This in order to help Danish workers, Danish workplaces and Danish companies get through the health crisis and to protect the Danish economy in this extraordinary situation. 

The parties note that the Government has already presented three economic packages that have subsequently been fast-tracked by the Danish Parliament or approved as a bill by the Finance Committee. 

The breakout of COVID-19 has created a need to bear additional costs at a rate and to an extent that requires extraordinary measures. The parties agree to take all necessary precautions. 

In the short term, it is necessary to launch a number of significant further initiatives. 

  • A compensation model for self-employed and freelancers, cf. Annex 1
  • A compensation model for companies’ fixed costs, cf. Annex 2.

The initiatives are described in more details in the attached annexes.  

In addition to this, the bill establishes legal capacity for state authorities to incur extraordinary costs as a consequence of COVID-19.

Payment of operating expenses (operating grants and grants of the type state activity) across the central government will be possible with the approval of the Ministry of Finance. 

For further initiatives involving expenditure, including initiatives to mitigate consequences for the corporate sector, and in order to cover an increasing spending needs in the regions and local authorities, separate bills must be introduced to the Finance Committee of the Parliament. 

The parties note that the Government will enter into a dialogue with Danish Regions and the National Association of Local Authorities in Denmark with a view to ensuring that the necessary steps are taken and that the necessary resources are available to finance COVID-19 initiatives.  

The parties note that, in light of the very particular nature of the situation, the Minister of Finance will use the administrative authority that the Minister has in accordance with section 12 of the Danish Budget Law, by an order, to exempt COVID-19-related expenses in 2020 from the spending caps. 

In the state, local authorities and regions, the received funding will be possible to spend without displacing other expenses. 

In addition to this, the parties agree to the following:

Denmark’s Export Credit Agency (EKF)

In order to help the small and medium-sized Danish export companies, who are often more vulnerable than larger companies, a new liquidity guarantee will be established in EKF.

This product will be targeted to small- and medium-sized companies with liquidity problems, among other things due to interruption of their value chains due to COVID-19. The guarantee is to pave the way for new loans at a value of DKK 1.25 billion. These are expected to help 250 small- and medium-sized companies with their export activities.

Unlike the existing guarantee schemes offered by EKF, the liquidity guarantee will provide a simpler and better risk coverage.

This means that the risks that banks take when supplying loans to small- and medium-sized companies are smaller and that it is thereby easier for them to offer them loans. A loss limit of DKK 100 million is allocated to the scheme. The scheme is pending EU-approval for state aid.

The liquidity scheme supplements the existing reinsurance scheme of EKF, which makes it possible for Danish exporters to continue to buy the insurance they need through reinsurance. EKF monitors the demand for reinsurance on a continuous basis and has, so far, allocated DKK 1.5 billion to the reinsurance scheme.  

Extension of the state-guaranteed loan schemes for both small- and medium-sized companies

State guarantee schemes for larger companies and small- and medium-sized companies have been established. Meanwhile, the realisation in the Growth Fund was, from the first day, that the guarantee framework might not be sufficient. 

The guarantee scheme for larger companies covers 70 percent of bank loans for companies with a significant loss of revenue by more than 30 percent due to the spread of COVID-19.

The guarantee framework will be raised to a total of DKK 25 billion. In this way, the scheme will be able to facilitate lending for up to DKK 35.7 billion. The scheme must continue to be able to function on market conditions. This will be reflected in the guarantee premiums companies must pay.

For small- and medium-sized companies, a guarantee framework of DKK 17.5 billion and a respective loss limit of approx. DKK 5 billion will be earmarked which will facilitate lending up to DKK 25 billion. 

The schemes also include Greenland and the Faroe Islands, if this is requested.

Public procurement

The parties agree that public procurement must contribute to ensuring that companies – and thereby also employees – get through the extraordinary economic situation caused by COVID-19.

