Work with temporarily reduced working hours and salary
On 11 March 2020, the Swedish Government proposed a scheme to enable employers to temporarily apply special provisions on short-term work in 2020, known as work with temporarily reduced working hours and salary (Sw. Korttidsarbete) (“RWH”).
The new temporary proposal entails that during 2020 the State will bear a greater proportion of the costs for the RWH, compared to the permanent state aid system for RWH. The State will bear up to three-quarters of the costs for RWH. The employee and the employer will share the remaining quarter. In this way, employees can reduce working hours but still receive more than 90 percent of salary. The aim is for affected companies to be able to retain their staff and get back to business quickly when the situation turns.
There are three fixed levels for reduced working hours: 20, 40 or 60 percent. The employer’s costs are reduced by 19, 36 and 53 percent respectively. State aid for RWH will only be provided at these three levels. An agreement on RWH during a contractual term shall amount to 20, 40 and 60 percent, respectively, and the salary reduction for each employee will be 4, 6 and 7.5 percent, respectively.
On 14 April 2020, the Swedish Government announced that it will enhance flexibility in the system, so that working hours can be reduced by up to 80 percent, resulting in a 72 percent cost reduction for the employer. At this level, the employee sees a salary decrease of 12 percent. It is proposed that the option for 80 percent RWH will come into force on 1 June and can be applied during May, June and July 2020. The Swedish Parliament is expected to consider the proposal in May.
To qualify, the employer must have experienced temporary and serious financial difficulties due to a factor beyond the employer’s control and which could not reasonably have been foreseen or avoided, and the employer must have used other available measures to reduce the personnel costs.
A further prerequisite for being entitled to aid from the State is that application of RWH is contemplated in collective bargaining agreements or in agreements concluded with the employees. For employers who are not bound by collective bargaining agreements, at least 70 percent of the employees within a business unit covered by the state aid must participate in RWH during the relevant month. The working hours and salary reductions that have been agreed must be the same for all participating employees in the business unit.
The aid applies to all employees who were paid in the three months before the month the application for aid is approved (the so-called comparison month) and to employees for whom the employer was obliged to pay employer contributions during the support month.
The Swedish Agency for Economic and Regional Growth (“ERG”) is the administrative authority and the application has been open since 7 April 2020. However, RWH support can be applied for retroactively from 16 March 2020. An application for preliminary aid must have been received by the ERG within two calendar months from the end of the support month. Otherwise, aid may not be provided for the support month. The rules will be applied throughout 2020.
The Swedish Parliament largely approved the Government’s proposal on 2 April 2020. However, the Finance Committee saw the need for certain changes and clarifications in relation to the Government’s proposal. Therefore, the following parts of the proposal are not yet fully established:
(i) the exemption for employers whose activities are mainly funded by public funds – the Finance Committee proposes that this exemption shall be suspended temporarily;
(ii) the exception for family members – the Finance Committee proposes that the family member exception shall be suspended temporarily;
(iii) the applicability of the law to staffing and consulting companies; and
(iv) clarification on share dividends etc. in companies applying for aid – the Finance Committee considers that it cannot be considered justifiable that employers who receive state aid are able, at the same time, to declare dividends and other similar payment.
Increased State responsibility for sick pay costs and delayed medical certificate requirements
The new sick pay rules entail that the State temporarily assumes the full cost of sick pay for two months. All employers are covered by the rules. The new rules apply from 1 April to 31 May 2020.
All employers are covered by the proposal. Self-employed persons who run limited liability companies are also covered. Self-employed persons who are registered for F-tax (Sw. F-skattsedel) will receive compensation for the qualifying days 1-14. The compensation is paid through a standardised sickness benefit.
The Government has also proposed that the requirement for medical certificates will be abolished. This means that anyone who is ill will be able to stay home from work for up to 14 days without the need to produce a medical certificate. Employers and the Social Insurance Office do not need any medical certificate to pay sick pay during the first 14 days. The rules apply retroactively from 13 March 2020.
The Swedish Parliament approved this proposal on 2 April 2020.
Temporarily reduced employer fees and deductibles
The Swedish Government has proposed a temporary reduction in employers’ fees and, for sole proprietors and natural persons who are partners in general partnerships, deductibles. This aims to limit the financial consequences for individual companies as a result of the spread of the corona virus, as many companies will suffer a sudden loss of income while remaining liable for wage costs.
