The Swedish Government’s financial rescue package for Swedish companies and employees

On 16 March 2020 the Government presented measures in the way of temporary rules regarding short time work allowance, sick leave responsibility and liquidity backup of the tax account.  

On 20 March they presented additional measures with expanded loan and warranty possibilities for companies in Sweden.  

On 25 March 2020 a new financial rescue package was presented. The last financial rescue package is to relieve the consequences for small and medium sized businesses and includes a governmental company acute, temporarily lowered social security contributions, temporary rental discount as well as measures aimed at smaller companies in the way of temporary changed rules for contributions to the tax allocation reserve called periodiseringsfond, expanded possibilities for extension with tax payment as well as exceptions for “resting companies”.  

First day of sick leave and sick note

It has been announced that the first day of sick leave, which formerly was unpaid, is now paid by the Government for the period from 11 March to 31 May. The employee will then need to put through a claim to Försäkringskassan (the Swedish Insurance Office) and the employer will, as normal, not pay the employee for the first day of sick leave. This measure comprises employees as well as self-employed.  Also, the sick note requirement is removed which means that someone who is off work because of sickness can be on sick leave for up to 14 days without handing in a sick note.   

Tax account 

The Government proposal imply that companies which temporarily experience payment difficulties because of the corona virus effects may apply for deferment of payment of employer’s contributions, provisional tax on salaries as well as VAT.  

The first proposal, from 16 March, only included VAT which is accounted for on a monthly or quarterly basis. The proposal is implied to come info effect on 7 April but will retroactively work from 1 January 2020. 

However, the proposal is now extended to also include VAT which is accounted for on an annual basis from 27 December 2019 up until 17 January 2021. In this way, many more self-employed may be approved for the extension of paying the VAT liability for 2019, and the companies which have already paid the VAT liability from 27 December 2019 may claim this as a repayment from Skatteverket (the Swedish Tax Agency). This measure is proposed to start working on 30 March. 

A company should be able to apply for the deferment with up to three tax payments and the deferment will last for maximum 12 months.  

The deferment will not be accepted for companies which are financially, or in any other way are, irresponsible. Companies which have large tax debts would not be accepted for this proposal either.  

When making the application to Skatteverket, the company must, according to current rules, proof that payments will be achievable after the end of the suspension period, i.e. the payment issues must be temporary. These requirements are not mentioned in the proposal, the presumption is that deferment will be approved unless special circumstances show differently.  

The obligation of submitting tax returns to Skatteverket monthly are still applicable, even if you apply for the payment deferment.   

The deferment application for payment of taxes is made by filling out Skatteverket’s form SKV 4305, Application – Suspension with payment of taxes because of temporary payment difficulties (only available in Swedish).  

If the application is approved, interest (currently 1.25 % annually) will be charged on the deferred amount and will be calculated until the day of payment. There will also be a deferment fee of 0.3 % of the amount.   

It is also important to mention the question regarding representative liability in accordance to this. Representative liability practically means that if a representative intentionally or because of gross carelessness have not made arrangements to pay the tax debt or other arrangements to prevent the liability (such as application for liquidation, payment defaults or company restructuring) by the last payment day, personal liability may apply.  

The personal payment liability only goes as far as the company liability. The company is considered to have fulfilled its liability on the payment day either by having paid its tax debt by this day, or if Skatteverket – on this day at the latest – have notified a decision regarding payment deferment.  

If deferment of payment of taxes has been notified on the payment day the latest, it is Skatteverket’s belief that the deferment will push forward the representative’s liability point of time. In other words, if a representative realizes that the tax payment, which is ruled under the deferment, will not be paid by the payment day of the deferment, the representative may not be liable for the payment of the company’s unpaid taxes if he or she makes arrangements which prevent the liability before the last payment day of the deferment. On 26 March 2020 Skatteverket announced that, as a main rule, they will not apply for representative’s liability for taxes and social contributions which apply to the new rules regarding temporary extension time. This also includes the extension time fee which is charged during the extension time. 

Temporarily lowered employer and social contributions

During the period from 1 March 2020 to 20 June 2020 it has been proposed to temporarily lower the social security contributions, which means that only the pension fee of 10.21 % will be paid. This lowered amount may be used for up to 30 employees and for a monthly salary up to SEK 25,000. This results in a monthly tax relief of SEK 5,300 per employee. 

It is also proposed to lower the social security contributions for sole traders.

Tax allocation reserve (”Periodiseringsfond”) 

A proposed measure is that the rules regarding periodiseringsfond will be temporarily changed for sole traders and Swedish partnerships with natural partners. 

The new rules imply that 100 % of the tax adjusted profit for 2019 may be allocated towards the periodiseringsfond, with an upper limit of SEK 1,000,000, which later may be used against future losses. Many sole traders and partners may therefore receive repayments of the provisional tax paid during 2019. 

When allocating funds towards the periodiseringsfond for this type of business owner, it is worth noticing that the company owner’s income on which pension is calculated, is computed from the profit in the tax return. Someone who has allocated all the profits towards the periodiseringsfond one year, therefore does not receive any income on which pension is calculated for that year. Reclaiming allocated amounts which would increase the profit in the tax return would be considered income on which pension is calculated in the year of the reclaim.  

