As part of the overall COVID-19 bailout package, the Government has announced the introduction of a temporary compensation scheme for business owners and freelancers that are particularly affected by the COVID-19 crisis. The scheme applies across sectors but is reserved for business owners owning at least 25% of the business and work in the business. There are still uncertainties as to the how the scheme will work, but below we attempt to describe the key issues in relation to the scheme.
Who can apply?
- As a self-employed with a maximum of 10 full-time employees, you may receive compensation if COVD-19 has resulted in a loss of turnover of at least 30 percent for your company. To receive compensation under the scheme, your company must have had an average turnover of at least DKK 15,000 per month during the preceding period, and the company must have been registered on 1 February 2020 at the latest.
- The scheme is reserved for company owners who have at least 25 percent ownership and who work in the company. This means that four owners each owning 25 percent may receive a maximum of DKK 23,000 per month per owner.
- The self-employed and the company must be registered with the Danish CVR (central business register) and CPR (central national register) registers to be included in the scheme. Regarding freelancers: see below in the paragraph “What applies if I do not have a Danish CVR-no.”.
How much can be applied for?
- The compensation will amount to 75 percent of the expected loss of turnover in the period compared to the average turnover in the latest fiscal year. However, there is a maximum compensation of DKK 23,000 per month (per CPR no. in case of several owners).
- The compensation may amount up to DKK 46,000 per month if the self-employed has an assisting spouse.
When and how can you apply?
- The application for compensation will take place online. The scheme is not open yet; thus, it is not possible to apply for compensation yet. The Danish Business Authority has further informed that it will prepare an application guide which will include guidelines on how to calculate the expected loss of turnover.
- In connection with the application, the following documents or information must be prepared:
- Statutory declaration, including the expected loss of turnover
- Explanation for how the loss of turnover is a consequence of COVID-19.
- The owner of the company must further document a loss of turnover of more than 30 percent in the specified compensation period compared to the average turnover during the latest fiscal year.
- The Danish Business Authority requires all companies to use accountant assistance.
What must you pay particular attention to?
- The temporary compensation scheme applies from 9 March until 9 June 2020. You cannot receive compensation for the same cost from other compensation schemes introduced due to COVID-19. This means that you can also receive wage compensation for any employees who otherwise risked being made redundant.
- You can only receive compensation once through this scheme, even though you own a minimum of 25 percent of other companies.
- Further, you must be aware that if you do not make annual accounts, the accounts for the loss must be made based on VAT registrations to SKAT (the Danish tax authorities). If your company has existed less than 6 months, you must prove that you have suffered a loss of turnover by other means, e.g. through bookkeeping entries.
- If it turns out that the turnover of your company did not decline with 30 percent during the compensation period, you must repay the compensation with the addition of interest.
- Furthermore, you must repay the compensation with the addition of interest if your personal income in the tax system for the fiscal year 2020 exceeds DKK 0.8 mill.
- The specific details of the scheme are not yet available. At present, only an appendix to the political agreement and a “fact sheet” are available.
What applies if I do not have a Danish CVR-no.?
- A temporary compensation scheme for freelancers without a Danish CVR no. has also been introduced. Thus, you may be reimbursed 75 percent of your expected loss of income not taxable at source (Danish B income), however, a maximum of DKK 23,000 per month if you declare solemnly an expected loss of income of at least 30 percent during the period 9 March until 9 June 2020.
- However, you must be aware that your income not taxable at source (Danish B income) in 2019 must have been DKK 180,000 at a minimum. At the same time, your personal income in 2020 must not exceed DKK 0.8 mill.