Additional measures for small and medium-sized companies (updated 200327)

The Swedish government has already presented a number of emergency measures to mitigate the economic effects of Covid-19. We have seen proposals for new rules on postponement of tax payments, the possibility to partially and temporarily lay off staff, and sick leave costs relief, among other things. The government is now taking things one step further and offers additional relief – mainly for small and medium-sized companies – in the form of temporarily reduced social security contributions, repayment of last year’s preliminary tax and a broadening of the previously proposed rules on postponement of tax payments.

Temporarily reduced social security contributions

The government proposes a temporary reduction of social security contributions for employers during the period March 1st to June 30th, so that only the pension contribution of 10,21 percent remains to be paid for this period. The reduction will be applicable for up to 30 employees and for salaries of up to SEK 25,000 per employee per month, which would result in tax relief of up to SEK 5,300 per employee per month. Thus, the maximum reduction for a company with at least 30 employees would be SEK 159,000 per month or SEK 636,000 for the entire four-month period.

The new regulations will have retroactive effect and hence be applicable for salaries paid in March, corresponding with the social security contributions to be reported and paid April 13th at the latest. The Swedish Tax Agency has advised that employers may request the reduction by checking the box 062 “Reducerad avgift först anställd” in the individual’s part of the payroll return. Thereby, salary up to SEK 25,000 will be levied only with pension contribution for the individual in question.

The initial proposal was that sole proprietors and partners in partnerships would pay the pension contribution and two thirds of the other social security contributions for 2020, without more specific details. However, when the draft bill was presented on March 27th, this had been revised. The current proposal is that sole proprietors and partners in partnerships will only pay the pension contribution on amounts of up to SEK 100,000. This results in a maximum cost reduction of SEK 18,760.

The social security contributions for sole proprietors and partners in partnerships are included in the preliminary tax, which means that this temporary reduction in social security contributions may also lead to lower preliminary tax, provided that a new preliminary income tax return for 2020 is submitted (read more below).

Repayment of last year’s preliminary tax

The government now proposes that the rules on tax allocation reserves for sole proprietors and partners in partnerships be changed temporarily so that the taxable profit for 2019, up to a maximum of SEK 1,000,000, may be allocated to tax reserves. This leads to reduced tax, which in turn means a possibility of having last year’s paid preliminary tax repaid. The taxable profit allocated to tax reserves can be offset against possible future loss but, regardless, needs to be reversed after no later than six years in accordance with the already existing rules.

The draft bill has clarified that the allocation may not lead to a loss, and that there will be an option to instead allocate a maximum amount corresponding to 30 percent of an adjusted positive result for tax reserves. This will lead to a larger deduction in cases where the adjusted result exceeds SEK 3,330,000.

To be able to receive repayment of preliminary tax that has already been paid to The Swedish Tax Agency, a preliminary income tax return needs to be submitted, which is possible up until six months after the end of the income year (meaning up until June 30th for payments regarding 2019). For the possibility to utilize the new rules on larger tax reserve allocations, in cases where the regular income tax return for 2019 has already been submitted, a new income tax return needs to be filled out.

For Swedish readers, more information can be found in our previous article Få debiterad preliminärskatt sänkt eller återbetald.

Broadening of previously proposed rules on postponement of tax payments

The new rules on postponement of tax payments proposed by the Swedish government last week has been the subject of our previous article Cashflow support through postponed tax payments due to corona pandemic. In short, the new regulations open up the possibility to postpone payment of up to three months’ VAT, social security contributions and tax withheld from employee salaries for up to a year. However, according to the previous proposal, postponement would not be granted regarding VAT for businesses reporting their VAT on an annual basis. The government has reconsidered on this issue, and now, many small businesses will be able to postpone VAT that would otherwise be due this spring.

The same conditions apply for the postponement of annual VAT as for the postponement of other VAT, social security contributions and withheld tax from employee salaries. However, for annual VAT, the new regulations will enter into force on April 6th (revised in the draft bill from April 8th) instead of March 30th.

Further, non-tax proposals

Other than the measures referring to tax and social security contributions already described above, there are also proposals for the following:

  • A government loan guarantee will be introduced where the state guarantees 70 percent of new bank loans to companies that are having financial issues due to Covid-19 but that are in otherwise good shape. The guarantee is made to the banks by the government, and the banks in turn issues guaranteed loans to the businesses. This measure is mainly aimed at small and medium-sized companies, but there are no real restrictions regarding company size for the possibility to receive a guaranteed loan. However, each business may normally not loan more than SEK 75,000,000. This proposal will be processed promptly, and businesses will be able to contact banks to apply for the loans. No interest rate payments will be due during the first twelve months.
  • Support aimed to facilitate and speed up renegotiations of rent will be distributed in the form of rent reduction where the state carries 50 percent of the reduction, up to 25 percent of the fixed rent (previously up to 50 percent of the fixed rent was proposed). The support may be applied for after the fact and will be applicable for the period April 1stto June 30th. The purpose of this is to reduce costs for retail, hotels, restaurants and certain other sectors that are suffering from financial issues due to the coronavirus outbreak.
  • Businesses that are forced to go dormant during 2020 due to unemployment will be exempted from the rule that this is normally only allowed once during a five-year period.

The proposals will soon be referred to the Swedish parliament in an additional budget amendment. We will keep you updated. Do not hesitate to contact us if your business is in need of assistance or advice – we have experts in these areas that are ready to help.

Lina Persson

Click here to go to the Swedish version of this article

Changes to this article have been made after the draft bill that entails some of the measures above was presented 2020-03-27.

 

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Lina Persson
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