The Business Compensation Scheme is regulated by the Act relating to the temporary subsidy scheme for enterprises with a large drop in revenue (in Norwegian only) and Regulation to the Act relating to the temporary subsidy scheme for enterprises with a large drop in revenue (in Norwegian only)
Below follows a summary of clarifications and more detailed descriptions from the legal department in the Norwegian Tax Administration. The clarifications are dated, grouped and shown by chapter and sections in the Regulation.
The summary is updated continuously.
Chapter 1. Scope
Clarification 11 May 2020 – convergence criteria for registration:
The general rule is that the enterprise must have been registered in the Register of Business Enterprises or the Register of Legal Entities on 1 March 2020, at the latest. The enterprise must also have had revenue in January and February 2020 in order to be included in the scheme, see section 2-3 subsection 3 of the Regulation. There are no requirements relating to when the enterprise must have been established or when it must have started doing business in order to be included in the scheme.
Clarification 8 June 2020 – effective date for mergers and demergers
The enterprise’s status as a legal entity at the application date is used as the basis when applying for a subsidy pursuant to the Regulations concerning the supplementation and implementation of the Act relating to the temporary subsidy scheme for enterprises with a large drop in revenue. For enterprises that merge or demerge, it means that as long as the application date is before the merger or demerger becomes registered in the the Register of Business Enterprises, the enterprise must apply based on its registered status at the application date and use their accounts as the basis. This applies even if the date on which the merger/demerger enters into force with respect to the accounts is set to 1 January 2020.
See a clarification under section 1-4.
Clarification relating to doing business in several industries:
If an enterprise does business in several industries, and some of these industries are not included in the scheme under this provision, then only the part of the enterprise that does business in the industry included in the scheme must meet the requirement relating to the drop in revenue.
Please note that enterprises with business activities among those listed in section 1-3 of the Regulation will not be included in the scheme even though they might also have other business activities. According to the Regulation, these enterprises are not eligible to apply for subsidies under the scheme.
Chapter 2. Conditions for receiving subsidies
Clarification 28 May 2020 – sole proprietorships (ENK) with employees that are not the owner’s main source of income:
It is our consideration that sole proprietorships (ENK) with employees, where the income from the ENK is not the main source of income for the owner, are covered by the scheme provided that the other conditions relating to employees are met. This means that the enterprise must be registered in the Aa Register at the time when the subsidy is granted, it must have had at least one employee registered in the Aa Register since 1 March 2020, and at least one employee who was paid a salary in either February or March 2020.
Clarification 11 May 2020 – percentage of full-time equivalent:
It is not a requirement that an employee have a certain percentage of full-time equivalent, nor that their work contribution be evenly distributed throughout the year according to this provision. However, there must be a real employment relationship.
For private limited companies, it is a requirement that at least one employee be registered in the Aa Register as of 1 March 2020, and be paid a salary in February or March 2020.
Clarification 11 May 2020 – Groups of companies:
If enterprises that are a part of a group apply for a subsidy for the enterprises according to section 3-4 subsection 1 of the Regulation, the individual enterprise that applies for the subsidy must fulfil the conditions in section 2-1 relating to employees.
If the group applies for a subsidy according to section 3-4 subsection 2 “as though the group was a single enterprise”, then the application must be based on consolidated accounts, and in this case, it is enough that one enterprise in the group meets the requirements relating to employees in section 2-1 of the Regulation.
It is not a requirement that the enterprise’s employees live in Norway, as long as the conditions are otherwise fulfiled.
Clarification 11 May 2020 – Shared liability partnerships (ANS):
Income from ANS must be remuneration from work contribution so that it constitutes personal income. See section 12-2 letter f of the Taxation Act and section 1-2 of the Regulation. The term partners here refers to partners in businesses assessed as partnerships.
Clarification 27 May 2020 – income from franchises, royalties, etc. and the term “revenue”:
Income from licenses, royalties and franchise fees will be considered revenue pursuant to section 2-2 (1) of the Regulations.
Clarification 11 May 2020 – The term revenue in relation to building and construction projects
The term revenue in section 2-2 of the Regulation refers to income from sales and goods that are delivered and services that are rendered by the enterprise in the month in question. In the building and construction industry it is generally a requirement that sales documents be issued in accordance with “progress”, see section 8-1-2 subsection a of the Bookkeeping Regulation. For this industry “progress” means “delivery”. It is the value of goods that are delivered and services that are rendered inclusive of “profits” that must be declared, that is, the periodised share of the agreed remuneration. This applies irrespective of how the sales are entered into the accounts.
