All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Evaluating Norway’s financial support programme for impacted businesses

Sponsored by Sponsored_Firms_deloitte.png
DAC 6 is expected to be transposed into Cypriot national law by the end of January 2021

Wensing Li and Heidi Skovdahl of Deloitte explain how businesses have responded to the Norwegian government’s financial support programme to mitigate the economic disruption of COVID-19.

As a response to the economic downfall and struggling businesses caused by the COVID-19 pandemic, the Norwegian government implemented a financial support programme for businesses with a significant revenue drop. The programme was originally applicable from March until May but was subsequently prolonged to August this year.

Overview of the Norwegian financial support programme

Under the financial support programme, enterprises with a turnover decline due to the COVID-19 pandemic may apply for a cash grant to cover a portion of unavoidable fixed costs. A turnover decline must exceed at least 30% per month (20% in March) compared to a normal turnover for the same month in a previous year, calculated on the basis of a specific set of rules. For businesses closed down following a government order, up to 90% of unavoidable costs are covered; for other businesses with turnover decline due to infection control measures, this is reduced to 80%. The grant is in any case subject to an upper limit of NOK 80 million ($7.75 million) a month per business. The same limit applies to groups.

The deadline for applying for June, July and August is October 31 this year. Businesses may still make amendments to already filed applications for March through May.

Since introduction of the financial support programme, many businesses have received grants. However, our experience suggests that there are several topics that applicants should address before applying for financial support under the arrangement. 

General experiences from practice

First, the law and regulation governing the financial support programme has strict eligibility criteria. To qualify for the support, the applicant must prove that they have had unavoidable fixed costs. Such costs are defined as concrete accounting items with a fairly narrow scope, resulting in the exclusion of several costs normally considered as fixed from ‘unavoidable’ costs. The scope has, to some extent, gradually been clarified so that e.g. license costs and rent of outside area now should qualify under the arrangement.

Furthermore, the support was mainly computed on the basis of the turnover decline in one of the application months compared to the turnover decline in the same month in the previous year, excluding seasonal businesses. A separate programme was eventually introduced for seasonal businesses making them eligible for financial support, but under a different arrangement. 

From a business’ perspective, there should also be no reason to differentiate a governmental order to shut down (entitled to 90% of unavoidable costs) vs. a municipal decision (entitled to 80% of unavoidable costs). As an example, the ferry terminals were early on shut down by municipal orders, making it impossible to run a ferry-business. Regardless, the ferry businesses are not entitled to receive 90% of unavoidable costs as the case was for other businesses shut down by a governmental order, e.g. hairdressers, dentists etc., making it important to address whether the business was covered by a government order.

Moreover, the support was limited to NOK 80 million per month per entity for March, April and May, reduced to NOK 70 million in June and July, and is further limited to NOK 50 million in August. Support exceeding NOK 30 million is in addition reduced with 50%. The limits apply regardless of whether the applicant is a single entity or a group. Hence, the structure and organisation of an applicant makes a material impact on the eligible support, resulting in a distortion of competition in favour of those entities that are not organised in a group as such.

As a measure to prevent misuse of the programme, an application must also be confirmed by an auditor or an authorised accountant. In practice, such confirmation involves, for some areas, an assessment even more extensive than a regular audit and especially for small businesses, such requirement appears disproportionate.

Lastly, received support under the financial support programme will be treated as taxable income. As a temporary response to COVID-19, the Norwegian government allows loss-making businesses to re-allocate accrued losses to previous income years with taxable surplus through a carry back scheme, limited to NOK 30 million (tax value of NOK 6.6 million for each entity). Received financial support will reduce the company’s taxable losses, and affect the business’ position to benefit from the loss carry back.

Final remarks

As a result of the specific eligibility criteria, the scheme appears to be in favour of larger businesses with employees that are organised as single entity or those businesses that are part of smaller groups with few legal entities. Businesses with no employees will on the other hand not qualify.

The compliance requirements under the arrangement can at the same time be burdensome. Businesses now considering applying for financial support for June through August should therefore make a thorough assessment of the applicability of the arrangement and the potential upside, before initiating the full application process.



Wensing LiT:+47 458 88 150E: wensli@deloitte.no

Heidi Kolstad SkovdahlT: +47 400 61 769E: heskovdahl@deloitte.no

More from across our site

But experts cast doubt on HMRC's data and believe COVID-19 would have increased the revenue shortfall.
EY’s plan to separate its auditing and consulting businesses might lessen scrutiny from global regulators, but the brand identity could suffer, say sources.
Multinationals are asking world leaders to put a scale on carbon pricing to tackle climate change at the 48th G7 summit in Germany, from June 26 to 28.
The state secretary told the French press that the country continues to oppose pillar two’s global minimum tax rate following an Ecofin meeting last week.
This week the Biden administration has run into opposition over a proposal for a federal gas tax holiday, while the European Parliament has approved a plan for an EU carbon border mechanism.
12th annual awards announce winners
Businesses need to improve on data management to ensure tax departments become much more integrated, according to Microsoft’s chief digital officer at a KPMG event.
Businesses must ensure any alternative benchmark rate is included in their TP studies and approved by tax authorities, as Libor for the US ends in exactly a year.
Tax directors warn that a lack of adequate planning for VAT rule changes could leave businesses exposed to regulatory errors and costly fines.
Tax professionals have urged suppliers of goods from Great Britain to Northern Ireland to pause any plans to restructure their supply chains following the NI Protocol Bill.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree