Aid for businesses in phase 2 of the Norwegian Government’s corona stimulus package

The Norwegian Government announced phase 2 of its three-phase stimulus package on Friday 27 March 2020, which includes specific financial aid to industries, businesses and households that have been severely affected by the corona pandemic. On the following Tuesday 31 March, Parliament approved the Government’s proposed efforts with some minor adjustments.

Phase 1 of the stimulus package was previously approved by Parliament and contained emergency measures to avoid unnecessary layoffs and bankruptcies, as well as securing income for temporarily and permanently laid off employees and others who lose their livelihood. Phase 3 refers to a future proposal for broader measures to maintain activity in the Norwegian economy, e.g. measures to contribute to a speedy return to employment for laid off personnel and thereby increase activity in the economy.

There is still some uncertainty regarding the final implementation of several of the aid schemes included in phase 2, including the specific terms for receiving aid. Some of the aid schemes are conditional on further processing by the authorities, e.g. the proposal for reduced payroll tax that the Government plans to put forward with its revised national budget 2020.

In the following we provide a brief summary of the aid schemes relating to businesses in the approved phase 2 stimulus package.

Measures to reduce costs for businesses

• The low VAT rate that applies to e.g. passenger transport, renting of rooms in hotels and broadcasting services has been reduced from 12 % to 6 % in the period from 1 April to 31 October 2020.
• The due date for the first installment of advance payment of tax has been postponed for self-employed persons to 1 May 2020, and the second installment to 1 July 2020, in addition to the previously enacted postponed due date for the second installment of advance payment of tax for companies until 1 September 2020.
• The Government has informed that it plans to put forward a proposal to reduce the payroll fee by 4% for a period of two months, in its revised national budget for 2020. The proposal will also include similar compensation of MNOK 250 in payroll tax zone V, which is currently exempt from payroll tax.

Compensation schemes

• The Government has proposed a new comprehensive scheme for monetary aid to businesses that have been severely affected by the infection control measures imposed by the Government. As a starting point, the scheme applies to all businesses registered in Norway, except for certain sectors such as finance, oil and businesses covered by other industry specific schemes. The basic requirement is that the business has a revenue drop of at least 20 % in March 2020 compared to March 2019, or at least 30 % in April or May 2020 compared to the same months in the previous year. The lower limit for compensation is NOK 5 000 and the maximum is MNOK 30 per month. Compensation shall be calculated on the basis of the following formula: [reduction in revenue] x [inevitable fixed costs] x [adjustment factor of 90 %] = [compensation]. For businesses that have not been ordered to close, a deductible of NOK 10 000 shall be reduced from inevitable fixed costs and the adjustment factor is reduced to 80 %. The scheme is pending approval from Parliament and the ESA.
• A total of 1 BNOK has been allocated to new compensation schemes for organizers in the fields of culture, non-profit and sports. The Arts Council of Norway will manage MNOK 300 for the culture sector, whereas the Norwegian Gaming Authority will manage MNOK 700 for the non-profit and sports sectors. The Norwegian Gaming Authority shall set up a portal for receiving applications for aid for all three sectors. Aid will only be granted to businesses that can document losses of at least NOK 25.000 for events that were scheduled in the period from 5 March to 30 April 2020.
• The Government has indicated that compensation will be granted for loss of revenue from omitted payment by parents in kindergartens, schools and after-school care. The Government will revert with further information on the specifics of such scheme in its draft resolution on 3 April 2020.

Subsidies, loans and aid through Innovation Norway and the Research Council of Norway

• Innovation Norway manages several schemes for subsidies, loans and other aid, which may be granted to Norwegian businesses upon application to Innovation Norway. The following further allocations have been granted to Innovation Norway for such schemes:
• BNOK 2.1 for subsidies to development activities in small to medium size businesses that are presumed to have market potential (Nw. innovasjonstilskudd).
• MNOK 500 for subsidies to start-ups with innovative business ideas that have market and growth potential, but reduced access to equity (Nw. etablerertilskudd).
• MNOK 300 for granting exemptions from interest and repayment, for existing and new loans (Nw. rentestøtteordningen).
• MNOK 100 for a new subsidy scheme for private innovation and start-up clusters and other ecosystems that stimulate entrepreneurship.
• BNOK 1,6 for loans to commercialize new solutions, strengthening working capital and for growth and internationalization, e.g. for projects that are difficult to finance through banks without risk-sharing (Nw. innovasjonslån).
• An additional MNOK 250 has been allocated to the Research Council of Norway for business oriented research and development, for renewal and readjustment in business. Such aid may be granted upon application to the Research Council of Norway.

Other measures

• Parliament previously approved a public guarantee scheme for small to medium size businesses, which has been approved by the ESA. The scheme is managed by The Norwegian Export Credit Guarantee Agency and is active as of 27 March 2020. The Government has now informed that it is working to expand the scheme to larger businesses during the week of 30 March to 5 April 2020, provided approval by the ESA.
• Investment capital in Investinor, an investment company that invests risk capital in promising Norwegian companies, has been increased by BNOK 1 to improve access to capital for businesses in an early stage.
• The Government has suggested a temporary income safety scheme for freelancers and self-employed persons, which would provide about 80 % of the average income over the previous three years up to a maximum of NOK 600.000. The specifics of the scheme are under development and will be discussed by Parliament in the future.
• Non-profit organizations which have been approved subsidies for projects that are canceled, delayed or reduced are allowed to keep such subsidies. The condition is that the subsidies are used within the purpose of the relevant subsidy scheme.