As in the rest of the world, Denmark is fighting the effects of COVID-19. The Danish Government and the parties represented in the Danish Parliament as well as the labour market parties have introduced relief measures to safeguard the Danish industry and labour market. The measures include salary compensation, compensation for fixed expenses and other compensation schemes, guarantee schemes and tax initiatives.

This article offers an overview and explanation of the most relevant relief measures in Denmark, and may as such provide inspiration for legislators, policy advisers, governmental authorities, trade associations, etc., in other jurisdictions as to how effects of COVID-19 can be mitigated.

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COVID-19 relief measures implemented in Denmark

On 11 March 2020 Denmark's Prime Minister shut down Denmark due to COVID-19 by closing all public institutions, sending home all public non-essential personnel, issuing a ban on larger gatherings and recommending the private-sector labour market to work from home. 

After the shutdown different relief measures have been introduced, all of them agreed between the Danish Government, the parties represented in Parliament as well as the labour market parties. Upon these agreements, the necessary legislation has then been carried through. It has resulted in 22 new COVID-19 related bills, as well as numerous ministerial orders and delegated legislation.  

The relief measures have been changed along the way as criticism has emerged, or experiences have shown that they did not work according to intentions.

On 5 May 2020 the Minister of Finance reported that the COVID-19 crisis is expected to cost the Danish Treasury somewhere between DKK 160-200bn in 2020, and that the relief measures themselves will cost app. DKK 100bn (app. 5 % of the Danish GDP).  

The current status (11 May 2020) is that Denmark is slowly and gradually beginning to reopen. The reopening is being effected in phases, in the hope of controlling COVID-19. The first phase ended on 10 May 2020, and saw the reopening of the Danish Courts, as well as certain liberal professions (e.g. psychologists, private hospitals and clinics and dentists) and some parts of the school system. The second phase is set to continue until 8 June 2020. An economical task force assessed and provided input to the Danish Government regarding the economic aspects of the second phase.

Some of the relief measures have been approved by the European Commission under applicable EU state aid rules. A more detailed description of those aspects, however, is outside the scope of this article. 

Other relief measures have been introduced aside from the ones mentioned herein. This article is not meant to give a comprehensive overview of all the relief measures in Denmark and their specific details.

As revenues decrease due to COVID-19, wage costs represent a high cost for Danish businesses. To help mitigate the adverse effects on liquidity, a salary compensation scheme has been introduced which offers to cover (part of) a business' wage costs.  

All private businesses registered in the Central Business Register can apply for salary compensation for the period from 9 March - 8 July 2020 (the "Compensation Period"), provided the business has been hit particularly hard by COVID-19 and therefore would otherwise need to lay off:

i. 30 % or more of the total employees/workforce, or

ii. more than 50 employees. 

Salary compensation is intended as a means and an incentive for employers to try to avoid terminations during the COVID-19 crisis, enabling them instead to send home employees under the salary compensation scheme. 

A condition for receiving compensation is that employees who are sent home must not perform any work, and the business must not terminate any employees at all (neither the ones sent home nor the ones still working) during the period in which salary compensation is applied for. 

Also, a business can only make use of the salary compensation scheme if it does not make use of other existing possibilities for sending home employees without pay, and employees for which compensation is applied must have been employed since before 9 March 2020 and have their normal working place in Denmark. It is possible to increase/decrease the number of employees sent home under the scheme as well as having groups of employees working/being home "on shifts", but not less than an average of 30 % of the total workforce/50 employees must at all times be sent home during the period in which compensation is applied for. Employees are required to contribute with at least five days of holiday, time off in lieu, etc., if sent home for three months, unless they have accepted a voluntary salary reduction prior to being sent home. 

Under the terms of the scheme, the business will on an on-going basis pay full salary to the employees for the duration of the compensation period. The maximum compensation rates are as follows:

• Salaried employees: The compensation is 75 % of the employee's salary up to a maximum of DKK 30,000 per month.

• Non-salaried employees: The compensation is 90 % of the employee's salary up to a maximum of DKK 30,000 per month.

The compensation rates are based on a full-term employment and will be reduced proportionately if the employee is working part-time. It is possible to combine participation in the salary compensation scheme with voluntarily agreed salary reductions, but special attention should be paid to the process by which any such agreements are made. 

