COVID-19: Crisis and funding actions

• New rules have been introduced to reduce employers expense related to temporary lay off employees. The new rules reduces the employer payment period from 14 days to two days. Notice period will either be 2 or 14 days, dependent on whether the financial situation is unforeseen or not. The rules applies to lay offs carried from 20 March.

• The 2 days notification period applies where the lay off is due to “unforeseen” events. It should be assessed on a case-by-case basis whether the outbreak of covid-19 qualifies as a an unforeseen event.

• Laid off employees are entitled to full salary (limited up to 6G/NOK 599 148) from the third day and until day twenty.

• When the twenty day period has expired, employees qualifying for unemployment benefits may received this from the 21st day. Unemployment benefit is calculated based on the employees salary and will comprise of 80% of salary basis limited up to 3&/NOK 299 592 and 62.4% of the salary between 3G and 6G. Maximum amount will approximately be NOK 426 000.

• In order to qualify for unemployment benefits, the employee must have had a salary of at least 0.75G (NOK 74 893) in the last 12 months or 2.25G (NOK 224 680) in the last 36 months. The rules applies to both laid off employees and unemployed.

• The general three-day waiting period before unemployment benefits are paid out is repealed. Hence, employees will not be left without income if they are laid-off. This also applies to terminations of employment.

• The requirement for reduced working hours for entitlement to unemployment benefits has changed from a minimum of 50% to a minimum of 40%.

• The maximum length of layoffs is 26 weeks, but several players in the business community have spoken that it will be extended to 52 weeks.

• Due to a significant increase in applications for unemployment benefits, NAV allows applications for advance payments of unemployment benefits from March 30. The advance payment may be as much as 60% of the previous salary, but limited NOK 426 000.

• Generally, parents have 10 days each to take care of children in case of illness. The amount of days are increased with immediate effect with 10 days per parent. The payment is limited to a salary basis of NOK 599 158.
• The extended period applies to all parent and may upon application be transferred between parents.
• The increase of parental leave days to 20 will apply for 2020.

• Upon to expiration of the third day of the parental leave, the employer is still obliged to pay salary, but may claim a refund from NAV.

• The employer obligation is to pay salary the first 16 days of sick leave due to COVID-19 infection. To the extent illness is connected with the virus, the employer period of payment obligation is reduced to 3 days with full salary.
• No medical certification is required if the employee is ill due to virus infection for the first 16 days. In fact, employees are encouraged not to seek doctor certification if symptoms are COVID-19 related.

• In case of quarantine ordered by the authorities and it is not possible to have a home office, employees may be entitled to sickness benefits. Sickness benefits are only allowed from the date where the authorities ordered quarantines.

• There is a reduction in employers social security contribution obligation with 4 percent for two months, from originally 14.1%. This applies to the third instalment (May and June).

• Payment deadline for employers social security for the months March and April is extended to 15 August 2020.  

• There is a temporary scheme for sole traders who lose all or part of the income due to the COVID-19 pandemic. Compensation is provided with a coverage ratio of approximately 80% of the last of the last three years' taxable income, with a limit of 6G. Compensation is covered as of the 17th day after the loss of income occurred.

• Sole traders are entitled to sickness benefits and care allowance from day four. The basis for calculation is the last three year’s taxable income and the coverage rate is approximately 80%.

• This means that compulsory fines will not be imposed for the reporting that should have been done by 5 March 2020. The next reporting deadline is 5 April 2020 and for this deadline compulsory fines will still be imposed if it is submitted too late.

• Businesses are however encouraged to submit the reporting as soon as possible because correct income information will have an impact on employees who may need to apply for unemployment benefit or sick pay from NAV.

• Sanctions will not be imposed by the Norwegian Tax Administration if the VAT return is submitted too late. For the time being this applies for returns that have a due date from March up to and including 10 June 2020, i.e. for the submission of Period 1 and 2. There will also be no compulsory fines for those who submit their returns once a year, i.e. 10 March 2020 and annual statements for primary industries with a deadline of 14 April.

• The deadline is still 31 May, but compulsory fines for late submission of tax statements for sole traders and limited companies have been stopped temporarily. 

• Payment of the second instalment of advance tax payment for companies, originally due 15 April, is deferred until 1 September 2020. Interest will not be charged on the postponement.