Viewed in the light of these facts, the contracting parties agree that, up to and including 31 October 2020, exemptions can be made to a number of rules on grants that are important to public procurement. The exemptions will allow the following:

  • Prepayment of deliveries until 1 July at a worth of a maximum of DKK 1 million
  • To refrain from enforcing non-compliance provisions (for example, a demand for payment of penalties for delays), that apply to state suppliers, if the lack of compliance can be attributed to COVID-19.

The Government will send a bill to the Finance Committee, as soon as possible, with a view to providing a legal basis for grants. If the current extraordinary situation is improved before this, exemptions will be withdrawn before 31 October 2020.

The Government will enter into a dialogue with KL and Danish Regions on the possibilities for a similar handling in local authorities and regions.

The parties note that KL and Danish Regions have encouraged local authorities and regions to expedite payments to companies. KL has, furthermore, encouraged local authorities to, in so far as possible, expedite planned building- and renovation projects, etc.

The Travel Guarantee Fund

The spread of COVID-19 has led to many cancellations of planned travels. This has serious consequences on the travel industry and it can have the effect that many Danish travel companies will go bankrupt.

In order help the travel companies get through this extraordinary crisis, the government and the contracting parties agree to strengthen the Travel Guarantee Fund through a state guarantee amounting to DKK 1.5 billion. 

At the same time, the aim of the Travel Guarantee Fund will be expanded so that, in this extraordinary situation, compensation will also be provided for reimbursement costs in connection with cancelled travels. 

Unemployment benefit

The contracting parties agree to mitigate the negative consequences that the spread of COVID-19 has already had and can potentially have on recipients of unemployment benefit. This is due to the fact that it can be difficult for recipients of unemployment benefit to find employment during the current crisis.  

The period from 9 March and until 9 June will therefore not be included in unemployment benefit seniority. It will be a precondition, that these recipients are members of an unemployment benefit fund during the said period.

Persons who, during the period from 9 March, have lost their entitlement to unemployment benefit, and who may have resigned membership of an unemployment insurance fund, will have the possibility to re-enter and thereby obtain the right to unemployment benefit until 9 June. 

It is a precondition that these persons re-apply for membership between 9 March and up to and including 9 June 2020, and that they repay membership fee for the period during which they were not members.

Sickness benefit

The contracting parties agree to mitigate the negative consequences that the spread of COVID-19 has already had and can potentially have on recipients of sickness benefit. During Denmark’s shutdown, it can be difficult to launch follow-up and get medical evaluations of the recipients of sickness benefits.

Persons who, from 9 March and until 9 June, have received sickness benefits for more than 22 weeks in the 9 preceding calendar months, i.e. when they reach the time of re-evaluation and therefore cannot extend the sickness benefit period under the existing rules, will have their right to sickness benefits extended for 3 months. This also applies if the right to sickness benefits stops due to the expiration of an extension rule, and the person in question therefore cannot receive sickness benefits anymore and is therefore transferred to a work availability assessment with resource program benefits.

This will ensure that, for the duration of the period, there will not be anyone who will be transferred to work availability assessments processes and resource program benefits. 

This is on the condition that the person in question is a sickness benefit recipient since 9 March 2020 i.e. he or she is unable to work due to his or her own illness and meet the requirements of the law.

Enhanced access to loans for pupils and students

Some pupils in upper secondary education and students in tertiary education will lose their jobs and thereby lose part of their income due to COVID-19. The Government and the contracting parties agree to protect pupils in upper secondary education and students in tertiary education. 

Students and pupils will be allowed to take out additional student loans up to DKK 6,388 per month in addition to the existing grant and loan opportunities. This means that an additional 2 months’ loans can be obtained every month.

As a point of departure, this right applies in March and April 2020. It will be prolonged if the situation so requires. This opportunity will be provided via the digital application systems as soon as possible.

The nature of the agreement

The agreement can be described as a voting agreement. 