Salary compensation is applied for online with the Danish Business Authority. Applications must be made no later than 8 July 2020. The business must provide, not later than six months after the compensation period, certain (audited) documentation for control purposes. Some of it must be certified by the union representative (if any).

More than 25,000 businesses have already applied for salary compensation, and the Danish Business Authority has worked intensely up to 1 May 2020 to ensure that nine out of ten businesses that had applied for salary compensation had received it. Still, the scheme has received criticism for being too un-flexible in terms of the non-working requirement during the period in which employees are sent home, as well as for the lack of possibility to effect terminations due to financial reasons during the period which compensation is applied for, as employers typically request this combination. Also, the scheme is less favourable to businesses with high-wage earners. 

A compensation scheme for businesses' fixed expenses has been introduced for the purpose of mitigating that fixed expenses must be paid during times of revenue decrease due to COVID-19. 

Every business registered in the Central Business Register since before 9 March 2020 can apply for compensation for fixed expenses in the Compensation Period. 

Generally, businesses must fulfil the following criteria to be eligible:

i. The business is anticipating a revenue loss of minimum 35 % as a result of the COVID-19 outbreak or is subject to a ban on opening and has no revenue during such closure. 

ii. The business' total fixed expenses during the Compensation Period must exceed DKK 16,666.

Furthermore, it is a condition that businesses pay taxes for the income year 2020 according to present international treaties and national legislation. This means that compensation cannot be paid if the business itself or a legal owner, who has control over the business, has its fiscal domicile in a country which appears on the EU list of non-cooperative jurisdictions for tax purposes.  

The scheme allows businesses to be compensated for a certain proportion of their fixed expenses which are not affected by the decrease in revenue, e.g. rent, interest expenses, non-terminable contractual commitments such as leases. Wage costs are not covered as certain salary expenses are covered by the salary compensation scheme, cf. above.

The proportion of fixed expenses covered by the scheme will be calculated in accordance with a step-based model:

Revenue loss of less than 35 %     / No compensation

Revenue loss between 35 - 60 %  / 25 % compensation

Revenue loss between 60 - 80 % / 50 % compensation

Revenue loss above 80 %            / 80 % compensation

However, businesses that are subject to compulsory closing may have 100 % of their fixed expenses covered, provided they have no revenue at all.  

The compensation will be proportionally reduced if the business has had an operating loss in the most recent financial year.

The amount of compensation is capped at DKK 110m per business, and businesses receiving compensation exceeding DKK 60m must declare that they will not distribute dividends or buy back shares in the financial years of 2020 and 2021. Nevertheless, a business can free itself from these restrictions by returning aid received in excess of DKK 60m. 

Compensation for fixed expenses must be applied for online with the Danish Business Authority. The application must include, among other information, the expected fixed expenses and the expected COVID-19-related revenue loss during the Compensation Period. Also, a statement by an auditor endorsing the application is required.

A point of criticism has been that compensation is not paid out fast enough. Thus, trade associations and certain parties in the Danish Parliament have advocated an approach with less prior control, as with the salary compensation scheme, where mainly applications with a high risk assessment will undergo an actual prior review. As of now, only few businesses (app.  < 5 %) have received compensation but that may be explained by the fact that at least some fixed expenses (such as rent) are often paid quarterly (and not monthly as is the case for salary). Moreover, compensation is determined per company registration number. Hence, it can be decisive whether businesses' stores (leaseholds) are organized in separate entities or collected in one entity. If the latter is the case, businesses cannot receive 100 % compensation for the stores (leaseholds) that are subject to compulsory closing.

The scheme covers self-employed owners of smaller businesses with no more than 25 full-time employees. The self-employed ownership share must be at least 25 %, and the owner must work in the business. Also freelancers without a business registration number are eligible for compensation.

To be eligible under the scheme, the business/freelancer must (i) in the Compensation Period experience a revenue loss of at least 30 % due to COVID-19, and (ii) have had an average revenue in 2019 of at least DKK 10,000 per month. Also, the business must have been registered since before 9 March 2020 in the Central Business Register. 

Self-employed owners are only entitled to receive compensation once, i.e. a self-employed who owns more than one business can only receive compensation for one of them. If multiple persons have an ownership share of at least 25 % and work in the business, each of the owners will be eligible for compensation. 

