The main goal is to reduce the impact of the Global corona-virus, and the Danish Government has implemented a massive number of rules to reduces the risk of infection. Only the most vital functions/jobs are continued. A significant number of employees has been asked to work from home, and some sectors are not allowed to open to the public. All in the interest of the community.
The financial impact of the corona-virus has been substantial, of course. The global and the national precautions there has suffered a significant negative effect on the economy, i.e. a large number of companies is facing a significant or total decrease in turnover, whilst the costs for employees etc. are still to be paid.
To avoid the major negative impact of this “lock down” of activities in Denmark, the government together with all political parties has agreed upon initiatives in last week (week 12).
The most significant initiatives are:
1. Postponement of company taxes
2. Postponement of payment of salary taxes
3. Postponement of payment of VAT
4. Compensation for cancelled events with many expected guests
5. Compensation for salary re employees returned home from work
6. Compensation for fixed costs
7. Compensation for private entrepreneurs/self employed
8. New loans and guarantees for business and students
9. Other initiatives re easing the rules re employees and business.
Below we have only addressed the most central initiatives.
We will off course be pleased to help your Danish company with any considerations they may have in this situation.
Companies that expect lower earnings in 2020 may choose to reduce the on-account payments of corporation tax, which must take place, respectively March 20, 2020 and November 20, 2020. The Tax Authorities may request documentation afterwards.
A company will not be allowed to bring its deposit (credit balance with TAX) above DKK 200,000. However, this limit has been increased to DKK 10,000,000 for the following months.
This is only to avoid any negative effect on cash flow due to the postponement of other taxes etc. However, it may be a safe harbor for cash in this interim period due to the negative interest rates on bank deposits.
The largest companies' payment deadline for A-tax and labor market contributions has been temporarily extended. With effect for the months of April 2020 through June 2020 the payment deadlines for A-tax and labor market contributions are postponed by four months respectively.
For small and medium-sized enterprises the following time limits apply:
Settlement Period/Reporting Period/Payment Deadline:
April 2020/May 11, 2020/September 10, 2020
May 2020/June 10, 2020/October 12, 2020
June 2020/July 10, 2020/November 10, 2020
For larger companies the following time limits apply:
Settlement Period/Reporting Period/Payment Deadline:
April 2020/April 30, 2020/August 31, 2020
May 2020/May 29, 2020/September 30, 2020
June 2020/June 30, 2020/October 30, 2020
There are no changes in the deadlines for reporting contained A-tax and labor market contributions for the small companies – only the largest companies with monthly payment has been given a postponement on reporting deadlines.
The postponement of the above taxes and VAT will be implemented by TAX, i.e. your company do not have to act on this initiative.
For companies paying VAT on a monthly basis, the settlement period is extended by one month, so that the declaration deadline will be the 25th of the second month after the end of the tax period for the tax periods from March 2020 to May 2020.
Furthermore, the government proposes to postpone the VAT payment for small and medium-sized businesses by combining two tax periods. This means that the payment deadline for the first tax period is postponed corresponding to the payment period for the second tax period. Thus, small businesses will only have to pay VAT on March 1, 2021, while medium-sized businesses will only pay on September 1 this year.
Companies will be repaid negative VAT as usual if they indicate after the end of the tax period.
Compensation for cancelled events
The government provides compensation to organizers who in March canceled or postponed events with +1,000 participants and events of less than 1,000 participants targeting specific COVID-19 risk groups, such as elderly or healthily vulnerable.
Compensation for salary
Employees of all private companies, who are exceptionally hard financially affected by COVID-19 and therefore face having to notify redundancies for at least 30 per cent. or more than 50 employees, are granted this initiative.
The company may receive a state salary compensation of 75 per cent. of the salaries of the employees concerned, but a maximum of DKK 23,000 per employee per month if they fail to notify the layoffs.
For hourly wage earners, state wage compensation amounts to 90 per cent, but a maximum of DKK 26,000 per hour. month.
The Temporary Compensation Scheme will apply from 9 March to 9 June 2020. The scheme is considered to constitute State aid in accordance with EU state aid rules and will therefore need to be notified and approved by the European Commission, which must be expected quickly.
Wage compensation will be paid based on the company's information on the number of employees who would otherwise have been laid off as a result of the COVID-19 situation. Employees must be registered with a CPR number, and the company must indicate and justify the period for which they expect to be unemployed, but not more than a period of three months beginning no earlier than 9 March 2020.
The company must, with the assistance of auditors, subsequently document that they have returned the affected employees during the specified period. The employee must be employed before 9 March 2020. The documentation must include, among other things, attestation that the employees in question have been returned from the possible professional representative at the company. If not, the relevant professional organizations may object.
Compensation for fixed costs
Under this scheme, all companies can be reimbursed for documentable fixed expenses, i.e. rent, non-cancellable contract-related expenses during the period (eg leasing), interest costs etc.
