COVID-19: Compensation for fixed expenses
The Danish Government has announced a new COVID-19 compensation scheme aiding businesses by reimbursing certain fixed expenses for the period between 9 March 2020 and 8 June 2020.
Which businesses are eligible for compensation under the scheme?
Businesses across any sector which are registered in the Central Business Register can apply for compensation for fixed expenses during the compensation period from 9 March to 8 June 2020 (the 'Compensation Period'). The company form is not decisive; however, the business must have been registered in the Central Business Register no later than 9 March 2020. The scheme is also available to associations, foundations, and self-governing institutions which are not publicly funded for more than half of their ordinary expenses. Businesses must fulfil the following criteria to be eligible:
- The business is anticipating a revenue loss of more than 40 % as a result of the COVID-19 outbreak or is subject to a ban on opening and has no revenue during such closure.
- The business's total fixed expenses during the Compensation Period must exceed DKK 25,000.
What expenses are covered?
The scheme allows businesses to receive compensation for a certain proportion of the businesses' fixed expenses, e.g. rent, interest expenses and non-terminable contractual commitments such as leases. Salary expenses and fixed asset depreciations are not covered. Certain salary expenses are covered by the salary compensation scheme, see also our previous news article.
Except for businesses who are closed as a consequence of a corona-related governmental order, the proportion of fixed expenses covered by the scheme depends on the anticipated decline in turnover:
Businesses who are closed as a consequence of a corona-related governmental order can have 100 % of its fixed expenses covered for the period of the ban, provided that the business has no revenue in such period.
The compensation cannot exceed the nominal decrease in revenue and is capped at DKK 60m (approx. EUR 8m) per business.
The compensation is reduced proportionally by a negative annual result. The most recent annual result must be utilized. The total compensation will be reduced by a quarter of the negative annual result multiplied with the relevant compensation rate. As an example, if the business has had a negative annual result of DKK 100,000, and the business is entitled to have 80 % of its fixed expenses covered, then the total compensation will be reduced by (DKK 100,000 / 4 ) x 80 % = DKK 20,000.
The compensation is paid out directly to the "NemKonto" of the business once the application is approved by the Danish Business Authority (Erhvervsstyrelsen).
Upon expiry of the Compensation Period, the Danish Business Authority (Erhvervsstyrelsen) will evaluate whether the actual revenue loss during the Compensation Period corresponds to the expected revenue loss. If an actual revenue loss is less than expected, the Danish Business Authority will adjust the allocated compensation.
How to apply for compensation under the scheme
The Danish Business Authority administers the compensation scheme and is responsible for distributing compensation achieved pursuant to the scheme.
In order to achieve compensation under the scheme, a business must submit a digital application attaching a statement including:
- The expected fixed expenses during the Compensation Period.
- The expected COVID-19-related revenue loss during the Compensation Period and justification that the revenue loss is due to the COVID-19 outbreak.
- The statement must be made for the entire Compensation Period, and the calculation of the expected revenue losses must be made with reference to the same period in 2019 if possible.
- Information on the most recent annual result (if the result is negative)
The statement must be endorsed by an auditor. If the application for compensation is approved, compensation can also be obtained for 80 % of the cost of the fees associated with endorsement.
Kromann Reumert is available to answer questions and assist with application under the scheme.
Updated April 15 2020