submit a joint application. However, any group of companies can still apply for overall support, as if it were one company.

Companies that want to take advantage of the scheme can apply in the application portal via Altinn. The application portal was opened on 18 April for companies that have been ordered closed by the state. For all other companies, the application portal opened on 20 April.

During the application process, the company will be asked to confirm that the information provided is correct and that the company is aware of the terms and conditions for support. Furthermore, a confirmation will be requested that the company is aware that providing incorrect information may result in sanctions. In addition, the company is required to provide and document direct and indirect beneficial owners.

In order for a company to be able to apply via the application portal, it is a condition that the tax return and annual accounts for 2018 must have been submitted, in addition to any tax claims, levy claims and withholding tax due before 29 February 2020 must have been paid.

The application for each individual month cannot be submitted until after the end of the month the subsidy is to cover. However, support for April cannot be submitted before 15 May.
The deadline for submitting applications is 30 June 2020.

Which companies does the cash support scheme apply to?

In principle, the cash support scheme is available to all taxable registered companies in Norway that have had/have a drop in turnover, provided that the company has had a large enough drop in turnover.

However, there are certain restrictions on which companies can apply. The scheme does not apply to the industries listed below:

• The financial services industry
• Private day care centres under separate support scheme
• Production, transmission and distribution of electricity and water supply
• Oil and gas extraction
• Airlines under separate support scheme
• International shipping engaged in the carriage of goods
• Enterprises without employees (except sole proprietorships where the business is the owner's main source of income)
• Companies with no activity or in bankruptcy proceedings

Companies that are not expected to be viable in the future, and are thus in financial difficulties, will not be able to apply for cash grants. Companies that were already insolvent before the corona outbreak and companies that are subject to a compulsory basis or an agreement with creditors that entitles the creditors to a share of any subsidy are also prevented from applying for the cash grant scheme. If a person with a leading role in the company is subject to bankruptcy quarantine, the company will not be entitled to apply for support.

The purpose of these requirements is to prevent misuse of the scheme and to ensure that the support scheme benefits viable companies.

Fall in revenue

All taxable registered companies in Norway, with certain limitations mentioned above, that have had/have a drop in turnover of more than 30 % in April and May, and 20 % in March due to the corona pandemic, are entitled to cash support.

The drop in sales measured in per cent is assessed against sales for the same period the previous year. However, growth or decline in turnover after March 2019 to February 2020 must be taken into account when assessing the fall in turnover during the application period. If the company had no operations in March, April and May 2019, the fall in turnover must be measured against the average turnover for January and February 2020.

Any sales of financial assets, such as returns on capital and real estate, that the company has had/has shall not be included. Return on real estate refers to realised or unrealised gains and losses on the sale or change in value of the property, respectively.

A more detailed specification of the calculation of the fall in sales will be provided in a separate regulation.

Unavoidable fixed costs

Companies that experience a loss of revenue as described above will be compensated for so-called unavoidable fixed costs. Unavoidable fixed costs are costs that are incurred even if there is an extensive loss of revenue, such as rent and electricity. The government has drawn up a detailed list of which costs are considered unavoidable fixed costs in the regulation. Among other things, the listed unavoidable fixed costs are covered:

• Rental of premises, but limited to the cost of commercial premises
• Light and heat
• Water and sewerage, but limited to public fees and charges
• Waste management, but limited to public fees and charges
• Insurance and taxes on means of transport
• Deductible membership fees.
• Insurance premiums
• Audit and accounting costs
• Rental of equipment, such as machinery and fixtures
• Hire of means of transport
• Net interest expense

A more detailed explanation of what can be regarded as unavoidable fixed costs can be found in www.kompensasjonsordning.no

In order for the government to cover part of the costs, it must be possible to document the unavoidable costs with, for example, agreements entered into before 1 March 2020.

The adjustment factor and the calculation of the amount of the cash grant

An adjustment factor is used to calculate how much each company can receive in cash support from the government. The adjustment factor varies depending on whether the company is required to close by the government or not. If the company is required to close, the adjustment factor will be equal to 0.9, while in all other cases it will be 0.8.

The formula for calculating the size of the cash subsidy for businesses required to close will be:

Cash subsidy = drop in sales in per cent x unavoidable fixed costs x adjustment factor of 0.9

For businesses that are not required to close, the formula will be:

Cash support = drop in turnover in per cent x (unavoidable costs - 10,000) x adjustment factor of 0.8

Documentation and disclosure

As the application process is fully automated, the company should have all documentation available before applying. Any company that applies for cash support will still have to document the loss of turnover afterwards by means of a certificate from an auditor or authorised accountant. In addition to being automatically checked when the applications are submitted, the verification of the submitted figures will also be checked by the Norwegian Tax Administration afterwards. It is important that companies are aware that they are responsible for ensuring that the information provided is correct, and that it is a criminal offence to provide incorrect or incomplete information.

Who has been granted support and how much each company has been granted will be available to the public and will be searchable.

Please feel free to contact us if you need assistance in relation to cash support.

Trine Glorvigen Øyvind Kilstad
Associate Lawyer Lawyer
[email protected]                                                                           [email protected]