To obtain this compensation the companies must be exposed to a large decline in revenue. The percentage of fixed expenses that are compensated is as follows:
- 80 per cent if the revenue decline has been 80-100 per cent.
- 50 per cent if the revenue decline has been 60-80 per cent.
- 25 per cent if the revenue decline has been 40-60 per cent.
Please note that companies with a temporary ban on doing business (to curb the spread of COVID-19) will be compensated by 100 per cent of the fixed expenses covered, as long as the prohibition applies.
Compensation cannot be applied for if the fixed expenses amount to less than DKK 25,000 during the period. A maximum compensation of DKK 60 million can be obtained per business during the period.
The expected decline in revenue due to COVID-19 is calculated for all or part of the period from March 9, 2020 to June 9, 2020 with reference to the same period in 2019. In practice, an average calculation for the last financial year can be made - a inventory for the period (whose season).
At the end of the period, a check will be made based on VAT reports, after which a subsequent adjustment may be made corresponding to the actual revenue loss.
Compensation of loss of income for self employed
Self-employed, who experience more than 30 per cent decrease in turnover because of COVID-19 virus may be compensated.
State compensation is 75 per cent. of the loss on turnover, but a maximum of DKK 23,000 per per month. The compensation may amount to up to DKK 46,000 per person per month, if the self-employed also has involved his spouse in the business.
The self-employed or small business person can receive maximum compensation for three months from 9 March to 9 June.
It is a requirement that the company has no more than 10 full-time employees.
New loans / guarantees
The Minister of Business Affairs has released the countercyclical capital buffer in the banks. As a result, the lending capacity of banks and mortgage banks is increased by more than DKK 200 billion. The extra capital must be used to keep hand during companies and workplaces.
The government introduces a guarantee scheme for 70 per cent. of banks' loans to larger companies that can document a turnover loss of more than 50 per cent. as a result of Covid-19. The scheme will have to operate on market conditions.
Many small and medium-sized companies are clearly under pressure for liquidity. Therefore, the government introduces a state guarantee of 70 per cent. of the banks' new lending to otherwise healthy SMEs in the relevant industries that can cover operating losses as a result of Covid-19. It is a prerequisite for being covered by the scheme that an operating loss of more than 50 per cent has been experienced.
For example, the scheme could help the smaller tour operator, who is experiencing a dramatic decline in sales, because the current situation means that very few are planning and booking vacations.
Increased student loan opportunities
Some students and students in higher education will lose their jobs as a result of COVID-19. Therefore, students and pupils at the youth education programs now have the right to borrow extra SU loans for up to DKK 6,388 per month in addition to the current scholarship and SU loan options.
Several other initiatives have been introduced. For example:
The so-called employer period of the sickness benefit system is suspended, so that there is reimbursement from day one when the employee is sick with corona virus or is in quarantine.
In order to mitigate the direct negative financial consequences for companies in sickness of employees due to COVID-19, the government has chosen to submit an urgent bill on expanded entitlement to sickness benefit for self-employed and sickness benefit reimbursement to employers because of COVID-19.
The law will allow employers to reimburse employers for paid wages and sickness benefits for the first 30 days (the employer period). In addition, self-employed workers can receive sickness benefits from the first day of absence instead of after the regular self-employment period of 2 weeks.
For people sick for reasons other than COVID-19, the general rules apply, i.e. the employer is obliged to pay all costs for sick pay or sickness benefits during the employer period, and an uninsured self-employed person is only entitled to sickness benefit after two weeks' sickness.
The scheme is temporary and will apply from 27 February 2020 to 1 January 2021.
At the same time, the system of work distribution becomes more flexible. In this way, companies can put employees down in time for a temporary period, and employees can then receive supplementary unemployment benefit.
The division of labor allows temporary contractual working hours to be reduced for a period without dismissing the employees concerned, eg during periods of lack of order access. During a division of labor, it will be possible to receive supplementary unemployment benefits during periods of home leave due to reduced working hours.
Alert on redundancies
The government wants to ensure that the “alert pool” is ready to deal with a situation where more major redundancies may occur. It is therefore ensured that the alert pool can be rapidly expanded by DKK 10 million DKK 20 in 2020, if this proves necessary. In this way, the alert pool can continue to ensure targeted efforts for those who may be terminated as part of major redundancies.
Increased access to export credit
To help especially small and medium-sized Danish export companies, a new liquidity guarantee is created in EKF - Denmark's Export Credit. It will increase maximum of new loans by DKK 1.25 billion.
State guarantee for the Travel Guarantee Fund
To help travel companies get through this extraordinary crisis, the government have agreed to strengthen the Travel Guarantee Fund with a state guarantee of DKK 1.5 billion.
We trust this overall information will prove helpful to get an overview of the Danish initiatives re Corona-crisis. We expect further developments in the following week (13).
We will off course be pleased to help your Danish company with any considerations they may have in this situation. Just feel free to contact your auditor or specialist in Beierholm.