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Accounting for sale of a sole trader

Read here about accounting when you sell your business. This includes the reporting of results, funds and interest distribution.

The sale must be reported for taxation

You must include the sale price as revenue in the company's accounting. You must not charge VAT if you sell all or a limited part of the company to someone who continues to run the company and who is deductible to input VAT.

Inventory

You may make a deduction for the part of the purchase price of inventory for which you have not previously made a depreciation deduction. The same applies if you yourself have paid compensation for, for example, goodwill or the company's name.

If you keep inventories privately, you must record them for withdrawal taxation. This means that you record the value of the inventory as income in the business. The value you must record is the amount you would get paid if you were to sell the inventory to a third party.

Report results in your income tax return

You make your last accounting of economic activities in your income tax return in May of the year after you make your last financial statement.

Reverse funds for taxation when the business is sold

You must reverse all funds for taxation when you sell your sole trader. Examples of funds are expansion funds and tax allocation reserves. The reversal will affect your taxable result.
In some cases, you can make use of the rules on accumulated income when reversing funds to get a lower national income tax.

Distribution of interest in final statement

Even in your final statement of economic activity, you can make interest distribution. Interest distribution can be either positive or negative and is calculated on the capital base. The capital base is calculated on the basis of assets and liabilities at the beginning of the tax year.

You may make a positive interest distribution if there was a positive capital base of more than SEK 50,000 at the end of the last financial year. When activities cease, positive interest distribution can also be made for reversed tax allocation reserves as well as reduction of expansion funds.

You must make a negative interest distribution if there is a negative capital base of more than SEK 50,000 at the end of the last financial year.
If your last financial year is shorter than 12 months, the amount of the distribution must be adjusted to take account of the length of the financial year.

Sale of commercial property

When you sell your commercial property, you must reverse previously allowed depreciation allowances as revenue in your economic activity. You must also reverse deductions for value-enhancing repairs you made in the year of sale and the previous five years.

You must account for the sale of the property in capital tax schedule on the Tax Agency's form K7. When you calculate the capital gain you can deduct the full purchase price and the improvement costs you incurred.

Individual social security contributions and special payroll tax

In the year in which the economic activity ceases, you can calculate the final individual social security contributions or the special payroll tax and deduct these directly in the last income tax return for the economic activity. Otherwise, you make a standard deduction for the individual social security contributions/special payroll tax in the income tax return for the last year of the activity, but then you must make a final reconciliation of the individual social security contributions/special payroll tax the following year.

Deficit in economic activities

Is your business showing a deficit in the last financial year? Under certain conditions, you can deduct the deficit from your capital income. A final deficit may be used the income year following the year in which the activity was discontinued. 70% of the deficit is tax deductible. You can spread out the final deficit deduction over up to three years if you wish.

If you sell your activity within the first five financial years, you can also offset the deficit against income from services. This applies if you have carried out active economic activity, if you have not directly or indirectly carried out similar economic activity during the last five years before starting the economic activity, and the first SEK 100,000 in deficit for each of the five years.

Keep your tax account

Your tax account is not affected by the sale of your business.