• Loss-making companies in 2020 could, subject to certain conditions, carry back losses for that year against the two previous years’ taxable profits. Relief would be allowed for up to NOK 30 million (tax value of NOK 6.6 million) of corporate losses in 2020. The tax value of the allowed carry back will be paid out as part of the ordinary tax statement in 2021.

• Owners of loss-making companies in 2020 could postpone payments of net wealth tax in respect of the value of the companies. Advanced payments of wealth tax could also be reduced accordingly. This measure is intended to reduce the need for, among others, family-owned businesses to distribute dividends to owners to cover the wealth tax.

• Although not a COVID-19 measure, we note that businesses that expects significantly lower profits comparing 2020 to previous years may apply for reducing the amount of advance payment of tax possibly to nil. The application for a reduction in or waiving of advance tax must be submitted well in advance of the due date for the final instalment, i.e. well in advance of 15 April 2020 by using the form RF-1097 in Altinn (web portal).

• The low rate of VAT will be reduced from 12 to 6% in the period from 1 April 2020 to October 31 2020.

• The low rate of 12% includes passenger transport, overnight lodging, public broadcasting, access to cinema, museums, amusement parks and major sporting events. Low rates mean that the tax subject according to current rules must calculate 12% value added tax on sales, while deducting VAT on acquisitions for use in the business which normally is 25%.

• Due date for VAT for 1st installment 2020 (January and February) is 14. The due date for April will be deferred to 10. June 2020.

• The air passenger tax has been abolished temporarily for flights between 1 January 2020 and 31 October 2020.

• The abolishment of the tax means that the air passenger tax already paid for the period, i.e. for January and February, will be reimbursed to the airline companies or their representatives.

• Airport tax for airline companies has been temporarily suspended in the period 13 March to 30 June 2020.

• The deadline for payment of the extra payroll tax for March and April has been deferred to 15 August (originally due on 15 May).

• The deadline for the second instalment of tax on profits from financial activity has been tax deferred to 1 September (originally due on 15 April).

• The government has established a state guarantee targeted at bank loans to small and medium-sized enterprises suffering losses as a result of the extraordinary situation arising from the spread of the corona virus. The state guarantee is limited to NOK 50 billion, but may be increased.

• The programme allows companies to take up loans of up to NOK 50 million, with a term of up to three years. It applies to new loans issued between the programme start date and 1 June 2020 only.

• The State will guarantee for 90 pct. of the loan value. Write-offs will be distributed between the State and the issuing bank pro rata.

• Loans already issued will not be covered.

• The programme is intended to provide liquidity for companies suffering revenue losses as a result of the coronavirus outbreak. In addition to a law regulating the programme, further framework and regulation will be adopted.

• Small to medium businesses are target, and is defined as businesses with:
  
  A) Less than 250 employees, and;
  B) Turnover of less than EUR50m or balance sheet items of less than EUR43m, and
  C) Acute liquidity shortage, operations in Norway and usually a profitable business.

• The government has reinstated the Government Bond Fund, offering credit bond purchases of up to NOK 50 billion directed at larger companies across all industries. The fund will be managed by Folketrydfondet, a State owned asset manager responsible for the management of the Government Pension Fund Norway.

• Folketrygdfondet will make the decisions on which individual bonds to purchase within a mandate laid down by the Ministry of Finance:

• A substantial share of the fund capital will be invested in bonds issued by non-financial companies.

• There will be limits to how much of the fund capital can be invested in bonds issued by one single issuer.

• High yield bonds may make up a significant part of the investments.

• The government proposes to create a scheme that entails that the state covers a proportion of the fixed costs for companies that have a significant decrease in turnover due to the outbreak of viruses and infection control measures. 

• Work is underway with Finans Norge on a solution where companies seek support through a central digital portal. The processing of the applications must to a large extent be automated and based on available register data.

• The scheme is designed in close cooperation with both business organizations and the banking industry, through Finans Norge. The government will come back with the details in a week. The goal is for the solution to be operational as soon as possible (estimate: 2-3 weeks).

1. The scheme must be effective and work quickly, so money can be paid out as quickly as possible.
2. The scheme must be targeted to ensure that the support goes to companies with a significant drop in turnover.
3. The scheme must be temporary, and will initially apply for two months.
4. The scheme must embrace broadly as the economic consequences of the outbreak of viruses affect the Norwegian business sector broadly.
5. The scheme should be simple.
6. The scheme must comply with the state aid regulations.
7. The scheme must be compliant and controlled in order to verify that the funds have been used in accordance.

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