Swedish Government Budget Proposal for 2026 – this is proposed in the tax area

On 22 September, the Swedish Government submitted the Budget Proposal for 2026 to the Riksdag. The overall focus of the Proposal is on strengthening household finances and the work-first principle. In the area of taxation, the Proposal presents, among other things, the final proposal for a simplified and improved tax regime for shareholders in closely held companies, a reduction of the SINK tax, the introduction of a tax reduction system for donations made by legal entities, and reductions in certain energy and consumption taxes. Below, Setterwalls summarises the most significant tax proposals.

Summary

• Tax on earned income and social security contributions
• Taxes on capital and property
• Corporate taxes
• Tax on consumption, etc.

Tax on earned income and social security contributions

• It is proposed that the ordinary earned income tax deduction be strengthened, and the tax reduction should be aimed primarily at full-time workers with low and medium incomes. In order to ensure that the increase does not lead to a difference in taxation between younger people with earned income and older people with pension income, the basic deduction will be increased accordingly. In addition, it is proposed that the tax reduction for sickness and activity compensation be strengthened, for neutral taxation compared to work. The Government intends to return to the Riksdag with a proposal in the autumn. The amendments are proposed to enter into force on 1 January 2026.
• The job premium that the government has announced will be introduced in 2026 is proposed to be tax-free. For this, it is deemed necessary to introduce a provision on tax exemption in the legislation, and the amendment is proposed to enter into force on 1 January 2026.
• As Setterwalls has previously announced here, it is proposed that the special income tax for foreign residents (SINK) be reduced from 25 to 20 percent (with the exception of seafaring income where the tax rate is 15 percent). For reasons of public finance, it is announced that the reduction should be implemented in two stages. According to the proposal, the tax rate will therefore be reduced to 22.5 percent as of 1 January 2026 and to 20 percent as of 1 January 2027.
• It is proposed that the tax-free benefit of charging a car, etc. at the workplace be made permanent, at the same time as the right to deduct fuel expenses for business travel is expanded. The Government intends to return to the Riksdag in 2025 with proposals. The upcoming proposals are proposed to enter into force on 1 July 2026.
• It is proposed that the limit for deductions for expenses for travel to and from work, travel to and from the place of education and cancellation trips be raised from SEK 11,000 to SEK 15,000. The Government intends to return to the Riksdag with a proposal in the autumn, and the upcoming proposal is proposed to enter into force on 1 January 2026.
• It is proposed to introduce a temporary reduction in the total collection of employer’s contributions and general payroll tax on compensation to persons who have reached the age of 18 but not 23 years of age at the beginning of the year. The proposal entails a contribution level of 20.81 per cent (compared to the normal 31.42 per cent), for the part of the salary that does not exceed SEK 25,000 per month. The upcoming proposal is proposed to enter into force on 1 April 2026 and be applied to remuneration paid during the period 1 April 2026 to 30 September 2027.
• Reduced levels are proposed for certain social security contributions in order to balance expected expenses and revenues. In order for the adjustment of the partial fees to take place within the framework of an unchanged levy, it is proposed at the same time to increase the general payroll tax to 12.62 percent. The proposal should result in reduced employer’s contributions for foreign employers who do not have a permanent establishment in Sweden. The changes are proposed to enter into force on 1 January 2026.

Tax on capital and property – final amendments to the 3:12 regime

As Setterwalls has announced on several previous occasions, the Government is now presenting its final proposal for simplified and improved rules for dividends and capital gains on shares in closely held companies (the so-called 3:12 regime).

The Government’s final proposal in the Budget Proposal largely corresponds to that presented in the Council on Legislation’s referral and which we previously reported on here. Certain parts of the initial 3:12 inquiry have thus not been included in the Proposal. Notably, the proposal to introduce an explicit requirement of at least 30 per cent of third party ownership in the third-party rule has been dropped, as has the proposal for a special definition of the concept of related parties, where the specificity of the sibling would be excluded. Nor has the proposal for a common ceiling amount for dividends and capital gains of 90 income base amounts been implemented.

The following key changes are proposed to become reality.

