The Swedish Budget and Taxes 2021
On 21 September 2020, the government presented the Budget Bill for 2021. In connection to this, Deloitte published an article in which we summarized and commented on the Budget Bill’s most significant tax proposals (See “Part 1” linked below). This article clarifies a selection of the changes that were introduced at the turn of the year 2020/2021, as well as future changes to be expected in 2021.
On 25 November, the Swedish parliament approved the Budget Bill and thus a framework decision for the state budget 2021 emerged. In addition, due to the current pandemic, the government has already submitted several additional bills with proposals for changes in the budget for 2021.
CHANGES FROM JANUARY 2021
Extension of the time limit for expert taxation
The time limit for the tax relief that, among others, foreign experts and researchers can receive under the so-called expert taxation is extended to five years from the previous time limit of three years. The extended time limit applies to all stays in Sweden initiated after 31 May 2020. The update is deemed important to strengthen Sweden's long-term ability to compete for international expertise.
Removal of standard income charge on deferred capital gains from the sale of a residence
The standard income for deferred tax on profits from the sale of a residence is removed. Both existing and future deferrals are covered by the new rules.
The RUT-reduction is expanded and the maximum amount for RUT is raised
The RUT-reduction (tax reduction for acquired household services) is expanded with four new services and the maximum amount for reduction is raised to SEK 75,000. The extension includes clothing- and textile care performed at a laundry establishment, furnishing services, and the relocation of furniture and movable property from the household to second-hand shops, and similar marketplaces in order to promote recycling and a simpler form of supervision of the household.
Measures within the tax area against non-cooperative jurisdictions
A restriction on deductions is introduced in the Income Tax Act for internal and external interest expenses on debts to companies in certain non-cooperating jurisdictions. The restriction on deductions refers to debts to companies established in a jurisdiction that is listed in the published list of special jurisdictions that the EU Member States have deemed uncooperative in the field of taxation. Furthermore, the application of the so-called CFC rules regarding Trinidad and Tobago is ensured, which means that Swedish shareholders in companies established in Trinidad and Tobago are in some cases taxed for the income of the company.
The provisions on the reduction of employer contributions for the first employee are made permanent
On 1 January 2017, a temporary reduction of employer social security contributions was introduced for sole proprietorships (Sw. enmansföretag) that hire their first employee. A sole proprietorship is a limited company that have no employees or only one employee who is also a partner, trading partnerships without employees and a maximum of two partners, and sole traders without employees. The previous rules applied until the end of 2021 but are now made permanent from 1 January 2021.
Temporary tax reduction on earned income
The tax on income from both work and pension as well as social insurance benefits is reduced by up to SEK 1,500 per person for the year 2021. A full tax reduction of SEK 1,500 is given to those who have earned income of more than SEK 240,000 per year. The purpose of the temporary tax reduction is to compensate for increased costs linked to the outbreak of the coronavirus and will remain in force until the end of 2022.
Regulations concerning the adjustment of restricted tax losses carried forward (Sw. koncernbidragsspärrade underskott) and deductions for negative net interest income.
The rules concerning the adjustment of restricted tax losses carried forward are changed. Among other things, the adjustment means that companies which have a deficit from previous years will be able to deduct losses from the surplus that may arise due to the company not being allowed to deduct all its interest expenses.
Tax deduction for installation of green energy sources
Natural persons who invest in solar cells, storage of self-produced electricity, and charging points for electric vehicles are allowed a tax reduction for labor and material costs. Tax reduction is granted with 15 percent for solar cells and 50 percent for storage of self-produced electricity and charging points for electric vehicles. However, the reduction is limited to a maximum of SEK 50,000 per person and tax year.
Reduced tax for people over age 65
There is a tax difference between employees and senior citizens due to employment tax deductions. An increase of the basic tax deduction for individuals that reached the age of 65, will level out this tax difference. The reduction is applicable on monthly income between SEK 17,700 and SEK 118,200.
However, some differences between senior citizens and employees will remain for the next two years due to the temporary tax reduction on work.
Changed rules regarding benefit of free food in specific cases
During both the forest fire in 2018 and the spread of COVID-19, food gifts to the public have been a common way to show support and appreciation. A new rule of the Income Tax Act makes these gifts, or “food benefits” provided by non-employers without a requirement for consideration, exempt for tax purposes.
NEW LAWS EXPECTED IN 2021
Laws expected to enter into force:
- Strengthened and simplified environmental management in the bonus-malus-system
- Reverse charge mechanism for VAT on sales between taxable persons of mobile phones, integrated circuit devices, game consoles, tablets and laptops
- Additional exemptions from energy taxes on self-produced electricity
- Adjustment of the standardized method for calculating the value of car benefits
- Further measures to strengthen the deduction of employer contributions for people working in research or development
For more information about each proposal, see The Swedish Budget and Taxes in 2021, part 1.
AMENDING BUDGET PROPOSALS
Due to the continued spread of COVID-19, the parliament has voted in favor of two supplementary amending Budget Bills for 2021. See the summary of some of the decisions below.
Temporary reduction of employer contributions for persons between 19 and 23 years of age
A temporary reduction on social security contributions and general payroll tax on compensation will enter into force for persons who at the beginning of the year have reached the age of 18 but not 23. The reduction applies to the part of the salary that does not exceed SEK 25,000 per month.
The rules enter into force on 6 February and shall apply to compensation paid during the period 1 January 2021 to 31 March 2023.
Companies that have applied for temporary payment respite can be granted a one-year extension of the respite period
The Swedish Tax Agency has been authorized to extend the period of payment respite up to one year.
The possibility of granting temporary tax payment respite was introduced on 30 March 2020 to mitigate temporary cashflow difficulties for companies. Payment respite is granted for one year. Due to the new proposal, the Tax Agency has the opportunity to extend the respite period with an additional year for companies which have already been granted payment respite.
Furthermore, it is now possible to defer six months of tax payments instead of three months which was the previous upper limit.
Turnover support for sole traders and reorientation support for companies shall also cover the period August-December 2020
The turnover support is a financial support to sole traders whose net sales decreased compared to the same period in 2019. The reorientation support is a financial support for companies whose net sales have decreased as a result of the pandemic.
The turnover support will be extended to the period August 2020 to February 2021. Within short the turnover support will also cover limited partnerships with at least one natural person as partner. The support will cover the period March 2020 to February 2021. The government has announced that the turnover support for both sole traders and limited partnerships will be extended to include March – April 2021.
The period for reorientation support will also be extended and applicable for periods between March 2020 and April 2021.
The above applies provided that the prescribed eligibility criteria are met.
Deloitte is following the development and will provide additional articles on the subject. For questions about the Budget Bill and its impact, Deloitte is here for you and your company.
Read the first part of this series of articles