Contributed by Stensvik & Partners AB, Sweden

On June 24, 2020, the Swedish Government issued a referral with a proposal, see https://www.regeringen.se/49e9db/contentassets/c9909aca68d94af78e34fa1e118f20eb/sankt-statlig-inkomstskatt.pdf , to reduce state tax on earned income for individuals, including two alternative options. The proposal is oriented toward the 2021 Budget Bill. Comments and suggestions on the proposal were accepted up until the 18th of August 2020.

On earned income Sweden imposes municipal tax at a tax rate varying from 30 – 35 percent depending on the municipality in which the taxpayer resides. State tax is also levied on earned income in addition to the aforementioned municipal tax, but there is a threshold to pass before the state tax is levied. The threshold implies that a certain amount of earned income per year must have been received before state income tax is levied. This layer boundary for levying state tax is currently approximately 500,000 SEK. The state tax is currently imposed at a flat tax rate of 20 percent.

The proposal contains two alternative ways to achieve a reduced levying of state tax. One alternative suggests an increased layer boundary. The threshold 500,000 SEK is suggested to be increased with 6,000 SEK. The other alternative suggests a decreased flat tax rate, 19.5 percent instead of the current 20 percent.

Among the authorities and organisations which were requested to comment on the referral, 18 have submitted their consultation responses. Two of them rejected the proposal in its entirety. The rest stood positive either to the proposal as a whole or to at least one of the two alternatives.

Much speaks for that the Swedish Government will include a proposal for one of the alternatives in the Budget Bill 2021. In that case, even if the decrease of imposed tax will be very small, this would be an interesting development in Sweden, since the Government suggesting the decrease consists of the Social Democrats in alliance with the Green Party.


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

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