Deloitte Legal Guide to Cross-Border Secured Transactions


Three questions regarding dividend distributions and conversion aid

Published: 2020-10-16

The conversion aid was introduced during the spring 2020 to ease the financial situation that Swedish companies faced after the corona virus outbreak. There is currently a proposal to extend the conversion aid for an additional three months. Several questions have arisen regarding eligibility for conversion aid if for example, a limited liability company has decided on a dividend distribution. Deloitte Legal answers three frequently asked questions about conversion aid.*

What does the extension of the conversion aid imply? 

The conversion aid is a temporary aid that was introduced for Swedish companies that experienced a turnover loss in the spring of 2020 due to the corona virus. 

Currently, the Swedish government has proposed an extension of the conversion aid to include the months of May, June and July. For aid to be granted for May 2020, a company must have a turnover loss of more than 40 percent compared to May 2019. For aid to be granted for June and July 2020, a company must have a turnover loss of more than 50 percent compared to June and July 2019.

The size of the conversion aid is dependent on the fixed costs incurred by the applicant during the specified aid period.

What can disqualify a company from eligibility to receive conversion aid? 

To ensure that the companies receiving conversion aid are in actual need of the aid, the Swedish Tax Agency considers several factors. 

One of these factors is value transfers decided on or carried out by a company during the period of March 2020 to June 2021. 

Examples of disqualifying value transfers are: 
• Dividend distributions
• Buy back of the company’s own shares
• Reduction of share capital or reserve fund for repayment to shareholders

It should be noted that depending on the size of the aid, a statement from the auditor is also required to ensure that the requirements for conversion aid are indeed met. 

What has the Swedish Tax Agency stated about decisions on dividends and foreign parent companies?

The prohibition of decisions or enforcement of decisions on certain value transfers, such as dividend distributions, during the period of March 2020 to June 2021 also applies to the parent company of an applying company. If the parent company of the applying company, or its parent company in turn, has decided or executed a decision on any of the disqualifying value transfers, it may disqualify the applicant from receiving conversion aid. This applies even when the parent company is based in another country and is governed by laws in other countries. 

The significant moment for whether a company is to be considered a parent company or not, is the time for when the decision for dividend was taken or the date of which the dividend decision was enforced.  

If an enterprise executes or decides on a disqualifying value transfer, the applicant is obliged to report this to the Swedish Tax Agency and may subsequently need to repay previously received aid. 


*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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