New regulation: Enterprises with at least 30 percent decline in turnover are eligible for compensation

COVID-19 respons: Guide to application for compensation

The application portal is available from April 18 2020. The compensation scheme is designed to help enterprises with a large drop in turnover due to the pandemic. The companies that are subject to the government order for a shutdown will be able to apply first. Here is our guide to application for compensation.

Are your enterprise eligiable for compensation? Check out Deloittes calculator to find out (Norwegian)

The regulation set forth by the Ministry of Finance for the additional details and implementation of law of 17 April 2020 No. 23 on the temporary grant scheme for enterprises with a large drop in turnover (the "Regulation") was published on Friday 17 April following the ESA’s approval of the scheme. The businesses that are subject to the government order for a shutdown will be able to seek compensation on the application portal as early as today. Other qualified businesses may apply from Monday 20 April. The businesses must submit one application per month. Compensation for April can be sought from medio May. Compensation for May can be sought from medio June.


Below is a summary of the updated application criteria based on the Regulation.



1. Limitation of scope

Businesses within the scope of the scheme are those who are registered in the Register of Business Enterprises within 1 March and sole proprietorships. The following industries are expressly excluded and are not covered by the scheme:

  • Enterprises that are liable to finance tax pursuant to Section 23-2 of the National Insurance Act
  • Enterprises that are taxable pursuant to Section 5 of the Petroleum Tax Act
  • Enterprises that have activities within industry group 35.1 Production, transmission and distribution of electricity in the Norwegian Standard Industrial Classification (SIC2007)
  • Airlines with Norwegian operating permits
  • Enterprises that have activities within industry subclass 88.911 Kindergartens in the Norwegian Standard Industrial Classification (SIC2007)

Ships in foreign trade engaged in goods transport were originally proposed excluded in the preparatory works. However, the industry is not exempt in the Regulation and is thus covered by the scheme. In the case of enterprises within oil and gas, a reference to Section 5 of the Petroleum Tax Act entails that only companies subject to special tax are exempt, which means that e.g. oil service companies are within the scope of the scheme.

As a starting point the scheme only applies to businesses subject to tax in Norway. Businesses that are exempt from tax liability are not covered. An important clarification in the Regulation is that the scheme applies to non-trading organizations (church, foundations etc.), but who carry out some economic activities. These organizations will be covered by the scheme for the part of the business that is taxable.


NORSK: Guide til søknad om kompensasjon

Ny forskrift: Virksomheter med minst 30 prosent omsetningsfall får kompensasjon fra staten

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2. Terms and conditions for the eligibility 

It is a requirement that the applicants have at least one employee in order to apply. Furthermore, the business must have been registered in the register of employers and there must have been at least one employee registered in the register of employees since 1. March 2020.

Businesses must have a decline in turnover of at least 30% in April and May (20% in March). It is stated that “turnover” refers to income from the sale of goods delivered and services rendered. Grants received from the public sector are considered turnover in that context. Furthermore, returns from capital, financial assets and real estate are not considered as turnover. The Ministry of Finance has previously stated that the return on real estate means gains related to the sale of real estate. Income from rental of property is thus covered by the concept of turnover. This is now directly regulated in the Regulation. A particular issue concerns companies engaged in residential development. We assume that these as a starting point should be eligible as their income is related to the sale of goods. However, due to the wording of the Regulation, this is somewhat uncertain as return on real estate is not covered by the concept of turnover. Another issue is the accrual of income from manufacturing contracts where goods etc. are produced over time.


As previously stated by the Ministry of Finance, details on the calculation of decline of turnover would be included in the Regulation. It is key to identify the actual turnover drop caused by the Covid-19 outbreak and the infection control measures. In order to establish what the reduction is in percent, the businesses must compare the turnover figures for March 2020 with the corresponding period last year, adjusted for development in turnover for January and February 2019 compared to January and February 2020. Businesses that were established after March 2019 or have undertaken restructurings may instead use average turnover for January and February 2020.


3. The size of the grant - unavoidable fixed costs 

The portion of the fixed unavoidable costs that can be covered depends on whether the business is defined as category 1) businesses that are required to close by a government order, or category 2) those that have not been required to close, but which have nevertheless had a decline in turnover as a result of the infection control measures. The first category has a coverage rate of up to 90% of its unavoidable fixed costs, while the latter category has up to 80% coverage of their unavoidable costs. Businesses with operations under both category 1 and 2 are considered to be category 1 business if at least 50% of the turnover in January and February 2020 was from activities subject to government order to remain closed. 

As unavoidable fixed costs are costs that may be listed under the following items in the trading statement form (tax return):

  • post 6300 Rental of premises, but limited to cost of commercial premises
  • post 6310 in the trading statement form 1, lease of a car
  • post 6340 Lighting and heating
  • post 6395 Renovation, water, sewerage, cleaning, but only to the extent the cost are public fees
  • post 6400 Rental of machinery, fixtures, transport equipment etc.
  • post 6700 External services (accounting, audit fees, consulting etc.), but limited to the cost of auditing and accounting
  • post 6995 Electronic communication, postage etc.
  • post 7040 Insurance and fees on transport equipment
  • post 7490 Labor union dues, but only to the extent that the cost is deductible
  • post 7500 Insurance

In addition, net interest expenses are included. It is stated in the Regulation that only net interest costs to banks, credit institutions and on bond loans qualify as unavoidable fixed costs. Such interest expenses shall be reduced by interest income from loans, deposits and bonds. Net interest income is set to zero. Foreign exchange gains or losses are not included in this calculation.