In the case of a contract worker or similar, the agreed payment plan can form the basis for the invoicing unless it diverges considerably from the real progress in the period, see section 5-2-4 of the Bookkeeping Regulation. This can involve a small discrepancy compared to the real progress. If, for example, an invoice is issued in April for building and construction work carried out in March according to an agreed invoice plan, the invoiced revenue in April can be counted as revenue for March if this does not diverge considerably from the real progress.
For enterprises with projects that started either totally or partly on their “own initiative”, the revenue will only exist once a contract for sale has been entered into (for example residential property). In this case, the revenue must be considered as existing concurrently with entering into the contract and the building and construction progress. If a contract is entered into upon completion of a residential property, the revenue will be considered to exist only at this point in time.
Questions about subsidies from the public sector
Section 2-2 subsection 1 of the Regulation states that revenue is “income from the sale of goods that are delivered and services that are rendered”. Subsection 2 states that this includes “public subsidies and income protection given in relation to the coronavirus outbreak” if the subsidy is given in order to replace income according to subsection 1.
The Regulation must be interpreted as applying to all types of subsidies from the public sector, not just subsidies given in relation to the coronavirus outbreak. The decisive factor is whether the subsidy can be considered as income from the sale of goods or services (revenue according to subsection 1) or a replacement for such income (revenue according to subsection 2).
Which subsidy can be considered as income, must be determined using the abovementioned criteria.
Benefits received from NAV that replace this kind of income, for example, sickness benefits, parental benefits and care benefits must be included in the revenue. The same applies to subsidies from the Business Compensation Scheme for self-employed persons and freelancers, that are provided by NAV.
Income from capital
Income or yield from capital, real property or other financial assets must not be included. However, rental income from real property must still be included.
Value Added Tax (VAT) and excise duties
Value added tax and excise duties relating to sales income will not be considered income.
Clarification 11 May 2020 – benefits to sole proprietorships (ENK) and shared liability partnerships (ANS)
For sole proprietorships and partners in shared liability partnerships, sickness benefits, parental benefits, carer benefits and care benefits will be considered as revenue according to section 2-2 of the Regulation.
Clarification 11 May 2020 – Restructuring:
Restructuring includes mergers and demergers. Establishing new departments will not be considered restructuring, but rather an extension of the existing business. For enterprises that have changed their line of business, the drop in revenue must be calculated using the general rule.
In general, the conditions in the provision must be met at the time of applying, at the very latest. For letters e, f and g, the conditions must also continue to be met right up until the time of payment.
Clarification 11 May 2020 – arrears, see section 2-6 subsection 1 letter b of the Regulation.
Taxes, duties and advance tax deductions that were due before 29 February 2020 must be paid in their entirety at the very latest by the time of application. The same applies in cases where a payment agreement has been entered into for amounts that were due before the 29 February 2020.
Clarification 11 May – Submitting the tax return, see section 2-6 subsection 1 letter c of the Regulation:
The tax return will be considered “submitted”, for the purposes of the Regulation, if the enterprise has submitted the tax return, even in cases where the auditor has submitted a negative audit report and has not signed the income statement.
Clarification 11 May 2020 – Bank account, see section 2-6 letter d of the Regulation:
The term “subsidy recipient” refers to the enterprise that has submitted the application for a subsidy. Many sole proprietorships have bank accounts registered to the owner’s national identification number. In this case, a separate bank account must be opened that can be registered to the enterprise’s organisation number in the KAR-register. This must be done before the application can be submitted.
Chapter 3. The subsidy amount
In order to be considered unavoidable fixed costs, the costs must be resulting from an agreement made before 1 March 2020. The costs may also result from an agreement made before 1 March, which is then renewed after 1 March without expanding the scope of the agreement, and without the agreed prices being increased beyond normal price adjustment. However, costs that are incurred in relation to the preparation of accounts and auditing do not need to result from an agreement made before 1 March 2020.
Costs resulting from agreements with a limitation on the scope of the supply of goods and services, are only considered unavoidable fixed costs up to the level of supply of goods and services that were delivered to the enterprise as of 1 March 2020.
The costs must be reduced with the relevant discounts, price reductions, etc. that are provided for the month in which the subsidy applies.
Costs that must be entered into the balance sheet according to the enterprise’s reporting standard, for example indirect fixed costs that are entered into the balance sheet as production costs or building loan interest, cannot be considered unavoidable fixed costs.
