The Law Council approves the proposal to increase the support but questions the clarification of the requirement for "serious financial difficulties".
As mentioned in a previous TaxNews article, the Government presented a new law council referral on May 7. On May 11, the Law Council issued an opinion on the content of the referral, accepting the Government's proposal to temporarily increase the support to include an 80 percent reduction in working hours during the period May 1 to July 31, 2020. At the same time, the Law Council questions the Government's proposal to clarify the requirement for "serious financial difficulties". The Government proposes, as mentioned earlier, to add "when assessing whether the employer has temporary and serious financial difficulties, particular consideration should be given to whether the employer simultaneously carries out stock dividends or other similar payments” in the legislative text, which according to the Law Council cannot be considered to add any value to the already applicable law.
The Law Council emphasizes that the existing legislation already provides the Swedish Agency for Economic and Regional Growth (sw. Tillväxtverket) with the opportunity to consider circumstances such as the existence of dividends on the basis that a condition for granting aid is that the company must have experienced temporary and serious financial difficulties. If a company makes a profit distribution during the COVID-19 crisis, this should be a clear indication that the company itself has not considered itself to suffer serious financial difficulties, which may justify a rejection of the support.
The Law Council states that such an extension in the legislation rather creates problems in the application of the law, since it does not clarify what should be considered to fall under "share dividends or other similar payments" despite the request for a clarification during the drafting of the legislation. Instead, this wording raises several basic questions, including the relation to different types of value transfers to co-owners and how to regard group contributions in this context.
As stated in a previous TaxNews article, the fundamental question is what is considered to fall under "stock dividends or other similar payments", which the Law Council also emphasizes. It is still unclear whether the size of a dividend has any impact on the assessment as well as what is referred to with similar payments. As this is not further clarified in the Law Council's remit, the legal application of such an addition to the law may become unclear and inexplicit.
Worth noting is also the Law Council's view that the Swedish Agency for Economic and Regional Growth already has the possibility to consider any dividends within the company in the light of the applicable law, a view that we have already stated in a previous TaxNews. The Law Council's questioning of the current supplement will hopefully lead to clarification on the part of the Government in this important issue for the companies.
KPMG continuously monitors the ongoing legislative work and the Government's processing of the Council's opinion.
Feel free to contact us if you have any questions about the regulations for short-time work.
The article in Swedish
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