The parties note that a number of initiatives have been taken in order to help the credit institutions to fulfil their role as lenders. The counter-cyclical capital buffer has been released, which increases the lending capacity by more than DKK 200 million, and state-guaranteed loan facilities have been made available for the institutions to provide to both SMV’s and larger companies.

Furthermore, the parties note that the credit institutions can, during the current situation, request permission from the Danish Financial Supervisory Authority to use the buffers in the so-called LCR.

On this basis, the credit institutions are expected to show public spirit and reach out to both companies and households in need. 

The contracting parties also appeal to the civil society, the public authorities, including local authorities and regions, as well as companies to continue to address and mitigate the consequences of the COVID-19 epidemic.

The contracting parties also agree to examine how activities in the public sector would be able to support the development in the sectors affected by the consequences of the spread of COVID-19, including construction activities in local authorities, regions and the state.  

The parties agree to take all necessary steps to help Danish companies and workplaces get through the COVID-19 epidemic in the best possible way and are willing to, if necessary, allocate hundreds of billions of Danish kroner to any additional initiatives. 

The parties, furthermore, agree to strive towards the most expedient payment of grants possible. The administration of the schemes has been organised to this end. However, efforts are made to reduce the risk of abuse and fraud through the use of auditors and risk-based follow-up checks.

Annex 1

Temporary compensation scheme for self-employed

Definition of the target group

The target group of the scheme consists of self-employed who expect a loss of revenue of at least 30 percent due to COVID-19. At the same time, it is a condition for receiving funding through the scheme, that the company has had a turnover of at least DKK 15,000 per month during a preceding period. 

The scheme is reserved for company owners who have at least 25% of the ownership and work in the company. The self-employed and the company must be in the central business register (CVR) and the central national register (CPR) in order to be covered by the scheme. The company must not employ more than 10 persons in order to qualify. The company must be registered on 1 February 2020 at the latest. 

The compensation calculation 

The compensation will constitute 75 percent of the expected loss of revenue for the duration of the period compared to the average revenue of the most recent financial year.

However, the compensation cannot exceed DKK 23,000 per month (per CVR-number if there are more than one owner). If the self-employed has an assisting spouse, the maximum compensation will be doubled, at a total amount of DKK 46,000. The compensation is taxable.

The temporary compensation scheme for self-employed will be effective from 9 March and until 9 June 2020. The company owner can only be covered by the scheme for a maximum of three months. 

The companies will not be able to recover the same costs from multiple aid schemes introduced as a consequence of COVID-19. 

The scheme is assessed to constitute state aid in accordance with the EU’s rules on State aid and will therefore be reported to and must be approved by the European Commission. 

Documentation requirements

It is a requirement for receiving compensation to submit a solemn declaration with the expected loss of earnings. The company must also state the reason why the loss of revenue is a consequence of COVID-19.

The company must subsequently document a loss of revenue of more than 30 percent of the stated compensation period compared to the average turnover during the most recent financial year. The Danish Business Authority will order every company to use an auditor. 

If the company owner does not submit a financial statement, the loss of revenue is calculated on the basis of VAT-registrations to the Danish Tax and Customs Administration (SKAT).

If the company has been established less than six months, the company must find another way to prove a loss of revenue due to COVID-19. This may be through account statements etc. This is expected to take place using a solemn declaration and will be specified in the solemn declaration required for the scheme.

If the loss of revenue has not amounted to 30 percent during the compensation period, the compensation must be repaid with interest. 

The compensation and interest must also be repaid if the company owner’s personal income for the financial year 2020 exceeds DKK 0.8 million. The specific administrative model is still being prepared.

Economic consequences

It is estimated, with considerable uncertainty, that the compensation scheme for self-employed will come at a cost of DKK 10 billion. The final costs of the scheme will depend on the economic consequences of COVID-19 for self-employed and their use of the compensation scheme. In addition to this, there will be administrative costs incurred by the Danish Business Authority. 

Compensation for freelancers etc. 

A temporary compensation scheme will be introduced for self-employed without a CVR number who expect a loss of revenue.

