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Sweden: Group contributions for FY 2019, short-term work allowance support during 2020 (COVID-19)

Sweden: Group contributions, short-term work

The Swedish Agency for Economic and Regional Growth (Tillväxtverket) on 12 June 2020 issued a press release addressing the treatment of group contributions for entities receiving short-time work allowance support. The agency’s release clarifies that group contributions for FY 2019 do not affect the possibility of receiving such support during 2020.

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The Swedish government previously announced measures to mitigate the economic effects of the coronavirus (COVID-19) pandemic—including measures intended to support “short-time work” and rules on short-term work, provisions concerning value transfers or dividends related to short-time work allowances, and a clarification of the requirement “serious financial difficulties.” Read TaxNewsFlash

In following up, the agency’s press release states that the regulations for short-time work allowance "required a comprehensive interpretation of existing legislation" and that "the question of value transfers is complex" and this in turn has caused the agency to continue to develop and clarify its answers.

The agency noted "the main rule is that a company cannot receive support for short-time work and at the same time make value transfers during the support period or in close connection with it" because of "the basic condition for a company to be entitled to support for short-time work, is that the company suffer serious financial difficulties.” However, an assessment must be made in each situation, and it is up to the applicant to prove that it has satisfied the requirements for the support. 

Earlier releases from the agency addressed value transfers in the form of dividends and how to determine and assess group contributions when an short-term work allowance is received. The agency stated that the rule that group contributions are not to be made during any part of the year when the allowance is received means that "group contributions for the financial year 2019 do not affect the possibility of receiving allowances." The same rule also applies to companies with a ”broken” financial year, for group contributions relating to financial year which ended before 16 March 2020.


KPMG observation

Many companies were waiting for clarification from the agency regarding the treatment of group contributions and the timing of support submissions. The information that group contributions for fiscal year 2019 are not to affect the possibility of receiving support in 2020 will be welcomed by many companies. Note also that the agency’s position is that a group contribution constitutes a transfer of value.

Tax professionals believe further clarification is needed concerning whether a company has a right to a support allowance for short-time work, if the company at the time of a group contribution simultaneously receives a contribution that compensates for the transfer of value that has occurred following the group contribution. Additionally, a question remains as to how the agency views group contributions that are being ”handed down” (that is, whether a group contribution from a parent company to a subsidiary is to be regarded as a transfer of value or not). Further clarifications would be helpful in this regard. 

Read a June 2020 report prepared by the KPMG member firm in Sweden

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