Cashflow support through postponed tax payments due to corona pandemic

The Swedish government has presented further measures to mitigate the economic effects of Covid-19. One of the proposals is cashflow support for all businesses through the possibility of postponing payment of VAT, social security contributions and tax withheld from employee salaries. These new regulations are proposed to have retroactive effect from 1 January 2020, meaning that taxes already paid can be reclaimed.

Businesses of all types have been hit with major financial issues due to the corona virus outbreak that has now turned in to a full-blown pandemic, and some companies stuck with large fixed costs are seeing little to no income. This is an extraordinary situation that requires extraordinary measures, which is being reflected in the emergency actions now presented by the Swedish government.

Several proposals are under way, one of which is the possibility to postpone payment of up to three months’ VAT, social security contributions and tax withheld from employee salaries. The reporting periods that may be subject to the postponement are January to September 2020, and the payments may be put off for up to a year. A fee of 0,3 percent of the postponed amount per every new calendar month will be charged, and also a non-deductible interest cost at a rate of 1,25 percent. This equates to a cost of credit corresponding to normal market rates.

Postponement will not be granted regarding VAT for businesses reporting their VAT on an annual basis. Companies that are economically ill-managed or are dishonest in some way, or that already have large tax debts, will also not be granted postponement of tax payments.

The new regulations are proposed to enter into force on 7 April 2020, but to have retroactive effect from 1 January 2020. This means that businesses that have already made tax payments earlier this year will be able to reclaim them from The Swedish Tax Agency.

What happens now?

The proposal has already been reviewed by the Council on Legislation without remarks and will now be referred to the parliament through an additional amending budget that will be decided by the government on 19 March. The new regulations are expected to enter into force on 7 April.

Simultaneously, The Swedish Tax Agency today published a press release to clarify what the possibilities are under the already existing legislation regarding postponement of tax payments – because both businesses and individuals can already apply for postponement of payment pursuant to the current rules of The Tax Procedures Act. However, to be able to qualify, the company or individual needs to be able to show that the payment problems are directly linked to the corona outbreak and that they will be able to make the payment as soon as the postponement is over. The postponement time is also very short, and it is the opinion of the Swedish government that these regulations are not enough to handle the extraordinary problems that businesses are facing at the moment.

We are here to help in any way we can, so do not hesitate to contact us for more information, advice and assistance in applying for postponement of tax payment.

Lina Persson

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Lina Persson
+46 732 04 74 01