The self-employed person can recover 75 percent of the expected loss of income not taxable at source, however not exceeding DKK 23,000 per month, on condition that the person solemnly declares an expected loss of revenue of at least 30 percent due to COVID-19 from 9 March to 9 June 2020. The parties agree to examine whether zero-hour contract workers could be covered by the scheme.

The scheme covers persons with income not taxable at source of at least DKK 180,000 in 2019, which corresponds to a monthly average of at least DKK 15,000. For persons who have not previously had an income not taxable at source, an administration model will be set up. Another requirement to receive compensation is that the self-employed does not have a personal income in 2020 of more than DKK 0.8 million. 

The scheme requires the approval of the European Commission under the rules on state aid.

Annex 2

Temporary compensation for companies’ fixed costs

A number of companies are currently experiencing a marked decline in sales due to the COVID-19 pandemic and due to the measures that are introduced to limit the spread in Denmark. For a number of companies including restaurants, hotels and airline, their commercial base is temporarily non-existent or significantly reduced. At the same time, the companies have to pay rent and other expenses, even though the customers stay away. 

The government has agreed on a wage compensation model with the social partners and has launched a model for compensation for self-employed business owners, just as a number of initiatives have been prepared with a view to strengthening the liquidity of companies.   

In addition to this, there is a need to compensate vulnerable businesses for some of the fixed costs, for example costs for non-terminable contracts.  The Government therefore proposes to introduce a temporary compensation for companies’ fixed costs based on the following principles, cf. box 1.

Box 1

Principles for a temporary compensation scheme for fixed costs etc.

  1. Companies across industries must be able to get compensation
  2. Compensation is targeted to companies with a major decline in turnover (more than 40 percent.)
  3. Compensation is targeted to the fixed costs and constitutes between 25 and 80 percent
  4. Compensation covers up to three months and is payable as soon as possible
  5. If revenues have declined considerably, the compensation must be repaid.

Delimitation of the scheme 

The stage is set for a scheme by which companies can be compensated for fixed costs, including, for example, rent, interest expenses, tied expenses for a period of time (e.g. leasing), when the companies have been exposed to a large decline in turnover. 

The specific plan is that a share of the fixed costs is covered in accordance with the following table:

  • 80 percent if the decline in turnover has been 80-100 percent. 
  • 50 percent if the decline in turnover has been 60-80 percent. 
  • 25 percent if the decline in turnover has been 40-60 percent. 

Business owners who have been ordered to close their businesses will be compensated for the duration of this period. This corresponds to 100 percent of the fixed costs.

The company must forward a statement attested by an auditor which shows the expected decline in turnover from 9 March to 9 June as a consequence of COVID-19.  The company must solemnly declare that the turnover has dropped.  The Danish Business Authority subsequently pays out the compensation. Random checks will be carried out on a continuous basis using information such as VAT-declarations. There will subsequently be re-adjustments in accordance with the actual loss of revenue. 

It is a very comprehensive model and provides payments to a potentially very large number of companies. The payment of compensation with therefore require a relatively significant level of manual case work in the Danish Business Authority. In order to reduce the costs for administration and controls in the Danish Business Authority, the administration will primarily be based on an auditor’s attestation of the company’s information which will increase costs for auditors’ statements.  In addition to this, the auditor’s statement will reduce the risk of fraud. 80 percent of the cost for an auditor can be recovered if an application results in compensation. 

It is not possible to apply for compensation if the fixed costs amount to less than DKK 25,000 for the duration of the period (due to the costs of the auditor’s attestation). The limit for compensation is DKK 60 million per company per period.

Economic consequences and state aid

There is significant uncertainty regarding the economic consequences. It is estimated that the scheme will cost approximately DKK 13 billion a month and a total of DKK 40 billion from 9 March and until 9 June. In addition to this, the administration costs are estimated to be high. It is necessary to submit a notification of state aid in connection with the compensation scheme.