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Proposed new 3:12 regulations

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PwC-skatteradgivning-Group-outline_0002_burgundy.pngYesterday, the results of the so-called 3:12 Committee work was made public with a proposal for changed tax rules for owners of closely held companies. All in all, it can be said that the proposal implies, as was expected, a number of negative changes for owners of closely held companies, but there are also a few bright spots.

The Committee’s work was initiated in March 2014 with the assignment to review ownership changes in closely held companies. In January 2015, the Committee received a supplementary directive in which the Government stated that it wanted a more extensive review of the 3:12 regulations than originally requested. Today, after 2.5 years of work, the Committee has presented its proposal.

The proposals for changed rules are:

  • Increased tax rate from 20% to 25% on dividends and capital gains within the threshold amount.
  • Decreased threshold amount according to the simplification rule (also referred to as the standard amount rule) from 2.75 income base amounts (SEK 159,775 for 2016) to 1.75 income base amounts (SEK 101,675). In addition, limitations are to be introduced implying that if the simplification rule is applied for calculating the threshold amount in one company, the owner cannot calculate a threshold amount for any other company.
  • Limitations on calculating the salary-based limit from today’s 50% of paid out salaries within the group, to the levels shown below. In addition, this calculation is individualised, implying that the salary base is allocated between the shareholders (related parties are seen, here, as one shareholder) prior to calculating the salary-based limit. In other words, the levels shown below apply on a per shareholder/related party basis.
    • 10 % of salaries up to 8 income base amounts (SEK 474,400)
    • 25 % of salaries between 8 and 60 income base amounts (SEK 474,400 – SEK 3,558,000)
    • 50 % of salaries in excess of 60 income base amounts (SEK 3,558,000)
  • The previous limitation that the salary based amount could not exceed 50 times one’s own (or related parties) salary is abolished. An increased level of paid out salaries is required in order to qualify for the salary base from 6 income base amounts (SEK 355,800) plus 5% of the total salary base in the company to 8 income base amounts (SEK 474,400) plus 5% of the owner’s/related party’s salary base. The maximum required level of salary to be paid out is increased from today’s 9.6 income base amounts (SEK 569,280) to 15 income base amounts (SEK 889,500 for 2016).
  • Elimination of the 4% ownership limit, which has implied that an owner who has controlled less than 4% of equity in a company has not been able to utilise the salary based amount.
  • Reduced tax from 30% to 25% on dividends and capital gains in excess of the ceiling amount for services.
  • The special definition of subsidiaries is eliminated. However, the definition of subsidiaries stipulated in the Annual Accounts Act is to apply.
  • The ceiling amounts for taxation as employment income as regards dividends and capital gains are combined to one ceiling amount of 100 income base amounts (SEK 5,930,000 for 2016) per year. Earn out payments after a sale of shares to be paid in subsequent years are, however, to be included in the ceiling amount.
  • A special exemption is to be introduced as regards change in ownership between related parties. This will imply that a generational shift will not receive less advantageous treatment than in the case of external sales.

The Committee proposes that the changes come into effect on 1 January 2018.

The exposure draft of the proposal will now be sent to interested parties for comments and, then, it is up to the Ministry of Finance to formulate the final proposal. In order that the new regulations can, subsequently, come into effect, there is the requirement that Parliament approve of the proposal in the form in which it is finally presented.


Based on the directive presented to the Committee, many have expected to see major negative changes for closely held company owners. Now, when we have the actual results of the investigation, the proposed changes appear thoroughly considered and well weighed, even if they clearly imply certain negative consequences for many owners. A large number of the proposals are in line with previous speculations, for example, increased tax rates and limited possibilities in terms of calculating a low-taxed threshold amount (both according to the simplification rule and the major rule).

The elimination of the 4% limit is a welcomed component, as many have experienced this rule as a hinder in recruiting key individuals, and have also seen this as distorting competition in the market.

The Committee makes no proposal for limitations as regards historically accrued threshold amounts, rather all of the changes apply to future calculations. However, an increase in the tax rate implies that dividends determined to be distributed after the higher tax rate comes into effect will be taxed according to that new tax rate (in spite of the threshold amount was accrued when the tax rate was lower).

Do you have any questions on entrepreneur and SME Taxes?

Annika Svanfeldt & Andreas Stranne

Annika Svanfeldt & Andreas Stranne

Annika Svanfeldt och Andreas Stranne arbetar som skatterådgivare för entreprenörer och deras bolag på PwC:s kontor i Stockholm respektive Göteborg.

Annika: 010-212 48 04, annika.svanfeldt@pwc.com

Andreas: 010-213 14 47, andreas.stranne@pwc.com

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