Announcement: 06/05-2020
New announcement on Fixed Cost Compensation - for four months.
The new announcement on Compensation for Fixed Costs has been published. We have summarized the most significant changes to the previously known scheme.
As you know, a united Parliament has decided to introduce, among others, a compensation scheme for companies' fixed costs if the company experiences a significant decline in revenue as a result of COVID-19.
The original rules were laid down in announcement 350.2020, which was subsequently amended by announcement 398.2020. This change introduced a compensation limitation rule if the company had a deficit in the last fiscal year. The introduction of this "deficit rule" was due to compliance with EU state aid rules.
Announcement 350.2020 is now ceased and replaced by announcement 574 of May 5, 2020. The new announcement will result in the political agreement on the extension and adjustment of, among other things, the Fixed Cost Compensation package concluded on April 18, 2020
The new order brings changes to the previous rules in several areas. Below we review the most important changes:
The compensation period
The compensation period - i.e. the period during which the company can receive compensation for its fixed costs - is changed so that the company must apply for compensation for one of the following periods:
- Three months calculated from 9th March 2020 to 8th June 2020.
- Four months calculated from 9th March 2020 to 8th July 2020.
Companies, which are prohibited from being open may supplement the period referred to in points (a) or (b) by seeking compensation for the separate period during which the company is prohibited from being open.
Thus, the possible compensation period is extended by one month from 9th June to 8th July 2020 - but there is nothing to prevent only applying for compensation for the previously known period from 9th March to and with June 8th, 2020.
Compensation rate
In accordance with the previous rules, the company's turnover decline would have to be at least 40% in order to receive compensation.
It now changes to a minimum of 35% in revenue decline, such that revenue decline in the range of 35% - 60% justifies 25% in compensation of fixed costs.
The compensation rates are thus the following:
|
Revenue Decline |
Fixed rate compensation rate |
|
From 35% to 60% |
25% |
|
From 60% to 80% |
50% |
|
From 80% to 100% |
80% |
Companies that are prohibited from being open are compensated by 100% of the firm's fixed costs, during the period in which the ban applies if the company has not had revenue during this period. This applies regardless of whether the company experiences a revenue decline of at least 35% during the entire compensation period.
Announcement: 23/3-2020
Support package to help businesses in Denmark
The Danish government is prepared to use all the necessary resources to protect the Danish economy and help Danish employees, workplaces and companies during the COVID-19 health crisis. The government has presented a number of initiatives to strengthen the liquidity of Danish companies and save Danish jobs.
HELP FOR SMALL AND MEDIUM-SIZED BUSINESSES
Source: https://em.dk/nyhedsarkiv/2020/marts/regeringen-praesenterer-stoettepakke-til-dansk-erhvervsliv/
Wide safety net for the Danish businesses
The situation is extraordinarily serious. Self-employed people feel that their livelihoods are disappearing, and corporate revenues are declining at the same time as bills and salaries have to be paid to employees.
The government has proposed two temporary compensation schemes:
Compensation for corporate fixed expenses
The tripartite wage compensation agreement provided increased security for employees' jobs, and the companies received substantial support for their labour costs. The government also proposes to cover some of the fixed costs that companies no longer have earnings to cover.
Temporary compensation for corporate fixed expenses
More companies are currently experiencing a marked decline in their turnover as as a result of both the COVID-19 pandemic and the measures taken to limit the spread in Denmark. For several companies, such as restaurants, hotels and airlines, the business base has temporarily disappeared or is strongly reduced. At the same time, companies have rent and other fixed expenses, which must be paid even if the customers do not show up.
The government has on March 23rd agreed on a wage compensation model with the social partners and this will be in the form of a model for self-employment compensation, and a number of initiatives have been taken to strengthen corporate liquidity.
There is also a need for the vulnerable companies to get some compensation on their fixed costs, e.g. expenses for non-cancellable contracts. The government is proposing a model for compensation of these expenses, which will be negotiated with the parties of the Parliament. The scheme will allow vulnerable companies to receive support to continue operations in the extraordinary situation.
The compensation scheme will be based on the following principles:
Fact Sheet March 18, 2020
- Businesses across all industries should be able to receive compensation
- The compensation is targeted at companies with a large drop in turnover domestically (more than 40 per cent).
- The compensation is targeted at fixed expenses and amounts to between 25 and 80 per cent.
- Compensation covers up to three months and is paid as soon as possible
- If revenue has decreased considerably less, then the compensation must be repaid
Source: https://em.dk/media/13490/faktaark_midlertidig-kompensation-for-virksomheders-faste-udgifter.pdf
Temporary compensation scheme for self-employed persons
The outbreak of corona virus has already had major financial consequences. Many self-employed people face major challenges, and this requires further initiatives. Therefore, the government is now proposing a temporary compensation scheme for the self-employed.
The scheme means that the small self-employed, who experience more than a 30 per cent decline in turnover as a consequence of COVID-19 virus, may be compensated. The government is trying to support and protect the many Danish self-employed and small traders. State compensation is 75 per cent of the revenue loss, however, a maximum of 23,000 kr. per month corresponding to the rates in the salary compensation scheme for salaried employees agreed with the social partners in the tripartite agreement. The compensation may amount to up to DKK 34,500 per month, if the self-employed has a spouse employed.
Self-employed or small businesses can receive maximum compensation for three months from 9 March until 9 June. It is a requirement that the company does not have more than 10 full-time employees.
The very specific model is determined as soon as possible when the data possibilities are finally clarified.
Source: https://em.dk/media/13488/faktaark_midlertidig-kompensationsordning-for-selvstaendige.pdf
Example: The master of crafts
An independent craftsman expects a monthly revenue loss of 40,000 DKK from 20 March to 20 May as a result of corona virus. The average monthly turnover of the master craftsman's company was in the financial year 2019 of DKK 100,000. The loss of revenue thus corresponds to 40 per cent.
Therefore, with the government's new compensation scheme, the craftsman gets 23,000 in compensation from the state per. month up to May 20, corresponding to the maximum monthly compensation. This enables the self-employed craftsman to better maintain his support base in this extraordinary situation.
Application and disbursement
The companies must apply for compensation on the Danish Commerce Agency's corporate portal for companies www.virksomhedsguiden.dk
The Danish Business Authority is working to be able to receive the first applications as soon as possible. Information on this will be published on www.virksomhedsguiden.dk
Fact Sheet March 18, 2020
Source: https://em.dk/nyhedsarkiv/2020/marts/regeringen-praesenterer-stoettepakke-til-dansk-erhvervsliv/
More information
Companies and organisations can get more information on www.virksomhedsguiden.dk.
For more on hotlines and who to contact for crisis consultancy please see here.
