Tax proposals in the autumn budget for 2018 – a summary

Last week, the Government presented its autumn budget to the Swedish Parliament. Below is a summary of the most important proposals within taxation included in that budget, as well as a summary of the proposals which the Government has notified it will present in detail later during 2017 and during 2018.

The current proposals in brief

• Relief on taxation of employee stock options in certain cases, with the aim of making it easier for some companies to recruit key individuals. If specific conditions are met, the proposal would imply that, generally speaking, the employee would not be taxed for benefits when employee stock options are exercised. Instead, taxation would take place first when the shares, which the employee has purchased through exercise of the employee stock options, are sold. Taxation would take place, then, in the income class for capital, alternatively according to the 3:12 rules. In such a case, neither is the employer required to pay employers contributions. The proposal is to apply to employee stock options which have been acquired after 31 December 2017.
• Reduced employers contributions for limited liability companies and partnerships employing their first employees (that is, in addition to the owner/owners and related persons). Dependent on certain conditions being fulfilled, this proposal implies that these companies would only pay retirement pension contributions (10.21 percent) during a maximum period of twelve months. This reduction is temporary and applies up to and including 2021.
• Increased taxation of savings in investment savings accounts (ISK) and in endowment insurance is to be introduced. This proposal implies that the standard calculated yield is increased to the statutory liquidity ratio (SLR) plus one percentage point (instead of the previous SLR increased by 0.75 percent).
• A decreased tax level for pensioners is proposed through a further increased basic allowance. A higher basic deduction for income from employment would be based on an increase from approximately SEK 123,000 to approximately SEK 202,000 with the aim of eliminating the difference in taxation between income from salaries and pensions.
• A reduction in tax would be introduced for individuals receiving sickness benefits and disability pensions. The amount of the tax reduction is linked to the municipal tax rate and the price base amount.
• The special state income tax for non-residents (SINK) would be increased from 20 percent to 25 percent.
• A change in the calculation of the benefit-in-kind value of company cars through the introduction of a bonus – malus – system for new light weight vehicles. Environmentally adapted vehicles with a low level of C02 emissions are to be prioritized at point of purchase through a bonus of SEK 10,000 – 60,000, depending on the level of emissions in the vehicle in question. For gas and diesel driven vehicles, the proposal implies an increased carbon dioxide level during the first three years. These rules are proposed to come into effect on 1 July 2018.
• The benefit of employer paid congestion tax and road, bridge and ferry fees is to no longer be included in the standard calculated benefit-in-kind value of company cars. This implies, for example, that paid congestion tax will not comprise a taxable benefit going forward, except as a part of the benefit-in-kind value.
• The Government proposes the introduction of an air travel tax of SEK 60, respective SEK 250 or SEK 400 depending on the length of the travel. It is the airline company executing the travel who is to be liable to pay the tax and is to present a declaration to the Tax Agency once a month.
• VAT on public demonstration of and on guided tours in certain nature areas, is to be reduced from 25 percent to 6 percent.
• Certain changes regarding advertisement, fuel, energy and tobacco taxes are proposed. We will revert with a more in-depth article regarding these areas.

Notified proposals regarding which the Government will revert to at a later date

• The Government intends to return to Parliament in 2018 with proposals for new regulations for the corporate sector. These regulations are to come into effect on 1 July 2018. These proposals are a part of the Ministry of Finance’s memorandum (published 20 June 2017) which is now in the consultation process until 26 September 2017. Following are examples of changes being proposed as regards the corporate sector:
  • a general rule on limitation of deductibility of interest expenses,
  • limitations on interest expense deduction according to two different alternatives (EBIT and EBITDA rules) in situations where the interest expenses are in excess of interest income (so-called negative net interest). This is combined with a reduced corporate tax rate.
  • tax rules regarding financial leasing agreements
  • temporary limitation on loss carried forward deductions
• Provided that the Parliament approves the multilateral instrument (MLI convention) which Sweden signed on 7 June a large number of laws regarding tax treaties will need to be amended. The Government has notified that the law changes are expected to come into effect, at earliest, on 1 January 2019.
• The Government intends to present proposals for a further reduction in tax for pensioners in two stages during 2019 and 2020, with the aim of entirely eliminating the difference between tax on income from salaries and tax on pensions.
• During 2018, the Government intends to present a proposal in which the tax exemption for benefits in the form of private health and hospital care which are not state financed, as well as the exemption for benefits from health care and medicine abroad, will be revoked.
• The Government also intends to review the current system for travel expense deductions, as well as reviewing the Coupon Tax Act.
• During 2017, the Government will present a proposal implying that the requirement of a personnel register should be expanded to also include massage and beauty parlors, vehicle service operations and food stuffs and tobacco wholesalers.
• The rule stipulating that a tax surcharge cannot be levied when corrections in tax returns are undertaken on the taxpayer’s own initiative should be reviewed. The Government believes that a tax surcharge should be able to be levied in the case of such corrections after the Tax Agency has informed the taxpayer regarding its general control measures.
• Rules regarding taxation and the payment of taxes for temporary work in Sweden should be introduced. Foreign companies lacking a permanent establishment in Sweden, and who undertake certain operations in the country, should be covered by the rules regarding tax deduction, the obligation to register, corporate tax and regarding the obligation to provide information in the same manner as Swedish companies undertaking equivalent operations.

Comments

The above-mentioned tax proposals in the autumn budget were expected, as the majority had been made public prior to the budget being presented. The budget does not advise of any adjustments to thresholds, nor does it advise of any changes in the rules for part-owners of closely held companies (the so-called 3:12 rules), as was previously announced. Neither does the budget address the questions investigated in the Real Estate and Stamp Duty Committee work (SOU 2017:27), where the consultation process was finalized this week. The tax issues regarding the 3:12 regulations and real estate, together with the advised proposal for new rules for the real estate sector, can be expected to impact those companies’ future tax situations. We will revert with in-depth articles regarding these matters and with commentary addressing the most important tax proposals presented in the autumn budget.