Has your company difficulties to pay taxes and fees in time due to COVID-19? Below is an update from Setterwalls on the possibility to apply for deferred tax payments in accordance with the government's crisis package.
Originally published 8 April 2020, updated on 16 April and 8 June 2020.
Setterwalls has earlier published an article about the government’s proposal of new possibilities to apply for deferred tax payments due to COVID-19. Apart from the proposed interest rate level, the proposal was approved by the Riksdag (the Swedish parliament) and entered into force on March 30 and April 6, 2020. A new proposal from the government covering a lower interest rate level has been approved by the Riksdag and entered into force on June 1, 2020.
What taxes are covered by the rules?
The possibility of deferral and thus postpone the payment of tax or fee to a later date covers the payment of
• social security charges,
• preliminary tax on wages, and
• value added tax (reported monthly, quarterly or yearly).
The company can at most be granted a deferral with the entire preliminary tax for the period and the entire amount reported in the PAYE report/employer tax return and the VAT tax return for the deferred period to which the application relates. The deferral cannot be applied for upcoming periods, but the company may apply several times for a maximum of three elective periods each with respect to deducted tax and employer contributions and VAT.
How long time can you get a temporary deferral?
The possibility of deferral applies to taxes and social security charges that are reported for up to three accounting periods during January - September 2020. For VAT that is reported quarterly during the specified period or annually from December 27, 2019 to January 17, 2021, the company may be granted one accounting period.
Temporary deferral can be granted to the company for up to one year from the date the Swedish Tax Agency grants the deferral, which means that the due date is postponed for a maximum of one year from this date. Should the company want the deferral to be terminated (in whole or in part) before the new due date, the company can request this from the Swedish Tax Agency.
With retroactive application, companies that have paid tax for January - March 2020 can apply to have the tax refunded from the Swedish Tax Agency. Already paid taxes are repaid by crediting to the company’s tax account.
Conditions for temporary deferral
Deferral is granted only to companies that do not mismanage their finances or are otherwise rogue and do not have large tax liabilities.
NEW - Interest on the deferred amount
The Riksdag rejected the Government's first proposal for interest rates and deferral fees for the temporary deferral. The first proposal corresponded to a deductible interest rate of 6.6 per cent per year. On April 14, 2020, the government announced an adjusted proposal with a reduced interest rate which has now been approved by the Riksdag.
Only 1.25 per cent interest of the granted deferred amount will be charged during the first six months of the deferral period. Thereafter, a deferral fee of 0.2 per cent of the deferred amount per commenced calendar month will be added up to the month of which the company should pay the deferred taxes. This corresponds to a deductible interest rate of 3.1 per cent per year, meaning roughly half of the total interest rate compared to previous proposal. The interest and deferral fee will be paid by the company at the same time as the deferred tax.
Representative responsibility (Sw. företrädaransvar) for temporary deferral with tax payments
The Swedish Tax Agency has stated that, as a starting point, the agency will not apply for such representative responsibility (Sw. företrädaransvar) if the company has been granted temporary deferral of tax payments according to the government's crisis package. Read Setterwalls’ article on representative responsibility here (available only in Swedish).
Applying for deferred tax payments
- The starting point for companies applying for temporary deferral under the new rules due to COVID-19 is that such deferral should be granted unless special reasons contradict it. Companies can therefore reasonably expect to be granted a temporary deferral, even if the application was submitted after the original due date.
- The application for temporary deferral of tax payments is submitted on “Mina Sidor” on the Swedish Tax Agency's website or by submitting the form "SKV 4839 - Tillfälligt anstånd med inbetalning av skatt i vissa fall, med anledning av coronaviruset”.
- Contrary to what was previously the case when applying for deferral with tax payments, the company does not have to show that the company meets certain deferral conditions or show how the company will solve the payment difficulties. Other than the company's contact details, the following information should be stated in the application:
- Accounting period
- The sum of social security charges/deducted tax/VAT
- Ordinary due date
- Deferment period
- Deferred amount
The day after the Swedish Tax Agency has granted a temporary deferral, the company can see the deferred amount in the company's tax account.
Debts to the Swedish Enforcement Authority (Sw. Kronofogden)
Due to the large volumes of applications for temporary deferral of tax payments and the short time for handling them, the Swedish Tax Agency will not submit any tax debts for recovery to the Swedish Enforcement Authority in connection with the ordinary reconciliation in April. Therefore, with regard to payment claims that should have been paid by March 26, the Tax Agency postpones the payment date to April 27. The ordinary payment date for taxes and fees according to tax returns on April 14 is not affected by the decision not to hand over debts to the Enforcement Authority.
Setterwalls continuously monitors the development of the government's crisis package for companies due to COVID-19. For questions about the above as well as advice on deferment of payment of tax and other opportunities to improve your company's liquidity during the corona pandemic, you are welcome to contact Setterwalls’ tax specialists.
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.