Crisis package for Swedish companies

Setterwalls explains the government’s new crisis package, presented on March 25, 2020: with an ambition to mitigate the economic effects of the coronavirus, the government has now proposed further measures aimed for Swedish entrepreneurs.

Updated on 3 April 2020

The proposals are based on an agreement between the Swedish Social Democratic Party, the Center Party, the Liberal Party and the Green Party and briefly include measures regarding the following:

• Central government loan guarantee for affected SMEs to be established
• Temporary reduction of employers’ social security contributions
• Temporary discount for rental costs in vulnerable sections
• Measures targeting small enterprises

The Committee on Finance endorsed the government’s proposal of new rules regarding taxes on April 2, 2020. On April 3, 2020, the Riksdag (the Swedish parliament) agreed to the government’s proposal.

A central government loan guarantee for affected small and medium-sized enterprises will be established
A central government loan guarantee has been for the financing needs of small and medium-sized enterprises (SME). The loan guarantee means that the central government will guarantee 70 percent of new bank loans to companies that have suffered financial difficulties due to the corona virus, but which are otherwise robust. The guarantee is issued to the banks, which in turn issue guaranteed loans to the companies. As a general rule, companies may borrow up to 75 million. Companies apply for a loan with a government credit guarantee from a lending bank. Although the proposal primarily targets small and medium-sized companies, there is no formal limit on company size to participate in the program. According to the proposal, the borrower will be granted deferral of interest payments during the first 12 months.

It is yet to be determined when the rules are proposed to enter into force. The Riksdag (the Swedish parliament) approved the proposal on April 1, 2020 and the government has commissioned to the Swedish National Debt Office to prepare and implement the guarantee program.

Temporary reduction of employers’ social security contributions and individ-ual contributions
The government proposes a temporary reduction of employers’ social security contributions during the period March 1 – June 30, 2020. The reduction means that only the old age pension contribution of 10.21 % is paid. The reduction is proposed to apply to up to 30 employees per company (regardless of the number of employees in the company), according to the Government Offices, and on that portion of the employee’s wage that does not exceed SEK 25,000 per month. This means that the employer receives a maximum of SEK 5,300 per employee per month, i.e. a maximum of SEK 159,000 per company and month.

The rules enter into force on April 6, 2020.

Temporary discount for rental costs in vulnerable sections
It is proposed that companies in vulnerable industries such as hotels, restaurants and durable consumer goods and certain other activities shall be offered temporary rental reductions. The approach is that central government will cover 50 per cent of the rent reduction up to 50 per cent of the fixed rent.

The support is proposed to apply for the period April 1 until June 30, 2020 and the support can be applied for retrospectively.

Measures targeting small enterprises
In addition, further measures are proposed that are directly intended to stimulate smaller companies and sole proprietors. 

It is proposed that the rules for tax allocation reserves will be temporarily changed so that sole proprietors who are severely affected due to virus outbreak will receive tax cuts. The proposal means that 100 per cent of the taxable profits for 2019, up to SEK 1 million, can be set aside in the tax allocation reserve, which can then be set off against possible future losses. Entrepreneurs can amend their preliminary income tax returns to receive a refund of preliminary taxes paid into the tax account for tax year 2019, which can be done until the end of mid-2020. If the entrepreneur instead claims a provision in the income tax return, the refund is made in the form of a tax refund. 

The rules enter into force April 7, 2020 and will be applied retroactively for 2019.

Also, the previously presented proposal for additional possibilities to defer tax payments, which we previously commented, is now proposed to be extended in such a way that VAT reported annually from 27 December 2019 to 17 January 2021 will also be covered by the proposal.

If you have any questions regarding the government’s new crisis package, you are welcome to contact one of Setterwalls’ experts.

The content is a general description of informative nature only and is not legal advice to use as a basis for assessments in an individual case.