Legislative proposal on adjustments to the rules on short-time support – COVID-19
Proposal: Adjustments to the rules for short-time work
The government proposes increased support for short-time work and that certain payments should be taken into account when considering the right to the support.
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On May 7, the Government held a press conference regarding the Law Council's remission on a temporary tax exemption of the benefit of free parking and gifts to employees, as well as adjustments to the rules on temporary deferral and support for short-time work. As previously stated by the Government, it is proposed that short-time work support be temporarily increased to include an 80 percent reduction in working hours during the period 1 May to 31 July 2020, which would reduce the employee's salary by 12 percent.
Furthermore, it is proposed to clarify the requirement for serious financial difficulties by stipulating in the legislative text that "when assessing whether the employer has temporary and serious financial difficulties, particular consideration should be given if the employer simultaneously carries out dividends or other similar payments". However, the Government does not provide any further clarification in relation to what was previously stated by the Finance Committee.
The key question is what falls under "dividends or other similar payouts"; i.e. whether it means a ban on dividends, if the size of the dividends is decisive, or when in time a dividend has been made are factors in the assessment. Further, it is not clear in the draft law commission whether group contributions are intended to be included in the concept of “payment” .
Another important question is how the updated rules, which are proposed to come into force on 1 June 2020, will be applied for retroactively. In light of both the Finance Committee's previous statement that "the employer is required to act in accordance with the purpose of the law" and that it therefore can’t be considered justified that employers receive short-time work support from the general public while simultaneously carrying out dividends and the Swedish Agency for Economic and Regional Growth's (sw. Tillväxtverket) more narrow statement that they are "of the opinion that it is inappropriate for companies to make large share dividends and at the same time receive the state aid for short-time work". It cannot currently be ruled out that some companies that have applied for the aid and already have been granted preliminary support, may become liable to repay some of that support if they have carried out dividends at the time of the reconciliation assessment.
In line with the active anti-fraud activities carried out by both the Swedish Tax Agency and the Swedish Agency for Economic and Regional Growth, it is further proposed that the authorities should carry out inspection visits at the employer's place of operation to assess the right to support in the case of short-time work.
The information provided during a visit will be checked against the information stated in the initial application for preliminary support and in the notification of reconciliation. Furthermore, it is proposed that the Swedish Tax Agency's law enforcement activities should also include fraud offenses, if the offense is related to the Tax Agency's activities in accordance with the Act on support for short-time work. The Government intends, after the Council's opinion, to submit the proposals to Parliament in an extra amended budget. The amendments to the law are proposed to come into force on 1 June.
KPMG are continuously monitoring the ongoing legislative work and the Swedish Agency for Economic and Regional Growth's guidance, primarily regarding the issue of share dividends and other payments in connection with the aid.
Please 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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