Avoid a tax hit this fall

In 2020, the Swedish Tax Agency introduced a temporary possibility of deferral of tax payments to support entrepreneurs who suffered financially during the pandemic. The aid has been extended in instalments but on 12 September this year it is time to start cashing in the tax. This is something that can cause problems for companies that do not apply for installment payments on time.

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The corona pandemic was tough on society at large but one group that was hit particularly hard was the country's business owners. While revenues slowed down, or at worst stopped off entirely, costs were made up. Therefore, a series of measures were introduced to help entrepreneurs financially during a deferred period. One of these measures was that the Swedish Tax Agency introduced a temporary reprieve which gave the possibility to defer payment of employer contributions, deducted tax and VAT.

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How the forbearance worked

The waiver could be applied for the accounting periods January 2020—January 2021, October to December 2021 and April to June 2022 and was divided into several levels. At the initial stage, companies could apply for a grace period of up to 12 months, but at the latest until 12 September 2023 (17 January 2024 for companies that report VAT once a year). After that, companies could apply for an extension of grace for up to a further 12 months until 12 September 2024 (17 January 2025 for companies that report VAT once a year). Thus, depending on when companies applied, they have been able to obtain a grace period of up to 24 months for the tax payments.

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It happens when the forbearance expires

When a company has had a temporary grace period of 24 months, or shorter if limited by the closing dates, it will have to pay the deferred tax. The Swedish Tax Agency sends out information about 30 days before the end date of the deferral with information about when the money is due and how much interest and fee will be added (the grace was not free of charge, but there will be interest on expenses and a grace fee). For all companies with monthly or quarterly accounts that applied for an extension of the forbearance beyond 12 September 2023, this will be around 12 August.

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Postponement can be paid in part

Fortunately, the vast majority of companies do not have to pay the full amount in one fell swoop. When the extended grace period expires, companies may apply to extend the period of grace for up to 36 more months, provided that an installment plan is established. However, in order to apply for an installment plan, the company must have had a temporary grace period of 24 months, or as far as possible if limited by the end dates.

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The instalment can be divided into at least two instalments and a maximum of 36 instalments over a period of maximum 36 months. However, the bulk of the repayment must occur during the first part of the installment plan.

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Read more about the temporary deferral of tax payments and how to apply for an installment plan at Swedish Tax Agency's website.

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