New rules on representative liability – a two-month grace period, but no 'pause button'

The core of representative liability remains

Representative liability under tax law means that, under certain conditions, a representative of a company may become personally and jointly and severally liable for the company's unpaid taxes and duties. Liability requires that the representative has acted with intent or gross negligence. That part of the regulations has not changed.

What has long made the rules particularly far-reaching in a situation of insolvency is the link to the tax's original due date. When a company realises that its liquidity is insufficient to cover both tax and other maturing liabilities, the board may need to take far-reaching decisions at very short notice. This risks having a bankruptcy-inducing effect, as directors may feel compelled to wind up the business to avoid personal liability, even though it could be viable in the long term.

This is where the new option for a period of reflection comes in.

Two months to act – not two months to wait

A representative who risks personal liability for payment under Chapter 59, Section 13 of the Tax Procedure Act (2011:1244) may now apply to the Swedish Tax Agency for a two-month grace period. The grace period is always calculated from the original due date of the first tax or charge covered by the application. A late application therefore does not extend the grace period.

If a grace period is granted, the relevant date for assessing the representative's liability is moved from the original due date to the date on which the grace period expires. If the problems persist when the grace period expires, the measures taken by the representative during the grace period will be taken into account in the assessment of personal liability.

Conditions for granting a grace period

The basic principle is that a grace period shall be granted unless there are specific reasons to the contrary. In making this assessment, the Swedish Tax Agency must, amongst other things, take into account any previous grace periods, deficiencies in the reporting of taxes and duties, and other unpaid taxes and duties if these amount in total to at least half a price base amount.[1] However, the tax liability to which the application for a grace period itself relates shall not be taken into account in the latter assessment.

The grace period is granted on an individual basis. If a company has several representatives, a grace period must be applied for in respect of each of them. The application may be made either before or after the original due date of the tax in question. The Swedish Tax Agency must process the matter expeditiously and, as a general rule, a decision should be issued within ten working days.

A grace period that has already been granted may be revoked if there are exceptional grounds, for example in the event of a clear abuse of the system. In the event of revocation, the assessment of liability reverts to the tax's original due date.

A refusal of a request for a grace period, or the revocation of a granted grace period, cannot be appealed to the Administrative Court, but may be reviewed by the Swedish Tax Agency upon request.

The grace period applies to the representative – not the company

Perhaps the most important limitation is that a grace period is not the same as a deferral of tax payment.

The company's obligation to pay is not affected in any way. The tax liability falls due as normal and may still be subject to enforcement proceedings. Even during the grace period, the Swedish Tax Agency may take enforcement action against the company and, if the conditions are met, apply for the company to be declared bankrupt.

The grace period should therefore not be regarded as two extra months during which business can continue as usual. The point is, rather, that the representative is given time to actively investigate and implement realistic courses of action – for example, securing financing, managing the company's debt situation, considering corporate reorganisation or, if the business cannot be saved, preparing for an orderly winding-up. It is, therefore, a window of opportunity, not a 'pause button'.

Taxes arising from a reassessment

Another important limitation is that the grace period is calculated from the original due date for payment of the tax. This becomes significant in cases where a company is retrospectively charged tax following a reassessment decision. In such situations, the two-month period will normally already have expired.

This is a significant limitation. A back-assessment or other reassessment may in itself create an acute liquidity crisis and, in some cases, be the circumstance that ultimately leads to insolvency. It is precisely in these situations, therefore, that the second main part of the reform – the new exemption rule – may take on particular significance.

Greater scope for exemption from liability

Previously, a representative could be wholly or partially exempted from personal liability for payment if there were special grounds. That provision has now been replaced by a rule whereby the representative shall be wholly or partially exempted if it is unreasonable for the representative to be liable for payment.

In making this assessment, particular consideration must be given to whether the representative

• had no ownership interest or controlling influence,

• took effective measures to limit the damage caused by the failure to pay,

• has a permanently reduced ability to pay due to age, illness or similar circumstances, or

• would otherwise be subject to a liability for payment that is not reasonably proportionate to the negligence.

This list is not exhaustive. Previous case law retains its significance, but the legislator's stated intention is that exemption should also be granted in other situations where full liability for payment appears unreasonable. This paves the way for a more individualised assessment of the representative's actual conduct.

What do the rules mean for the board in practice?

The new rules give boards and other representatives better opportunities to manage a temporary liquidity crisis without the threat of personal liability for payment immediately hanging over every decision. However, they do not alter the need to act early.

When a company assesses that it may face difficulties in paying forthcoming taxes, the board should therefore quickly gain an overall picture of its liquidity, forthcoming tax due dates and other liabilities. The possibility of a 'grace period' should be considered immediately and the decision-making process should be documented. The grace period should then be used to take concrete measures – not to simply postpone the problems.

At the same time, the situation needs to be assessed more broadly than solely on the basis of directors' liability. A grace period does not alter the company's financial situation nor does it resolve the other issues that arise when a company is approaching or is in a state of insolvency.

In other words, the reform gives the representative greater scope for action. How that scope is utilised may prove decisive.

Do you have any questions about the representative's liability, the grace period or other possible courses of action? Please contact one of our experts in insolvency law and financial restructuring.

The author

Disa Johnsson is an associate specialising in insolvency law and is a member of Lindahl's insolvency and reorganisation practice group.

[1] Half a price base amount corresponds to SEK 29,600 for 2026.