Tax exemption for biofuels

The EU Commission has approved of an extension of the Swedish tax exemption on biofuels. The decision applies to biogas used as fuel up to and including the end of 2020, and for other biofuels the decision applies up to and including the end of 2018. There is also a requirement, from 1 January 2016, of production plant permits (anläggningsbesked) to secure tax exemption.

Tax exemption on biofuels

The Commission had previously determined that the Swedish tax exemption on biofuel comprises government support as the exemption decreases the government’s tax revenues and, thereby, represents financing on the basis of state funds. However, the Commission deems that this support is, in fact, in agreement with the rules of the internal market of the European Union.

Sweden has committed to providing annual monitoring reports to the Commission and to adapting the tax exemption as required to avoid surplus compensation in the future.

Biogas as fuel is entirely exempt from energy and carbon tax up to and including the end of 2020.

Other biofuels covered by the decision are entirely exempt, up to and including the end of 2018, of carbon tax and, as regards energy tax, there is an exemption or tax reduction from and beginning 1 January 2016 according to the following:

• 74 percent energy tax reduction on low-level blending ethanol
• 100 percent energy tax exemption on low-level blending biofuel without ethanol
• 8 percent energy tax reduction on low-level blending fatty acid methyl esters (FAME)
• 100 percent energy tax exemption on low-level blending biofuels without FAME
• 50 percent energy tax reduction on high-level blending FAME
• 73 percent energy tax reduction on high-level blending ethanol (E85)
• 100 percent energy tax exemption on high-level blending biofuels without ethanol and FAME
• 100 percent energy tax exemption on hydrogenated vegetable and animal oils and fats, so-called HVO

Requirement for production plant permits for biofuel tax exemption from 1 January 2016

Tax exemption and, thereby, right of deduction on behalf of the taxpayer applies, however, only on the premise that the taxpayer can evidence that the biofuel is produced in a plant put into operation prior to 31 December 2013 and is not fully depreciated. For this purpose, an application for a so-called production plant permit (anläggningsbesked) is to be sent to the Swedish Energy Agency prior to year-end.