PwC summarises the tax proposals in the autumn budget bill for 2017

The autumn budget for 2017, which was presented to the Swedish Parliament on September 20, includes a number of Government proposals regarding taxation. Some of the changes put forward are new, while others have been previously announced. We provide below a summary of the most of these and of the proposals the Government plans to announce later during the year and during 2017.

The most important proposals:

• Limitation on the upward adjustment of the thresholds for state income tax up to the Consumer Price Index plus one percentage point. This implies that the lower threshold will be SEK 438,900 and the top threshold will be SEK 638,500 for income year 2017. The Government expects that this proposal will result in approximately 39,000 additional individuals paying state income tax, and that an additional 13,000 will pay the highest level of state income tax. The time limit on the possibility of obtaining a reduction in the value of the fringe benefit of certain environmentally adapted cars is to be extended until 2020. This proposal was originally introduced to facilitate the use of environmental cars and to help to create the premises for improved environmental performance on behalf of existing company cars. The maximum amount of the reduction has, on the other hand, been reduced from SEK 16,000 to SEK 10,000.
• The possibility of making RUT deductions for repairs and the maintenance of white goods undertaken in residences is introduced. This is the so-called the REP deduction. This is initiated against the background of environmental concerns and is expected to reduce tax revenues by SEK 190 million during 2017, and in future years.
• The threshold for deducting certain travel expenses for travel to and from work, etc., is raised from SEK 10,000 to SEK 11,000 per year. This new limit is intended to apply from 1 January 2017 and is applied to income years after 31 December 2016. The proposal is expected to increase tax revenues by SEK 338 million.
• Reduced employers contributions for private businesses employing their first employee. This reduction applies during the new employee’s first twelve months and implies that only old age pension fees of 10.21 percent are to be paid on that portion of the compensation paid to the employee exceeding SEK 25,000 per month. The cost of this in terms of public finances is calculated at SEK 407 million during 2017.
• Prohibition of deduction for interest expenses on certain subordinate loans for, amongst others, banks and insurance companies. This change is expected to increase tax revenues by SEK 1.7 billion. The proposal also includes certain changes in group contribution rules and deficit rules.
• Discontinued right of deduction against income tax of representation costs for lunches, dinners, buffets and other refreshments. On the other hand, the right to deduction for simple refreshments of a limited value is retained. Clarification of the right to deduct VAT in conjunction with representation costs. VAT deduction is granted calculated on the basis of SEK 300 per person and occasion. These proposals are deemed to increase tax revenues by approximately SEK 700 million in 2017.
• Introduction of tax on certain chemicals and certain electronic products in order to decrease the existence of dangerous substances in the home environment. Products purchased by private individuals directly from foreign suppliers are exempt. This proposal is expected to grow tax revenues by approximately SEK 1 billion during 2017, and going forward by approximately SEK 2 billion per year.
• Lower carbon dioxide tax on diesel fuels used in boats and ships in agriculture, forestry and aquaculture operations (expected to reduce tax revenues by approximately SEK 1 million).
• Changes regarding certain issues concerning electricity tax implying, amongst other things, the continued reduction of energy tax for certain municipalities in northern Sweden. This proposal implies, on the other hand, a decrease in the amount of reduction from 9.9 kWH to 9.6 öre kWh, something that is forecasted to increase tax revenues by SEK 29 million per year. The proposal also includes reduced energy tax for electric power in computer centers, which is expected to reduce tax revenues by approximately SEK 250 million per year.
• Reduced advertising tax is expected to reduce tax revenues by SEK 20 million in 2017.
• Increased alcohol tax equivalent to 1 percent for hard alcohol and 4 percent for other alcoholic drinks. This proposal is introduced against the background of the Government’s interest in protecting peoples’ health and is expected to increase tax revenues by approximately SEK 400 million in 2017.
• Exemption from VAT liability for individuals with net sales less than SEK 30,0000 per year. This change intends to decrease the administration needed to be undertaken by companies, organisations and private individuals having limited sales. According to the Government, the proposal implies that detached house owners with sun panels can sell their surplus energy without needing to register for VAT. Smaller operations, such as hobby and seasonal activities and newly-started businesses, can also benefit from this proposal. An entity with very limited net sales which is already registered for VAT will need to apply to the Tax Agency to be covered by this exemption.
• Reduced VAT from 25 to 12 percent on repairs of bicycles, shoes, leather goods, clothes and household linens. The proposal is estimated to reduce tax revenues by SEK 270 million in 2017.
• Reduced interest on revenue in tax accounts, lowest rate 0 percent, to avoid the use of tax accounts for savings.
• Introduction of the definition of the income year in terms of certain excise duties. This proposal is aimed, amongst other things, at clarifying the point in time a decision on a refund or on compensation for excise duties can be reconsidered or appealed, and what is meant by income year in the context of these decisions.

Proposals the Government intends to announce at a later date:

• Elimination of a ceiling on deferment of tax to be paid on the sale of a residence. The proposal is intended to enhance the turnover in the housing market and is aimed to come into effect between 21 June 2016 and 30 June 2020. The Government intends to revert later during the autumn of 2016 with a prepared proposal.
• Changes in the energy tax area implying, amongst other things, that the tax on the thermal effect of nuclear power reactors is phased out, at the same time the energy tax on electricity for households and the service sector is increased. This proposal also contains a gradual reduction of property tax on water power stations. The Government intends to revert to Parliament with a proposal during 2017.
• Proposal for the introduction of mandatory, monthly reporting by employers per employee as regards paid compensation and taxes deducted. These details are proposed to be included in the employers income tax return to the Tax Agency, and are intended to reduce tax cheating and avoidance.
• Introduction of a floor for the Government borrowing rate in tax legislation to 0, respective 0.5 percent. This proposal is aimed at preventing certain unforeseen effects of tax legislation if the Government borrowing rate would be zero or negative. The Government intends to revert to Parliament during 2016 with a full proposal regarding this issue.

Comments

Amongst the changes proposed in the autumn budget there are a number of already known proposals and which had been advised already in the spring budget. The Government, also in this autumn budget, states that it intends to produce a number of other tax-related proposals before the end of 2016 and also during 2017.

We will get back to you with a more in-depth article and comments regarding the most important tax proposals in the audit budget. Keep a look out for this on Tax matters!

Andreas Stranne and Filip Engström