Accounting for bankruptcy of sole proprietorship

Submit PAYE tax return until the bankruptcy decision

Your business activities cease with the bankruptcy decision. Therefore, you should also not be registered as an employer for the period after the bankruptcy decision.

You must report employer contributions and deducted tax for all accounting periods up to the bankruptcy decision.

If you have not paid any wages, report this by entering zero (0) in the box "Total employer contributions" ("Summa arbetsgivaravgifter") and zero (0) in the box "total tax deducted" ("Summa avdragen skatt"). If a receiver chooses to continue the business after the date of bankruptcy, they are responsible for submitting PAYE returns to the Tax Agency.

Submit VAT returns until the bankruptcy decision

Your business activities cease with the bankruptcy decision. Therefore, you should also not be registered for VAT for the period after the bankruptcy decision.

You must report VAT for all accounting periods up to the bankruptcy decision. If you have no VAT to report, fill in zero (0) in the box "VAT to pay or get back" ("Moms att betala eller få tillbaka").

If a receiver chooses to continue the business after the date of bankruptcy, they are responsible for submitting VAT returns to the Swedish Tax Agency.

Submit your income tax return

You must continue submitting you income tax return after the bankruptcy.

Tax liable income during bankruptcy

As a rule, you are obliged to pay tax on all its income. This also applies when you are declared bankrupt.  For example, you must pay taxes for:

• capital gains on property sold by the bankruptcy estate
• income from employment, even if some of the salary is paid into the bankruptcy estate
• claims which have arisen in economic activities before the bankruptcy and invoiced by the receiver
• income from economic activities in which you have carried out economic activities outside the bankruptcy estate after the bankruptcy, even though such activities are not permitted during bankruptcy.

If you are a property owner, you are obliged to pay property tax for the time you own the property.

If you are liable for tax on income during the bankruptcy, this should be reported in the usual way in your income tax return.

Reverse funds

You must reverse tax allocation reserves, replacement funds and expansion funds for taxation in the event of bankruptcy. This means that you must report the amount reversed as income in the tax year in which the bankruptcy decision was made.

Distribution of interest in the event of bankruptcy

You can make interest distribution even on your final statement of economic activity in bankruptcy. The interest distribution can be either positive or negative and shall be calculated on the capital base. The capital base is calculated taking into account the assets and liabilities existing at the beginning of the tax year.

Distribution of interest at The Swedish Tax Agency (in Swedish)

Deficit in economic activities

You may not deduct the deficit incurred before the bankruptcy decision, i.e., the opening deficit for the bankruptcy year. It is only if the bankruptcy is not concluded because creditors are paid in full that you are entitled to make a deficit deduction. However, you can deduct a deficit incurred in the year of the bankruptcy. Such a deficit is rolled over if the bankruptcy continues.

Tax account in bankruptcy

Your tax account is not affected by the sale of your business. However, during the bankruptcy proceedings, the tax account statements will be sent to the receiver and not to you.