The compensation scheme covers 90 % of the revenue loss but cannot exceed DKK 23,000 per month. If the self-employed/freelancer is subject to compulsory closing, though, the compensation is 100 % of the revenue loss (maximum of DKK 23,000 per month).

An application must contain certain documentation, e.g. an explanation for how the loss of revenue is a consequence of COVID-19. Auditor assistance, however, is not a requirement. If the self-employed's/freelancer's personal annual income exceeds DKK 800,000, or the revenue loss turns out to be less than 30 %, the compensation received will have to be refunded. 

Originally, the Danish Business Authority would review applications under the scheme before compensation was paid out. However, due to criticism it has been decided that applications received before 28 April 2020 will be prepaid no later than on 11 May 2020 with only a minor prior review. Afterwards, the Danish Business Authority will review the application in the usual manner. Applications received after 28 April 2020 will be reviewed in the usual manner. 

At this moment more than 36,000 self-employed and freelancers have applied for compensation. 

In March, a ban on larger gatherings was introduced, but has since been adjusted so as to now encompass smaller gatherings as well (10 or more people). The ban will have effect until at least 8 June 2020. However, the Danish Government has already declared that gatherings of more than 500 people will be banned until the end of August 2020.

The scheme covers events set to take place in Denmark between 6 March and 31 August 2020 which now due to the COVID-19 outbreak have had to be cancelled, postponed or substantially changed. The event must have an audience of more than 350 people. 

Main organizers of events are eligible for getting their deficit (expenses deducted from the revenue) compensated. This includes expenses from different sources, such as (i) loss of ticket revenues, (ii) loss of revenues from the sale of food and beverages and (iii) paid artist fees. Only main organizers' deficit will be compensated, not a potential loss of profit.

An application for compensation must be accompanied by relevant documentation, e.g. if compensation is sought in respect of presold tickets, the application must include a calculation of the number of tickets refunded. If compensation is sought for more than DKK 500,000, the documentation must include an auditor's statement and evidence that main organizer's insurance does not cover the losses.

Criticism was raised at an early stage regarding the definition of events as well as the criteria of attendees. Adjustments have since been made concerning these matters. The Danish Business Authority, which administers the scheme, has not made public the number of applications received.  

Due to COVID-19 and the cancellation of most travels, the travel industry is experiencing cash flow-difficulties as travellers have the right to get a full refund of any payments made for travel packages. 

The purpose and scope of the Danish Travel Guarantee Fund has been expanded to cover reimbursement claims from travellers which are a consequence of extraordinary situations, including the COVID-19 situation. Normally, the Danish Travel Guarantee Fund will only cover reimbursement claims involving bankrupt travel providers. Thus, the Travel Guarantee Fund has received access to a state guarantee of DKK 1.5bn to ensure that the Fund has sufficient liquidity to meet reimbursement claims. 

The state guarantee is arranged as a loan, and the intention was that repayment of the state guarantee would be borne collectively by the travel industry. However, after intense criticism from the travel industry a new bill was put forward on 28 April 2020, in which repayment of the state guarantee is more individual. In the new bill, each travel provider must pay back two-thirds of their individual draws on the state guarantee, while the last one-third will be repaid collectively by the travel industry. The bill is expected to be finalized 15 May 2020.

The new and more individual approach regarding repayment has not deflected all criticism and some of the largest travel providers in Denmark are still threatening to leave the Danish Travel Guarantee Fund. 

The Danish state has instituted a state guarantee scheme (through the Danish Growth Fund), under which the Fund will guarantee loans and credits granted by financial institutions to businesses for the purpose of covering losses of at least 30 % of revenue as a result of COVID-19.

The guarantee scheme covers 70 % of the financial institution's exposure and can have a tenor of up to six years (generally written down annually on a linear basis) (or seven years for SMEs). The covered business generally needs to be considered creditworthy prior to COVID-19 impact.

The amount of the individual guarantee is capped at the business' realised or expected loss of revenue in the period from 1 March to 30 September 2020 and, furthermore, needs to be below either (i) twice the total annual amount of salary expenses for 2019, (ii) 25 % of the total revenue in 2019 or (iii) the budgeted liquidity needs of the business for the coming 12 months.

An upfront fee of 0.25% of the guaranteed amount (however, capped at DKK 250,000 for large businesses and fixed at DKK 2,500 for SMEs) applies and a semi-annual guarantee fee based on the financial institution's "all-in margin" less a funding margin depending on currency and maturity (fixed at 1% p.a. for SMEs) is payable.