Interest expenses to non-financial institutions may also be included, but limited to the portion of the equivalent interest expense paid by the creditor for its own debt to banks and credit institutions.


The Regulation also provides an important clarification regarding accruals. Costs shall be accrued evenly over the entire period where such costs provides the business with a return, e.g. if the annual rent is paid upfront in a month, the cost may be distributed over 12 months in equal parts. If the tenant has obtained reduced rent in the period, this will be deducted in the month in which the reduction applies.

According to Section 3-2 (8) of the Regulation differences in accounting standards shall have no impact in respect of leasing costs. Hence, leasing costs should be comprised regardless of whether it is an operating or financial lease. The cost of operating and financial leasing shall be accrued in the same way as other rental costs.

Any part of fixed, unavoidable cost, which, according to the business' accounting standard, shall be capitalized may not be included as a cost within the scheme.


3. Limits on the size of the grant

If an enterprise meets the conditions for applying, the following restrictions will apply in respect of the amount of the grant:

1.    The grant cannot exceed the fall in turnover, measured in NOK.

2.    Grants cannot exceed the percentage of decrease in turnover multiplied by the sum of fixed, inevitable costs and 1/12 of the ordinary result before tax in last year’s accounts. This means that companies that have had losses may have their grant reduced partly or fully. If the loss is greater than the fixed unavoidable costs, the grant is reduced to 0. However, this does not apply if, in the case of auditor-confirmed information, the business can document that in January and February 2020 it had a positive ordinary profit before tax.

3.    Grants under NOK 5000 are not paid out.

4.    The upper limit for grants is NOK 80 million per business per month. Amounts up to NOK 30 million will be paid out in full. Amounts between 30 million and 80 million are reduced by 50%.


3.2 Group companies 

A parent company together with subsidiary(s) constitutes a group. The requirement is that there is more than 50% control. In addition, a company is also considered a subsidiary if this company is controlled by two other companies that are part of the same group, and together they own shares or represent more than 50% of the votes in the former company. In order to equate structures that have a legal entity with many departments and a group with multiple legal entities, the maximum amount of the grant is set at NOK 80 million for both single enterprises and groups.

If a group has calculated a grant of more than NOK 30 million for the entire group, the group shall apply for the incentive collectively. In practice, this means that each company that chooses to apply, sets up a separate overview of its costs and turnover drops. The data from such overviews shall then be summed up and reported as one entity (one application form), and filed by the group parent. In structures where there is no clear Norwegian parent, we assume that the group can designate someone who can apply on behalf of the Group.

Companies that for organizational reasons cannot apply on a standalone basis can still apply collectively for the entire group. Such an application is based on consolidated accounting for the Norwegian part of the group. We understand that, e.g. groups organized as single-purpose companies without employees will also be entitled to apply if another group company has at least one employee, and compensation is sought collectively for the entire group. For groups with large variations in turnover in the various units, companies with large turnover declines will be diluted by other group companies that do not have a corresponding fall in turnover. 

The grant may be both higher and lower if you calculate and apply for grants for the entire group and not for the individual enterprises. In our view, companies should explore both options and apply on the basis of the option that provides the highest grant.   


New regulations from FIN

The regulation set forth by the Ministry of Finance for the additional details and implementation of law of 17 April 2020 No. 23 on the temporary grant scheme for enterprises with a large drop in turnover (the "Regulation") was published on Friday 17 April following the ESA approval of the scheme.

4. The application process 

The application process is based on self-declaration. It is stated in the Regulation that authorized accountant and auditor can apply on behalf of the business. Furthermore, the applicant must, upon request, be able to provide confirmation of the content of the application from the auditor or authorized accountant. In addition, it is stated in the Regulation that the applicant must submit such confirmation in any case when setting up the financial statements for FY20. Businesses that are not obliged to prepare financial statements must present such confirmation upon filing of tax return for FY20. It is therefore important that the applicant enters into a dialogue with the auditor or accountant at an early stage to agree on the basis of the application and ensure that it is fully in accordance with the rules.  

The application shall be attached with an overview of the figures and calculations that form the basis for the application, referring to the relevant accounting material. We understand that it is not necessary that the accounting material is presented at the time of application, but such documentation must be presented upon request in the event of an inspection, and shall generally be kept for five years after the end of the financial year. As there are strict sanctions related to incorrect applications, we recommend that the documentation is prepared at the time of application to ensure the correctness of the application and documentation thereof.  


Apply for compensation

Enterprises with at least 30 percent decline in turnover are eligible for compensation.

The following contacts are ready to help you with the application

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