On the 8th of June the Swedish government initiated a review of the existing rules concerning two areas of taxation, Expert Tax relief and Research & Development.
The aim of the review is to address any difficulties in the practical application of the existing rules, to increase the international competitiveness of the rules by creating better incentives and to provide better conditions for companies to attract and retain international key personnel.
Expert Tax relief
Regulations concerning Expert Tax relief have existed for many years in Sweden. These apply to non-Swedish experts, researchers and other key personnel. Expert Tax relief implies that 25% of an employee´s remuneration is exempted from taxation, provided that certain criteria are met.
The government has now decided to initiate an extensive review. The review is meant to, among others, evaluate whether the existing rules have had the intended effect, in terms of attracting and retaining foreign key personnel, and to propose appropriate changes to increase their effectiveness. In that sense it is to be analysed whether the tax-free portion of the remuneration should be amended and if the applicable time limit should be extended.
Additionally, difficulties in the application and enforcement of the rules are to be identified. This includes a review of the regulations concerning one of the two grounds for applying, the employee´´s Level of Expertise. The review is to assess whether the rules concerning the Level of Expertise ought to continue to exist or be removed entirely. If they are to remain, it is to be determined whether they should be designed differently, to increase their predictability.
Further issues to be looked into are, among others, assessing whether it would be beneficial to introduce different salary thresholds for different occupational categories and to review other currently existing prerequisites and determining if they are to remain unchanged.
Research & Development
In 2014, Sweden implemented R&D tax incentives, which granted a 19.59% exemption on employer's social security contributions. These incentives operate independently from corporate tax liability and are administered through the Swedish social security system. Currently, the maximum annual deduction allowed is SEK 14.7 million.
Since their introduction, the generosity of R&D tax support in Sweden has remained relatively stable. However, periodic reforms have led to changes in the availability, scope, and generosity of these incentives. Despite their positive impact, there have been challenges associated with the existing regulations, including unpredictability and complexity. To address these issues, the government has decided to appoint a special investigator to conduct a thorough review.
The final report, expected by January 15, 2025, will provide valuable insights and recommendations for refining the R&D tax incentives.
The primary objective of this investigation is to assess the efficiency of the current regulations and explore ways to enhance their effectiveness. The review will include an analysis of the need to expand definitions within the Social Security Act, establish clearer distinctions between R&D and non-R&D work, and explore alternative procedures for determining eligibility for deductions.
By appointing the special investigator, the government aims to ensure that the regulations align with their intended purpose of promoting increased investments in research and development, ultimately strengthening Sweden's international competitiveness.
The final report, expected by January 15, 2025, will provide valuable insights and recommendations for refining the R&D tax incentives. These directives are part of an agreement between the government and the Sweden Democrats, highlighting a commitment to advancing the effectiveness of Sweden's R&D tax incentives and promoting the growth of research and development activities.
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Aspia will continue to follow the development and provide updates.
Do you have questions concerning Research & Development?
Contact Milena Boyanova (milena.boyanova@aspia.se).
Do you have questions concerning Expert Tax relief?
Contact Henning Weitner (henning.weitner@aspia.se) or Agnes Fröjd Almefjord (agnes.frojd.almefjord@skeppsbronskatt.se).
