As most managers, directors and company owners already know, the Danish government has implemented several initiatives in response to the coronavirus outbreak in order to support Danish companies. Below, Lundgrens has prepared a significant portion of the list of the supportive initiatives by the Danish government to provide management and business owners with a quick overview of their opportunities.
This list comprises the supporting initiatives that are already in place and will be continuously updated as further measures are announced:
1. Salary compensation
2. Postponement of payment deadlines for VAT and taxes
3. Return of paid VAT as interest-free loans
4. Compensation for organisers of major events
5. Sickness benefit/salary for employees and self-employed people
6. Special support for self-employed people and freelance workers
7. Compensation for fixed expenses
8. Government-guaranteed loans
9. Cash flow guarantee
10. Match funding scheme in Vækstfonden
11. State guarantee scheme and the export and investment package
12. National crowdfunding platform and boosting of the Innobooster programme of Innovation Fund Denmark
13. Postponement of deadline for filing annual reports
1. Salary compensation
Together with the Danish social partners (management and labour), the Danish government has concluded a tripartite agreement enabling a temporary scheme for salary compensation to companies. This agreement includes employees the company expects to send home instead of dismissing them as a result of the coronavirus situation.
To be covered by this agreement, the company must be exceptionally impacted by the corona crisis. This is the case if the company is forced to cut its staff by at least 30% or more than 50 employees as a result of the coronavirus situation.
Companies can apply the salary compensation scheme on condition that they do not lay off their staff without salary.
The compensation scheme will apply from 9 March 2020 until 8 July 2020, as an agreement was reached for an extension of the scheme, which previously ran until 8 June 2020. Companies that have already applied for salary compensation for the period from 9 March 2020 to 8 June 2020 will have to reapply for an extension for the period from 9 June 2020 to 8 July 2020.
2. Postponement of payment deadlines for VAT and taxes
The Danish government has also launched a temporary postponement of the payment deadlines for VAT, AM contribution (labour market contribution) and A-tax (withholding tax).
Lundgrens has described the opportunities and the individual deadlines in detail in this English article: https://lundgrens.dk/en/covid-19-postponement-tax-payment-0.
Moreover, it is worth pointing out that companies can reduce their on-account payments if they expect their revenues for 2020 to deviate significantly from the amount on which the ordinary tax-on-account is based.
In addition, on 18 April 2020, a proposal was made for the removal of the cap on the tax account deposit for companies’ payment of VAT, AM contributions and tax (previously DKK 10 million) in the period until and including 1 April 2021, and that payments from the tax credit scheme relating to the 2019 accounting period are advanced from November 2020 to June 2020.
3. Return of paid VAT as interest-free loans
On 18 April 2020, the Danish government and the Danish Parliament agreed on a scheme whereby small and medium-sized enterprises that have paid VAT for the second half and fourth quarter of 2019 with a time of payment of 2 March 2020 or later may apply for return of the amounts as interest-free loans.
The scheme also includes the payroll tax paid for the first quarter of 2020 and ¼ of the payroll tax for profit earned in the 2019 accounting period by certain companies (e.g. physiotherapists, dentists, occupational therapists and road carriers), so that such companies may apply for return of the amounts as interest-free loans. It should be mentioned that these companies also have the opportunity to postpone payment of payroll tax for the second and third quarter to 1 September 2020 and 16 November 2020, respectively.
The loans must be repaid by 1 April 2021. The scheme is expected to enter into force on 4 May 2020 and it is expected that applications for return of the said amounts may be filed from 4 May until and including 15 June 2020.
4. Compensation for organizers of major events
Organisers of major events may apply for compensation for events which were to have taken place during the period from 6 March 2020 to 31 August 2020 if the event has been cancelled due to the coronavirus. The compensation is given on the basis of the event’s deficit.
The compensation scheme has been extended partly to cover events with a minimum of 350 participants and partly to include more types of events since the government first proposed this scheme on 10 March 2020.
5. Sickness benefit/salary for employees and self-employed people
On 10 March 2020, the Danish government introduced an urgent bill on an expanded right to sickness benefits for self-employed people and sickness benefit reimbursement for employers due to the coronavirus outbreak. The bill was passed on 17 March 2020.