When it comes to computing the income on which sick leave pay is calculated it is sometimes done differently. Allocations and reclaims to periodiseringsfond should not, according to case law, affect the income on which sick leave pay is calculated. This means that if someone one year is allocating all the profits to periodiseringsfond, he or she may still take this into account when computing the income on which sick leave pay is calculated for that year. In the year of the reclaim, the reclaimed amount should not be taken into account when computing the income on which sick leave pay is calculated, i.e. it is deducted from the profit or loss in the tax return which Försäkringskassan use to compute the income on which sick leave pay is calculated.  

Resting companies 

Companies which are put to rest during period of unemployment are, in 2020, exempted from the rule that companies may only be resting once in a five-year period.

Short-time work allowance  

The Government have proposed a new system regarding short-time work allowance, i.e. a temporary lay-off of work force, in order to not loose Swedish jobs. The changes are proposed to come into effect on 7 April but will retroactively apply from 16 March 2020. The proposal means that the employer’s costs may be reduced by up to 50 % if the working time of the employee is reduced, whilst the employee would keep approximately 90 % of the salary. The Government would step in and pay for large parts of the cost.   

There are three levels of reduced working hours: 20, 40 or 60 percent which would imply reduced costs by 19, 36 and 53 percent respectively for the employer. It is only in cases of reduced working hours for these levels which will give support for short-time working.   

Companies which can proof issues with management of the financial difficulties because of Covid-19 may apply for short-time work allowance. The difficulties have to origin from circumstances which the employer cannot supervise and specifically cause damage to the company’s trade. The application is made to Tillväxtverket (Swedish Agency for Economic and Regional Growth), with start from 7 April, and can only be in relation to employees which have been paid for at least three before the application and for which the employer is paying employer’s contributions during the supported month. The support may also be paid for dismissed staff, but it will only be applicable during the special circumstances period 2020. Employees which are part of the employer family do not qualify for the support.  

Everyone, except for sole traders, may apply for support. Owners/employers which may apply are for example limited companies, partnerships, communities and foundations.  

To make it possible to apply for support for short time working there must be support for short time working in the central and local collective bargaining agreement. If the company does not have a collective bargaining agreement in place at least 70 percent of the employees in the operation unit must consent to and participate in the short time working. The reduce of working hours and wages which has been agreed must be the same for all participating employees within the operating unit. 

The employer is also required to having applied other available measures to reduce the working force costs ahead of the application for the support. 

Compensation for short-time work allowance will cover monthly salaries up to SEK 44,000 and can be given for six months, with the possibility to extension for an extra three months.   

Companies which during the time for application are required to produce a balance sheet for control, are part of a company restructuring or are during insolvency may not receive the support.  

Sick leave costs 

The Government has proposed to temporarily take on the full cost of all sick leave costs during April and May 2020. Self employed are also compensated by way of receiving a conventionalized sick leave pay for day 1-14 of the sickness. 

Expanded loan and warranty possibilities for companies in Sweden  

The Government have proposed additional contributions to Almi Företagscenter, which is to be used for supporting small and medium sized companies through loan offerings.  Svensk Exportkredit’s possibility to loan out cash is increased and may be used to give loans to exporting businesses being governmental bodies as well as commercial businesses.   

In addition of the Government’s proposal, Almi is offering a possibility to apply for postponement of loan payment as a result of Covid-19. A fixed postponement period of six months may be approved.  

Governmental company acute - Loan warranty 

The Government is proposing a governmental loan warranty to make it easier for the financing of companies. The proposal imply that the Government will guarantee up to 70 % of new loans from the banks to the companies which because of the corona virus effects experience financial difficulties – but are strong companies in normal circumstances. The warranty is given to the banks which give the guaranteed loans to the companies. If a credit warranty has to be settled, the Government will pay the guaranteed loan amount. 

There is no formal limitation to the size of the company, but the warranty is aimed at small and medium sized companies. The Government is explicitly saying that the guaranteed loan may not be used for bonuses and floating compensation to management or in any other way profit-based remuneration which is different from fixed salaries. 

Every company may take a loan of maximum SEK 75,000,000, but there may be exceptions. The bank will pay a warranty fee to Riksgälden (the debt office of the Swedish Government) for the issuing of the warranties which is based on the loan taker’s risk category. 

Temporary rental discount 

Companies in exposed business sectors which are experiencing large difficulties due to the corona virus effects, for example trade with unfrequently sold products, hotels and restaurants, will according to the proposal receive support with the aim to make it easier and quicken the negotiation process of rents.  The proposal implies that the Government would take on 50 percent of the lowered fixed rents. It should be possible to apply for the support at hindsight and would be effective for the period 1 April to 30 June.   

Article by: Lisa Dahl and Nina Berglund, Mazars.

The crisis we are currently in will have an enormous effect on the companies in Sweden. The Government have proposed different measures to avoid the worst economic effects of the virus and it is not impossible that more measures will be implemented, or that already proposed measures will be changed.  

Please get in touch with us if you require help or support during these difficult times. 

Beatrice Hultman, Tax Lawyer Mazars Göteborg.