Value added tax that is deductible for the enterprise in the VAT settlement will not be considered unavoidable fixed costs.
Unavoidable fixed costs for renting and leasing fixed assets or property are reduced by the income from subleasing the fixed asset or property.
Property tax must be entered under item 7700 in the income statement, and will not be considered an unavoidable fixed cost.
Section § 3-2 subsection 2 states that costs, insofar as they can be classified under the items in the income statement that are listed in the provision, will be considered as unavoidable fixed costs. Where the cost is actually entered is not relevant. The costs that are included, as well as their amounts, must be able to be documented. For example, a contract showing the basis for apportionment, how the fee is calculated and what it covers. The contract must have been entered into before 1 March, see section 3-2 subsection 4 of the Regulation.
Expenses entered under other items in the income statement may also be covered:
The decisive factors are whether the costs are of the type that can be classified under the items listed in the income statement, and that this can be documented. The enterprise must therefore be able to document the costs that are to be included and the amount for each type of cost. The documentation can for example be a contract that shows the basis for apportionment, how the cost is calculated and what it covers. The contract must have been entered into before 1 March 2020.
Enterprises that are affiliated with a collective entity where the administrative company handles the common costs and invoices each individual enterprise a precisely defined portion can be considered “unavoidable fixed costs” if they can be documented, see the section above.
For rental agreements where a part of the rent is connected to, for example, common expenses (janitor services, insurance, marketing costs, etc.), the degree to which the common costs are costs that are included in the items listed in section 3-2 subsection 2 must be assessed, and whether these costs are considered “unavoidable fixed costs”. The part of the rent costs that include types of costs not covered by the Regulation, such as costs relating to marketing, security, cleaning, etc., can not be included in the costs basis.
Clarification 11 May 2020 – Renting outdoor areas:
Renting premises also includes renting outdoor areas that are used for the enterprise’s business activities, for example carparks, storage space, parking spaces.
Clarification 11 May 2020 – Costs relating to private waterworks
Costs relating to fixed, continuous agreements with private enterprises for waste collection are considered unavoidable fixed costs in the same way as equivalent public services. The same applies to costs relating to private waterworks that are a part of the public water supply. Two conditions that apply are that the service is a service that the public sector must provide, and that the private service is the same as the equivalent public service.
Clarification 11 May 2020 – Costs relating to licences:
Item 6400 Rental of machinery, fixtures and fittings, means of transport, etc., can be included as fixed licence costs for, for example, accounting system, cashier system, appointment system and staff register system. These types of costs are eligible to be compensated.
However, a delimitation must be carried out for costs that ordinarily come under item 7600 Licences, patent costs and royalties, and that are not covered by the scheme. This is normally “costs relating to licences, patents and royalties in connection with own production/own sales.”
Clarification 11 May 2020 – expenses relating to taxi centrals:
The Norwegian Directorate of Taxes states that if a fee to a taxi central includes unavoidable fixed costs, then portions of the fee that can be documented and categorised under items in the income statement listed in section 3-2 subsection 2 of the Regulation, can be considered unavoidable fixed costs. The costs that are included, as well as their amounts, must be able to be documented. For example, a contract showing the basis for apportionment, how the fee is calculated and what it covers. The agreement must have been entered into before 1 March, see section 3-2 subsection 4 of the Regulation.
Clarification 11 May 2020 – Franchises:
Franchise royalties are normally entered under post 7600, but if the portion og the royalty can be categorised under the listed items in the income statement, such as (fixed) rent, then the portion of the costs that are able to be documented can be included as unavoidable fixed costs.
Clarification 11 May 2020 – Interest on overdue payments:
Interest on overdue payments are not considered unavoidable fixed costs, and are not covered.
Clarification 11 May 2020 – Leasing of residential property
Fixed rental costs for residential properties used for business activities with short-term leases must be categorised under item 6300 in the income statement and are considered unavoidable fixed costs for the leasor (business premises).
Chapter 4. Administration
The applicant must be able to provide a confirmation of the content in the application from an auditor or authorised accountant upon request. Generally, the enterprise may choose whether to use an authorised accountant or an auditor. If the authority granting the subsidy finds that there is a special risk of errors or misuse, the authority may request a confirmation from an auditor.
There is a separate guide outlining the content and requirements for a confirmation from an auditor or an authorised accountant. The guide also applies to confirmations that must be attached to the annual accounts or the submitted tax return for 2020.