This statute means that employers are entitled to receive benefit reimbursement as early as the first day of absence if the employee is incapacitated due to the coronavirus and meets the general conditions in the Danish Sickness Benefits Act.
For employees who meet the general conditions of the Danish Sickness Benefits Act, the employer – even if the employees are not unable to work due to coronavirus restrictions – is entitled to claim a reimbursement from the municipality for salaries paid during the period when the employees are unable to do their work due to a recommendation from the health authorities for certain groups to stay at home due to specific circumstances related to the coronavirus.
6. Special support for self-employed people and freelance workers
An initiative for self-employed people is currently in effect by law. On 18 March 2020, the Danish government agreed on improving the scheme so that self-employed persons with up to 25 full-time employees may potentially be granted compensation for up to 100% of lost earnings, with a maximum of DKK 23,000 per month.
This scheme means that small businesses and self-employed people who experience more than 30 percent decline in their earnings as a result of the coronavirus may receive compensation.This compensation may amount to a maximum of DKK 46,000 per month if the self-employed person has an employed spouse. An extension of the compensation scheme by one month up to and including 8 July 2020 has been proposed.
The parliamentary agreement of 18 April 2020 also contains a proposal to establish a compensation scheme for freelance workers with mixed A and B income who expect to experience A and B-income loss of at least 30 percent. The scheme allows the target group to receive compensation for up to 90% of the expected A and B income loss during the period compared to the corresponding period in the previous year (maximum DKK 20,000 per month). This scheme will apply from 9 March until and including 8 July 2020.
7. Compensation for fixed expenses
The Danish government has presented a new compensation scheme regarding compensation for fixed expenses. This compensation scheme means that companies, across all industries, will be entitled to compensation if the company experiences a turnover decline of more than 35 percent in this country. If the turnover decline subsequently turns out to be significantly smaller, however, the compensation must be repaid. On April 18, the Danish Parliament agreed on improving the compensation scheme.
The compensation is targeted at fixed expenses that equal 25-80 percent as follows:
- 80 percent - if the turnover decline equals 80-100 percent
- 50 percent - if the turnover decline equals 60-80 percent
- 25 percent - if the turnover decline equals 35-60 percent.
If the company has been shut down as a result of the government’s temporary ban on running a business in order to stop the spread of the coronavirus, the company is entitled to 100 percent compensation of the fixed expenses in question as long as the ban is in force.
The scheme has been extended so that it is possible to apply for compensation until and including 8 July 2020. The company must apply separately for compensation for the period from 9 June to 8 July, i.e. two applications are required.
8. Government-guaranteed loans
One of the initiatives that has also been implemented is a guarantee agreement that supports companies with liquidity problems. This new guarantee agreement offers small and medium sized enterprises a government guarantee of 70 percent of the bank’s new loans so that the banks will hopefully still lend money to their customers.
To benefit from this scheme, the company must, however, be able to document a consequential loss of more than 30 percent as a result of the crisis caused by the coronavirus. Moreover, the company must have been healthy and viable prior to the coronavirus outbreak, so that the company only has cash flow problems due to the coronavirus crisis.
In addition, the government has implemented a relief package which is specifically targeted at small and medium-sized enterprises and includes a guarantee agreement on particularly favourable terms. To be covered by these agreements, the company must have experienced – or expect – a revenue loss of more than 30 percent as a result of the impacts caused by the coronavirus crisis.
Before your company can be covered by this guarantee scheme, you must contact your bank, which will apply for the guarantee on behalf of your company via the Danish Vækstfonden (the Danish state’s investment fund).
9. Cash flow guarantee
In addition, the Danish government will launch a new cash flow guarantee initiative through EKF, Denmark’s Export Credit Agency, in order to support small and medium-sized enterprises with their export activities.
With this new initiative, EKF will cover a significant part of any bank loss on new loans in order to ensure the cash flow of export enterprises. Thus, this cash flow agreement serves as a guarantee and, in comparison to the existing cash-flow arrangements in EKF, this cash-flow guarantee will provide a simpler and better risk coverage.
10. Match funding scheme in Vækstfonden
One of the latest initiatives is a relief package for the business sector, where DKK 3.4 billion is being injected into Vækstfonden (the Danish state’s investment fund).