• A new common model with a basic amount of 4 income base amounts (SEK 322,400 in the income year 2026) that replaces the current simplification rule. The basic amount shall automatically be distributed among the shares in the company and, for owners of several closely held companies, also proportionately between the holdings.
• A changed calculation of the salary-based amount, abolished salary withdrawal requirements and equity participation requirements combined with an introduced standardised salary deduction;
• A changed definition of subsidiaries in terms of salary base, while limiting the salary base in certain AIF structures;
• A limited calculation of interest on cost amounts and no annual increase in saved dividend space;
• The time periods for the extended definition of a closely held company, the qualification rules, the third-party rule and the waiting period rule when a company ceases to be a close company will be shortened from five to four years;
• An extended right to a salary-based amount in the event of a share exchange;
• Reporting obligations linked to holders of qualified shares.

The proposals in the previously presented Inquiry on the Taxation of Carried Interest, which Setterwalls has previously written about here are only partly dealt with in the Budget Proposal through the limitation of the salary base in AIF structures. No other proposals from this inquiry are noted in the Budget Proposal.

The changes are mainly intended to enter into force on 1 January 2026. However, certain parts will apply for tax years commencing after 31 December 2026.

Corporate taxes

• A new system for tax reduction is proposed to be introduced, where legal persons are entitled to a tax reduction on request for gifts that have been given to an approved gift recipient to promote social aid activities or scientific research. The tax reduction is calculated on the value of gifts paid during the calendar year and amounts to the basis multiplied by the corporate tax rate (20.6 percent). The reduction for a legal entity is proposed to amount to a maximum of SEK 164,800 for a calendar year. According to the proposal, a gift that entitles a legal person to a tax reduction should not be taxed by anyone who directly or indirectly owns a share in the legal person. Nor is withholding tax payable on such a gift. The changes are proposed to enter into force on 1 January 2026.
• In 2025, the Government intends to return to the Riksdag with a proposal regarding new provisions that, among other things, simplify and improve the tax rules relating to forests, etc., and adapt the rules to EU law. The proposal is proposed to enter into force on 1 April 2026.
• In the spring of 2026, the Government intends to return to the Riksdag with preliminary amendments to the tonnage taxation system, which will enable more companies and vessels to be covered while adapting the regulations to comply with the EU’s state aid rules. The changes are proposed to enter into force on 20 July 2026 and will be applied for the first time for tax years beginning after 31 December 2026. However, before the announced proposal can enter into force, it must be notified to and approved by the European Commission.

In the area of corporate taxation, it is noted that the previously announced proposal for reduced corporate tax, which Setterwalls previously reported on here, has not become a reality in the proposal. The previous proposal for improved interest deduction rules for companies is also not included in the Budget Proposal but is expected to be submitted to the Riksdag in a separate proposal at the end of September.

Tax on consumption, etc.

• In the area of energy and environmental taxation, it is proposed, among other things, that the energy tax on electricity be reduced to 36 öre/kWh as of 1 January 2026. The temporarily extended reduction in the tax on agricultural diesel is extended for consumption in 2026 and the conditions for reimbursement are adjusted. Furthermore, the taxation of gases is modernised, and a more uniform energy taxation is proposed to be introduced in metallurgical processes. Vehicle tax and market wagon tax are proposed to be abolished for certain trailers as of 1 February 2026.
• The alcohol tax is proposed to be reduced for beverages from independent small producers from 1 July 2026, which means an extension of the previous reduction for small breweries. At the same time, it is proposed that the tobacco tax be increased on certain tobacco products as of 1 January 2027. The aim is to strengthen the competitiveness of small producers and at the same time protect public health.
• The Government proposes that the VAT on food be temporarily reduced from 12 to 6 per cent from 1 April 2026 to 31 December 2027, and that the VAT on access to dance events be reduced from 25 to 6 per cent as of 1 July 2026. In addition, it is proposed to introduce new measures to counteract VAT fraud from 1 July 2026 and the rules for the allocation of deductions for VAT in mixed activities are proposed to be changed as of 1 January 2027. The changes aim to strengthen households’ purchasing power and increase legal certainty in the VAT system.

Public finance effects

According to the Budget Proposal, the rule changes will reduce tax revenues in 2026, mainly through strengthened earned income tax deductions, temporarily reduced employer’s contributions for 19-23-year-olds, reduced electricity tax and temporarily reduced food VAT.

Setterwalls’ comment

Setterwalls monitors the proposed changes and will return with further details, including regarding the proposed changes to the 3:12 regime. If you have questions about how the proposals affect you, please contact Setterwalls’ tax experts.

The content is a general account of an informative nature and is not legal advice on which to base an assessment in an individual case. Please contact us for advice on a case-by-case basis.