On the evening of March 25 the Swedish government presented an expanded crisis package to help Swedish small and medium sized corporations financially affected by covid-19. In short, the new proposals mean the following.
Temporary reduction of employer's contribution and social security contributions
According to the proposal, the employers' contributions will be temporarily reduced for salaries paid 1st of March to the 30th of June 2020. The proposal means that the employers' contributions will be reduced to 10.21 percent (only retirement pension is payable) compared to today's 31.42 percent. The reduction applies to up to 30 employees per corporation and on salaries up to SEK 25,000 per month. This means a tax relief for the corporations of SEK 5,300 per month and employee. For corporations with 30 employees or more, this means a reduced cost of employer contributions of SEK 159,000 per month.
Self-employed people's social security contributions (paid by individual traders) are also reduced correspondingly. This means that no other contribution than retirement pension and two-thirds of the other self-employed person's social security contributions as well as the general payroll tax will be paid during 2020.
The rules are proposed to enter into force on the 6th of April 2020.
Temporary rental discount for exposed industries
For corporations with major difficulties due to covid-19 the state has proposed to cover half of the cost of reducing local rents up to 50 percent of the fixed rent. The proposal applies to certain industries, such as durables shopping, hotels and restaurants. The support is applied for by the landlord afterwards and is valid for the period of 1st of April to 30th of June 2020.'
Measures aimed towards smaller companies (individual traders and physical partners in partnerships)
Opportunity to offset profits in 2019 against future deficits
The Swedish government proposes an opportunity for self-employed people to allocate 100 percent of the taxable profits from 2019 to a so-called tax allocation reserve (up to SEK
1 million). This means that no tax needs to be paid for profits up to SEK 1 million in 2019 and the profits can instead be deferred and offset against any deficits in 2020 or the following year (however no later than 2025).
In order to get back the preliminary tax already paid for 2019, the self-employed person must submit a new preliminary tax return for 2019.
Expanded possibility for a postponement of VAT-payments
According to previous proposals for the possibility of postponement with payment of employers' contributions, deducted preliminary tax on salary and VAT, only VAT reported per month or per quarter was included. The possibility is now extended to include VAT that is reported annually from the 27th of December 2019 to the 17th of January 2021. The rules are proposed to enter into force on the 8th of April 2020 but are applied retroactively, which means that those who have already paid VAT as of the 27th of December can have the tax refunded if a deferral is granted.
Ability to put the business “on hold” (inactive company)
Furthermore, businesses that are put on hold, i.e. inactive companies, during 2020 due to unemployment are exempted from the rule that businesses may only be put on hold once during five years.
A state loan guarantee for small and medium-sized corporations is set up
The Swedish government proposes to introduce a state loan guarantee of SEK 100 billion, which means that the state will guarantee 70 percent of new loans from banks to corporations that are affected by financial difficulties. The guarantee is issued to the banks, which then lend to the corporations. According to the proposal the guarantee applies to loans up to SEK 75 million per recipient (with some exceptions).
The corporations can apply for a loan with a state credit guarantee by contacting their bank.
The crisis package that was presented by the Swedish government is primarily aimed at the smaller companies. On the 24th of March, the Confederation of Swedish Enterprise presented its demands for a crisis package totaling SEK 200 billion why many entrepreneurs were probably hoping for even more powerful efforts by the government. At the press conference the Swedish Minister of Finance Magdalena Andersson commented that she is fully aware that there are demands from the business community for even larger support packages. However Magdalena Andersson pointed out that the government must also think long-term in the current situation. At the same time, Magdalena Andersson opened a door to insert a powerful incentive package when the crisis is over.
Reduced employer contributions means an immediate liquidity relief for corporations as the required legislative process can be relatively quick. Furthermore, the proposal does not imply an increased workload for the corporations in the form of an application with subsequent processing time before payment can be made.
The proposal did not include an adjustment of the cost associated with the possibility of deferment, a cost which has been criticized and debated in recent days. The adjustment was included in the Confederation of Swedish Enterprise Report and would most likely have been a welcomed element. According to previous proposals, the deferrals are charged with an interest rate of 1.25 percent plus a deferred fee of 0.3 percent per commenced calendar month. This corresponds to an external deductible credit cost of 6.6 percent on full utilization of deferrals, which many consider to be quite high. Many corporations are also hesitant to borrow additional money in the form of deferral to cope with their survival, as it is not yet known how long the current situation will last.