Deloitte Legal Guide to Cross-Border Secured Transactions

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Ordinance on conversion aid  

Published: 2020-07-01

On July 1 2020, the Conversion Aid Act will enter into force. So far, only summarizing information on the conversion aid has been announced, but now the government has published the ordinance that regulates the aid more closely. We give an overview of the relevant details of the ordinance.*

Utforska innehåll

Application requirements

There are a number of specific requirements to be met in order for an applicant to benefit from the support;

1. The company's total net turnover for March and April 2020 shall be less than 70 percent of total net turnover for March and April 2019.

2 The decline in net turnover shall be "almost exclusively" caused by the effects of the spread of covid-19.

3. The company's net turnover must have amounted to at least SEK 250,000 in the financial year ending before January 1 2020.

4. During the period March 2020 to June 2021, the entity may not decide on or execute a decision on the distribution of profits, compensation, acquisition of its own shares or reduction of the share capital or the reserve fund for repayment to shareholders. If the company is part of a group, the above-mentioned prohibition also applies to the parent company of the company that is part of the group. 

5. The company must have done what is reasonably required to exhaust the possibilities for insurance, damages and similar compensation, as well as other state aid for such loss of turnover or costs on which the aid is calculated.

The application for aid must be submitted to the Swedish Tax Agency by August 31, 2020. Conversion aid may not be granted if, at the time of examination of the application, the company can be considered insolvent, has a business ban or has tax or fee debts which have been handed over to the Enforcement Authority for recovery. 
 

Auditor's statement

The application for conversion aid must have an auditor’s statement attached. The auditor shall give a statement on the following information in the company's application:

1. the decrease in the company's net turnover when comparing net turnover for March and April 2020 and net turnover for the corresponding period of the previous year;

2. whether the conditions set out in p.2-4 above are met;

3. the sum of the company's fixed costs for March and April 2020;

4. the extent to which the company has received insurance compensation, damages and other similar compensation for such loss of turnover.

The auditor shall examine accounting material, summaries and other supporting documents on which the information in the application is based. The audit shall be carried out with professional skepticism and be as thorough and comprehensive as good auditing practice requires. If the requested conversion aid amounts to at least SEK 300,000, the auditor shall certify this information with reasonable certainty. The requirement for the auditor’s statement referred to in the first subparagraph does not apply if the requested conversion aid is less than SEK 100,000.
 

The calculation of the aid

Conversion aid is provided at an amount equal to a proportion of the company's fixed costs for March and April 2020. The proportion of fixed costs is calculated as the percentage decline in net turnover for March and April 2020 compared to March and April 2019, multiplied by 0.75.

The proportion of fixed costs can be calculated according to the following formula:

((net turnover for March and April 2019 – net turnover for March and April 2020) / net turnover for March and April 2019) × 0.75

Conversion aid is provided with a maximum of SEK 150 million per eligible company. If several companies in a group of companies are eligible for conversion aid, the maximum aid relates to the whole group and is allocated to the respective eligible companies.
 

Fixed costs

The Ordinance defines and exemplifies the term "fixed costs" as the cost of:

1. rent and leasing if the term of the contract is at least six months,

2. interest rates,

3. depreciation of fixed assets and necessary repairs and maintenance of such assets,

4. property tax and municipal property tax,

5. consumption of water and electricity, sewage, internet and telephone, and heating of premises,

6. services related to cleaning, waste disposal, alarm and surveillance,

7. services relating to the washing of textiles, if the term of the contract is at least three months,

8. insurance against financial loss through property damage, liability or other property damage,

9. animal feed,

10. franchise fees,

11. public-law authorizations, as well as periodic supervisory and control fees and,

12. royalties and license fees for intellectual property rights.

Fixed costs do not include costs that are possible for the company to avoid by measures that may reasonably be required in the event of a sudden decline, VAT receivable, are attributable to an activity carried out abroad, corresponded by a revenue from a company of the same group or are attributable to non-business activities.


How is the application submitted?

An application for conversion aid must be submitted electronically to the Swedish Tax Agency. If, at the time of the application, several applicants are part of a group, the applications shall be submitted at the same time. These companies shall also provide information on the group structure.

 

* The information shall be considered neither advisory nor exhaustive. For advice in individual cases please contact us via the contact details below.

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