Contributed by Leonie Selting, Tax Partner at Stensvik & Partners AB, Sweden

The Swedish Government presented its budget proposal for 2021 to the Swedish Parliament on the 21st of September 2020. The budget contains a few tax proposals. Please find below a summary of four interesting tax proposals concerning company tax included in the budget.

1.     The Government proposes temporarily reduced social security charges (employer paid) on employment income when the employee is between 19 and 23 years of age. The temporary lower level charge rate will be approximately 20% and be valid between the 1st of April 2021 and the 31st of March 2023.

2.     The Government proposes that the lower tax rate on energy consumed in the manufacturing industry process is abandoned. Instead, full tax rate will be levied on energy consumed within this process. From the 1st of January 2022, the full tax rate should apply.

3.     The Government proposes a temporary reduction in company income tax when investments are made in building equipment and fixtures and machine inventory. The aim of the proposal is to stimulate investments. The investment must have been made during 2021, to enable tax reduction. The claim for tax reduction for the income year 2021 will be made in the tax return filed in 2022. The tax reduction discussed is approximately 3.9% of the total cost of the building equipment and machine inventory investment.

4.     Interest limitation legislation entered into force in Sweden on the 1st of January 2019. The legislation implements the provisions in Article 4 of the EU Anti-Tax Avoidance Directive. The rules aim to discourage artificial debt arrangements designed to minimise taxes. The Swedish rules have in some instances resulted in a few unwanted and asymmetrical effects for companies with past losses (losses from a tax point of view). The Government proposes that this asymmetry will be adjusted and that the change will enter into force on the 1st of January 2021.

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