The financial institution formally applies for the guarantee based on financials and budget from the relevant business and the Danish Growth Fund generally processes the application within two business days.

A similar guarantee scheme is available through the Danish Export Credit Agency (EKF) for businesses with at least 10 % of export revenue.

The guarantee schemes seem so far to be used, in particular, by businesses that do not have the highest credit rating or that are severely impacted by the COVID-19 outbreak and consequential measures. The terms of the guarantee schemes are of a quite general nature and have, in practice, given rise to a number of legal questions, e.g. in respect of use of the proceeds of the guaranteed loans/credits, handling of existing loans and credits with the relevant financial institution, repayment of other financial debts, and revenue calculation in international groups.

Danish tax initiatives in relation to the spread of COVID-19 mainly relate to improving liquidity of businesses as well as easing administrative burdens by postponing tax reporting deadlines.

As such, payment deadlines for withheld payroll tax, labour market contribution and self-employed income tax are postponed. Furthermore, VAT reporting/payment deadlines are postponed for all businesses, i.e. businesses subject to either monthly, quarterly or semi-annual VAT reporting. Lastly, reporting/payment deadlines regarding payroll tax are also postponed for certain businesses.

Furthermore, the tax return filing deadline has been extended for the income year 2019. For businesses with a tax return filing deadline of 31 March 2020 or later regarding the income year 2019, the deadline has been extended to 1 September 2020.

A credit balance on the tax account indicates that the business has a net receivable against the tax administration. Under current rules, the credit balance is generally paid out to the business. However, the business can choose that only amounts in excess of DKK 200,000 are paid out. With a newly introduced bill, the DKK 200,000 limit is raised to DKK 100bn. The increase is temporary for the period 7 May 2020 until 1 April 2021. Thereafter, the limit will be DKK 200,000 again.

The government has also introduced interest-free VAT/payroll tax loans, whereby businesses can receive already paid VAT/payroll tax as an interest-free loan payable by 1 April 2021. Only certain businesses can apply for the interest-free loans.

Moreover, payment of so-called tax credits regarding the income year 2019 has been advanced, so that tax credits can be paid out to businesses in June 2020 instead of in November 2020. Businesses must apply for receiving the tax credits under the advanced deadline.

Conclusion

Several relief measures have been introduced in order to protect the Danish industry and labour market. Some have already proven themselves useful, whereas others have not yet. 

However, a common denominator is that the relief measures have been introduced rather quickly, with some of them even taking the form of "emergency legislation". Therefore, adjustments have been, and are being, made along the way and various legal uncertainties emerge as the schemes are being applied in practice. 

The objection most frequently advanced is that compensation under the compensation schemes is not paid out fast enough, as the businesses experience cash-flow difficulties. A membership survey led by the Danish Chamber of Commerce (network for Trade, IT, Industry and Service) shows that 82 % of the retail trade have experienced a drop in revenue, and that 37 % believe to have sufficient liquidity for May and June. This is also the reasoning behind compensation under the salary compensation scheme and the compensation scheme for self-employed being prepaid, subject to subsequent review of the applications. 

Compensation under the compensation scheme for fixed expenses has only been paid out to a lesser degree, and it will be interesting to see at what point compensation will be paid out more continuously or even prepaid with reference to the businesses' cash-flow difficulties.

Also, it will be interesting to see to what extent the guarantee schemes will be applied, as they are generally seen as a measure for businesses that do not have the highest credit rating and may not have other options in order to survive.

Furthermore, the situation of the Danish Travel Guarantee Fund is uncertain, and it will be interesting to see if travel providers will leave the Danish Travel Guarantee Fund as threatened, and where that will leave the travel market going into the summer holidays.

Having entered into the second phase of the reopening of Denmark, and the third phase beginning on 8 June 2020, the focus is now assumed to shift to how and when the relief measures will be phased out. 

The key take away from this article is that a broad range of relief measures have been introduced in Denmark to safeguard the Danish industry and labour market - some of them have proved or are likely to prove themselves useful, whereas others have not or are likely not to. Legislators, policy advisers, governmental authorities, trade associations, etc., in other jurisdictions may find inspiration - but no definite answers - as to how effects of COVID-19 can be mitigated.