Action plan due to the outbreak of Covid-19
On Monday the Swedish government made a second announcement regarding the financial actions that have been deemed necessary due to the outbreak of Covid-19 (Corona Virus). As of now it is clear that the spread of the virus will have significant effects within all areas of the Swedish economy, why an action plan, aiming to lessen the financial damage that the virus outbreak may cause to Swedish companies and employees, was presented.
The government stressed the importance of Sweden’s stable economic situation and if the action plan is fully used it may include approx. SEK 300 billion.
Below we present the measures taken by the government. If you prefer the information in Swedish you can read a Swedish version here.
Financial support to employers and employees
On the 16th of March a short-time furlough (Swedish: korttidspermittering) was implemented by the government. This alternative has been requested by a number of Swedish companies and will serve as an important mean to avoid termination of employees. If employers and employees agree to reduce the number of working hours as an alternative to termination, the government will support employers by partly carrying salary costs. The reduced number of working hours are set to three different levels: 20, 40 or 60 percent. An employee with a monthly salary of SEK 32 700 who agrees to a 40 percent furlough will be able to obtain 92,5 percent of his/her salary, while the employer will reduce costs for salary and employer’s contributions by 52,5 percent - from SEK 43 000 to SEK 20 425. The government will cover the intermediate costs. Furthermore, it should be added that the employer’s salary costs can be reduced further through deferral of payments of employer’s contributions (see below).
Another important measure proposed by the government is to temporarily carry the full cost of companies’ sickness allowances throughout April and May. This is a way to ensure that the increased number of employees on sick-leave due to the outbreak of Covid-19 will have a limited effect on the companies’ profitability.
Credit support through deferral of taxes
The government proposes a deferral for payments of employer’s contributions, employer’s preliminary taxes on salaries for companies and value-added tax (VAT). The deferral will be available for companies that report these taxes monthly or quarterly. The deferral includes up to three months of tax payments and can be granted for a period of up to 12 months. The deferral will enter into force by 7 April 2020. However, the proposed deferral will be retroactively applicable as well, meaning that taxes payed in February and March covering taxes reported in January and February, can be refunded. The proposal is an important measure to make sure that companies keep their liquidity and are able to cover their ongoing costs. It is suggested that an interest charge will apply, and an extension fee will also be incurred. In order for the tax deferral to be granted, the company is required to have a sufficient financial stability and cannot have any larger tax debts.
In addition, the existing possibility for companies to file a revised preliminary income tax return reflecting decreased income should also be mentioned. Filing a revised return would serve as basis for the preliminary tax payments and would hence aim at adjusting remaining tax payments whilst the deferral also can be used to achieve a repayment of funds from the Tax Agency. The Tax Agency does not apply interest nor fees for accepting a revised tax return resulting in reduced future tax payments.
Other financial measurements
At the end of last week, the government made an announcement where they presented initial measures in order to limit the financial stress put upon local authorities, companies and employees. This included financial support to local authorities and regions in order to compensate for the extra ordinary measurements that have been necessary due to the outbreak of Covid-19 as well as increased financial resources to the authorities concerned. The initial proposal also included a contribution of SEK 500 billion from the central bank of Sweden in order to increase lending opportunities for Swedish businesses. Furthermore, the government decided to abolish the current qualifying day of sickness between 11 March and 31 May (sickness allowance during this first day will be paid out by the government) and to increase the financial capacity to offer benefits for infectious diseases.
The government has presented a powerful action plan in order to lessen the financial effects due to the outbreak of Covid-19. As for today, it is difficult to determine whether these measures will be enough to limit the possible impacts on Swedish companies and jobs.
We will closely follow the progress and make frequent updates as soon as more information is available. If you have any questions or concerns about how the government’s action plan will affect businesses and employees, please contact us!
Besök vår globala temasida om COVID-19
Deloitte har tagit fram en internationell temasida om COVID-19 för att hjälpa företag att hantera risker kopplade till rådande situation. Sidan uppdateras löpande med artiklar från Deloittes specialister.Till temasidan
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