SWEDEN: COVID-19 VAT IMPLICATIONS

Apr 1, 2020 | COVID-19

SWEDEN – Update 29th June

New information due to Covid-19 regarding VAT treatment of bad debts

The Swedish Tax Agency has published a new guideline with the purpose to facilitate companies’ VAT treatment of bad debts. We explain what this means.

In the ongoing pandemic, many companies suffer from economic losses due to a massive decline in sales. In addition, more and more companies are having difficulties paying their invoices, which means that many suppliers will face bad debts. Normally suppliers must meet high standards in order to reduce previously reported VAT on bad debts. For instance, the supplier must prove that the buyer has no ability to pay. In short, the new guideline means that it, under certain circumstances – due to covid-19 – can be assumed that the buyer has no ability to pay.

According to the Swedish Tax Agency, it can be assumed that the buyer has no ability to pay a debt, if the following conditions are met:

  1. the buyer is a legal or natural person independently carrying on economic activity
  2. the invoice is issued 1 February 2020 – 31 December 2020
  3. the invoice is at least three months overdue
  4. a written reminder letter has been sent
  5. the seller and the buyer are not associated enterprises.

If all of the requirements are fulfilled the supplier is allowed to lower the taxable amount and reduce the previously reported output VAT on the supply. Also, when a receivable qualifies as a bad debt, the supplier does not have to issue a credit note to the buyer.

Should the supplier receive payment at a later stage, partly or in full, output VAT must be reported for the incoming payment.

 

Source Credit – pwc Sweden

 

SWEDEN – Update 24th June

New information due to covid-19 regarding VAT treatment of bad debts

The Swedish Tax Agency has published a new guideline with the purpose to facilitate companies’ VAT treatment of bad debts. We explain what this means.

In the ongoing pandemic, many companies suffer from economic losses due to a massive decline in sales. In addition, more and more companies are having difficulties paying their invoices, which means that many suppliers will face bad debts. Normally suppliers must meet high standards in order to reduce previously reported VAT on bad debts. For instance, the supplier must prove that the buyer has no ability to pay. In short, the new guideline means that it, under certain circumstances – due to covid-19 – can be assumed that the buyer has no ability to pay.

According to the Swedish Tax Agency, it can be assumed that the buyer has no ability to pay a debt, if the following conditions are met:

1. the buyer is a legal or natural person independently carrying on economic activity

2. the invoice is issued 1 February 2020 – 31 December 2020

3. the invoice is at least three months overdue

4. a written reminder letter has been sent

5. the seller and the buyer are not associated enterprises.

If all of the requirements are fulfilled the supplier is allowed to lower the taxable amount and reduce the previously reported output VAT on the supply. Also, when a receivable qualifies as a bad debt, the supplier does not have to issue a credit note to the buyer.

Should the supplier receive payment at a later stage, partly or in full, output VAT must be reported for the incoming payment.

 

Source Credit – pwc

 

SWEDEN – Update 28th April

Budget 2020 Relief measure: deferral for the remittance of VAT for taxpayers that remit VAT on an annual basis

The Swedish parliament is considering a draft bill for the 2020 Spring Budget, which was presented on 15 April 2020. The bill primarily includes measures to fund efforts to combat the COVID-19 pandemic and provide relief and support the economy. One of the relief measures includes deferral by up to one year for the remittance of VAT for taxpayers that remit VAT on an annual basis.

 

Source Credit – Orbitax

 

SWEDEN – Update 17th April

 The Government will take measures to support financially affected businesses with late penalty and interest fine easements on VAT payments for up to one year. The new rules apply from 7th April 2020, but can be applied retroactively from 1st January 2020.

 

Source Credit – Accordance VAT

 

SWEDEN – Update 9th April

Businesses below SEK 3mio yearly turnover may switch to cash scheme, SMEs below 1million may extend reporting period

Businesses below SEK 3million annual turnover may switch to VAT cash scheme. Small companies below SEK 1million can apply for extending VAT reporting period.
Update 30 March – timings of proposals below are now confirmed as coming into force on 30 March 2020.

Sweden has become the latest country to introduce Value Added Tax easement measurers to help businesses cope with the economic downturn of the Covid-19 crisis.

As part of a kr 300 billion (Swedish Crown) support package, companies may delay VAT payments and other tax settlements for up to 12 months. The measure will be backdated to January 2020, can last until September 2020 for quarterly VAT reporters. For annual VAT payers, the measure is introduced between 27 December 2019 and 17 January 2021.

There will also be a range of loan packages, salary support and direct measures for the airline industry.

 

Source Credit – Richard Asquith (Avalara)

 

SWEDEN – Update 8th April

COVID-19: VAT accounting during the corona crisis

 The Swedish Tax Agency has announced that companies may have the opportunity to change their VAT account due to the corona crisis. This means that companies can change their accounting method or accounting period to temporarily strengthen their liquidity.

 

Source Credit – PWC

SWEDEN – Update 31st March

  • Companies can defer payment on employer’s social security contributions, preliminary tax on salaries and VAT that are reported monthly or quarterly. The payment respite covers tax payments for 3 months and is granted for up to 12 months. The rules came into force March 30, 2020, but are applied retroactively from January 1, 2020. That the rules are applied retroactively from January 1, 2020, implies that companies that have paid the above taxes to their tax account from January 1, 2020 to March, 2020 are eligible to have that tax refunded from the Swedish Tax Agency.
  • The taxes deferred must, however, be repaid including interest, by the taxpayer within 12 months. It should be noted that the refund can cover a maximum of 3 months paid taxes. Interest of, at present, 1.25 percent and a deferral fee of 0.3 percent per commenced calendar month, will be charged for granted deferred amounts. Please note that the interest is non deductible, i.e. the interest for a company that has a deferral is equivalent to a non deductible interest of up to 6.6% yearly. The government has announced that it follows the question of the size of the interest rate and may act to adjust the interest rate if the current crisis takes a more extended course.
  • Deference will not be granted to companies that misperceive their finances or are otherwise rogue. Nor can deferrals be granted to companies that have larger tax liabilities.
  • Please note that the Swedish Government has proposed to introduce a possibility for businesses that declare their VAT annually for deferral with payment of VAT that is to be declared during the period December 27, 2019 – January 17, 2021. The possibility of deferral applies for an accounting period, i.e. a tax year. Deferment can be granted for up to one year.
  • Proposed tax measures:
  • Possibility for businesses that declare their VAT annually for deferral with payment of VAT that is to be declared during the period December 27, 2019 – January 17, 2021. The possibility of deferral applies for an accounting period, i.e. a tax year. Deferment can be granted for up to one year.
  • Temporary reduction of employer’s social security contributions for the period March 1, 2020 to June 30, 2020, so that only the old age pension contribution is paid.
  • A central government loan guarantee to make it easier for companies to access financing, i.e. the central government will guarantee 70% of new loans banks provide to companies that are experiencing financial difficulty due to the COVID -19 virus but that are otherwise robust.
  • New system of support in the event of short -time work. The proposal implies that the central government will cover three quarters of the costs when staff working hours are reduced, compared with short – time work, where central government covers one third of the costs. This proposal means that employers’ wage costs can be halved, while employees receive more than 90% of their wage. The aim is for affected companies to be able to retain their staff and rapidly gear up again when the situation improves

Source Link here

SWEDEN – Update 31st March

  • Sweden to introduce deferral of VAT payments (for up to 3 months of VAT payments)
    • The Swedish tax authorities will not impose fees on revised VAT return submissions

Source Link here

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