Evaluating Norway’s financial support programme for impacted businesses
International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX
Copyright © Legal Benchmarking Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

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 across site & bottom lb ros

More from across our site

There is a 'critical need' for a unified platform to address challenges in TP, the organisation’s president told ITR
Tax specialist Kate Barton helped to transform EY’s global tax practice, Dentons has claimed
Alex Gerko had challenged HMRC’s positions on deferred trading profits that he and other traders made while working for hedge fund GSA
The Tax Practitioners Board had required PwC to overhaul its internal processes following the tax leaks scandal
With corporate tax rates already exceeding 15%, India will need to think creatively to extract additional revenue through new pillar two rules, local partners tell ITR
France continues to be a hot spot for tax lateral partner moves, according to ITR+’s Talent Tracker
Losses for HM Revenue and Customs and the Australian Taxation Office, cum-ex fraud and a 'mysterious funder' all feature in ITR’s list of 2024’s most significant tax cases so far
New requirements for advisers to inform clients of any relevant matters that might impact their relationship have raised concerns from a raft of professional bodies
The fallout from PwC China’s Evergrande audit has reportedly hit the firm hard; in other news, the US and Turkey look to reform their corporate tax rates
Canada risks inflaming US trade relations in a presidential election year and increasing costs for consumers, according to local experts
Gift this article