The money is initially intended for three concrete initiatives:
- Match-funding scheme for early-phase entrepreneurs
- Match-funding scheme for venture enterprises
- Boosting equity investments
Match-funding scheme for early-phase entrepreneurs
For early-phase entrepreneurs, Vækstfonden will receive a special guarantee limit of DKK 1,500 million, which includes DKK 500 million in loss limits.
Early-phase entrepreneurial companies typically find it difficult to obtain funding from financial institutions, e.g. due to lack of or very low turnover, and are therefore financed to a large extent by external investors.
Under the scheme, early-phase entrepreneurial companies will have the opportunity to apply to Vækstfonden for funding in the form of loans that match investment capital from private investors up to a 1:3 ratio.
Match-funding scheme for venture enterprises
For the scheme relating to venture enterprises, Vækstfonden will receive a special guarantee limit of DKK 700 million, which includes DKK 300 million in loss limits.
Venture enterprises are typically defined as established growth companies in a growth phase, i.e. companies that have moved on from the establishment phase, and that have, for instance, received investments from Danish or foreign venture funds.
Venture enterprises, like early-phase entrepreneurial companies, will have the opportunity to apply to the Vækstfonden for funding in the form of a loan with a ratio of up to 1:3 of the funding provided in the form of equity or loan finance from external investors.
Boosting equity investments
In addition, with the aim of boosting equity investments, Vækstfonden will receive a new capacity of DKK 1.2 billion, which is intended for investment directly in companies and via funds.
Financing with equity is defined as direct investment in the company, and with this type of investment, Vækstfonden will become a co-owner of the company.
Final terms and entry into force
The executive order and the final terms of the match-funding scheme are expected to be sorted out soon, and the match-financing scheme is expected to expire at year-end 2020.
11. State guarantee scheme and the export and investment package
A temporary state guarantee scheme for corporate trade and exports will be established, as private credit insurance companies, due to the coronavirus, anticipate significant losses and thus expect to withdraw a substantial portion of their insurance capacity (around 25-35 percent). The scheme is expected to expire at year-end 2020.
With the export and investment package, the Ministry of Foreign Affairs’ payment scheme for export and market advisory services for businesses in 2020 and 2021 is reduced. The Ministry’s export promotion grant will be doubled in 2021.
12. National crowdfunding platform and boosting of the Innobooster programme of Innovation Fund Denmark
DKK 10 million has been allocated for the development and operation of a national platform in cooperation with private crowdfunding platforms. The creation of this platform is to make it easier to raise donations and reward-based contributions via crowdfunding. Being a temporary solution, the platform will be in place until year-end 2020.
At the same time, the Innobooster programme of Innovation Fund Denmark is to receive an extraordinary lift of DKK 350 million to be used for supporting innovation projects in small and medium-sized enterprises, as well as start-ups.
13. Postponement of deadline for filing annual reports
A ban on holding and attending events with more than 10 people is currently in force. This ban affects companies that have more than 10 owners who are required to hold an annual general meeting during the period of the ban and who are not able to hold the general meeting electronically. In many cases, these companies will not be able to legally hold an annual general meeting, and some companies, as a result, will be unable to submit their annual report within the normal deadline.
If your company’s financial year ends during the period from 31 October 2019 to 30 April 2020, i.e., the deadline for submitting the annual report under normal circumstances will be during the period from 31 March 2020 to 30 September 2020, then the submission deadline has been extended. For instance, this will apply if a company’s financial year follows the calendar year and the normal deadline is, therefore, 31 May.
If the financial year is not within the stated period, the annual report must be submitted within the usual deadlines, i.e., within five months from the end of the financial year.
The annual report must be received by the Danish Business Authority no later than eight months after the end of the financial year, but no later than seven months after the end of the financial year for listed and state public limited companies, i.e., the deadline is extended by three months.
If the assembly ban prevents the company from holding a general meeting, then it is possible to postpone the deadline to eight weeks after the assembly ban is lifted. This applies in situations where more than 10 participants are required at the general meeting where the annual report is approved.
If the company wants to use the deadline of eight weeks, the Danish Business Authority must be notified of this at indberet@erst.dk no later than eight months after the end of the financial year or seven months after the end of the financial year, if it is a listed company or a state public limited company.