The proposal covers all companies with employees and entails that employers will only need to pay pension contribution on the remuneration paid during the period 1 March to 30 June 2020. This reduction applies to up to 30 employees, and up to a salary sum of SEK 25,000. The part of the salary that exceeds SEK 25,000 is not covered by the temporary reduction. This means that the employer receives financial relief of a maximum of SEK 5,300 per employee per month.
For sole proprietors and natural persons who are partners in general partnerships, the proposal means that they will only pay pension contributions for income received during the period 1 January 2020 to 31 December 2020. The reduction in deductibles and general payroll taxes applies to a contribution basis of up to SEK 100,000. The rules entered into force on 6 April 2020.
The Swedish Parliament approved this proposal on 2 April 2020.
Postponement of tax payments due to covid-19
On 16 March 2020, the Swedish Government presented proposals for a number of budget measures in response to the new coronavirus, covid-19. Among other things, on application to the Swedish Tax Agency, companies may be permitted to postpone tax payments due to their tax account. Relevant tax payments are the deducted provisional tax on salaries, employers’ fees and VAT.
The period of postponement shall be limited to a maximum of 12 months and shall relate to a maximum of three months’ payments of provisional tax, employers’ fees and VAT each. For VAT that is reported quarterly, postponement may be granted for a maximum of one accounting period. For VAT that is reported yearly, postponement may be allowed for a maximum of one tax year.
The measure entered into force on 30 March 2020, with retroactive effect from 1 January 2020. Postponement of VAT that is reported yearly entered into force on 6 April but applies to VAT reported from 27 December 2019 through 17 January 2021.
If postponement is granted for already paid taxes and/or fees, an amount corresponding to this tax and / or fee will be credited to the taxpayer’s tax account. This may mean that the taxpayer receives a surplus in his tax account which can be paid out. The postponed amount must be repaid no later than the due date (according to a certain provision of the Tax Procedure Act) falling closest to the expiry of the postponement period.
The postponement shall be granted unless there are special reasons against it. This means that the Swedish Tax Agency will make an assessment in each case. Companies with poor compliance history, and those with larger tax liabilities, will not be granted postponement.
An interest rate corresponding to the base rate, currently 1.25 percent, will apply from the day following the original due date of the postponed amount up to the postponed due date. In addition, a postponement fee of 0.3 percent on the granted postponed amount will be charged per calendar month, from the month after the postponement is granted up to the month when the postponed amount shall be paid at latest. The cost rate and the postponement fee together correspond to a deductible interest rate in a limited company of 6.6 percent. The postponement fee shall be paid no later than the due date for the postponed amount.
Personal payment responsibility
According to Chapter 59 Section 12 of the Tax Procedure Act, representatives of a company may become subject to personal payment liability (so-called “representative responsibility”) if they fail, either intentionally or through gross negligence, to pay taxes or fees due. The obligation to pay is related to the time at which the tax or fee should originally have been paid.
However, the Tax Agency has published a legal guidance stating that, in this situation, the Tax Agency does not intend to seek redress for unpaid taxes and fees covered by the regulations under the representative responsibility provision, except where companies have obviously abused the opportunity in violation of the purpose of the postponement provisions.
The Swedish Parliament largely approved the proposal on 2 April 2020. The Finance Committee believes however that the overall rate for postponed tax payment of around 6.6 percent is too high and that the Swedish Government should urgently return with a proposal to reduce the overall interest rate.
Discount for rental costs in exposed industries
On 25 March 2020, the Swedish Government submitted a proposal for support measures aimed at lowering rental costs for companies in vulnerable sectors, such as the grocery and hotel and restaurant industries. As of 17 April, there is a regulation in place and a summary of the sectors proposed to be covered by the rental subsidy based on the Swedish Tax Agency’s SNI codes has been published: www.regeringen.se.
The proposal is that landlords who agree to lower rents during the months of April, May and June can receive support from the State. The State will bear 50 percent of the rent reduction up to 25 percent of the fixed rent. Utility costs, e.g. electricity, heat and water, are not covered by the support measures. The support must be able to be applied for by the landlords afterwards via the county administrative boards, provided that an agreement on rental discount is concluded before 30 June. An application for support must have been submitted to the county administrative board no later than 31 August 2020. The regulation has been approved by the European Commission and entered into force on 17 April. Further details regarding the regulation can be found here.