The annual report is a standardized formal way of presenting the company’s financials.
The time when the annual report is due depends on the company’s fiscal year. A fiscal year can be the same as a calendar year. Swedish legislation allows a fiscal year to end at any month of the year. The reason for this is to be able to spread out the workload compared to if all companies should have the 31st of December as end of fiscal year.
If we prepare the annual report for you, there are still things you need to have in mind and decide. These are mainly:
- Director’s report – Any changes, equity issues, significant events etc?
- Tax reserves – If there’s profit, any tax reservations? How much? Maxmium possible?
- Dividends – If there’s accumulated profit, enough cash and the dividend allowance is enough? How much dividends? Maximum possible?
More detailed explanations follow below:
Director’s report – förvaltningsberättelse
The director’s report should contain information about the company, what it does and if there has been any significant events during the year.
Significant events are for example
- A percentagewise high revenue increase / decrease (>30%)
- Buying or selling of other companies (subsidaries)
- Equity is running low
- Big changes in ownership of the company
- Changes in equity (emissions etc).
- Change of name and/or type of business.
Tax reserves – periodiseringsfonder
Tax reserves are only applicable if you have a profit. If you have a loss and previous tax reserves, the tax reserves can be dissolved.
If you have a profit and would like to postpone taxation you can put up to 25% of the company’s profit before tax in a tax reserve. That means that you put away untaxed profit for taxation a later year (at most 5 years later).
This increases your company’s liquidity with the postponed tax.
If you are to make a loss a later year, you can use this postponed profit to cover the loss. If the loss is higher than the postponed profit, there won’t be any tax on it.
Downsides to tax reserves are
- It lowers your company’s profit after tax and hence your available amount for dividends.
- There’s a small interest on the postponed tax.
Dividends are proposed in the annual report. If you’d like dividends the standard procedure is to propose a dividend in the annual report.
There are a few restrictions on dividends. These are
- Liquidity – The company must have enough cash to pay out the dividends suggested. If everything is bound up in fixed assets and there’s no cash, the company is unable to pay dividends.
- Own equity – The company is only allowed to pay out from accumulated profits. If there’s no accumulated profit, there can be no dividends.
- If the share holder(s) is/are individuals and there are only a few shareholders in the company, there’s a dividend tax allowance to consider. Any amount above that allowance will be taxed as salary. The base level for this allowance is around 170 kSEK per year but it can be increased if the company pays out salaries above a certain level.