Few new tax measures, with important reforms still pending

With the formation of a new government still pending following the parliamentary elections, this year's Budget Bill is a transitional budget and, as expected, contains few new tax policy initiatives. The general principle governing a transitional budget is that it should be based on the previously adopted budget and should not introduce new policy, subject to limited exceptions. 

For businesses and investors, the most interesting aspect of the Budget Bill may therefore be what is not in it.

Several tax reforms previously announced or under consideration have been left for the incoming government, including proposed changes affecting the allocation of input, VAT deductions, reforms concerning R&D incentives and the taxation of foreign experts.

The immediate changes are therefore limited. The longer-term direction of Swedish tax policy is much less settled.

The Budget Bill largely maintains the existing tax framework. This is a direct consequence of its status as a transitional budget: the starting point is the 2026 budget, with adjustments primarily for previously enacted legislation, existing commitments and measures necessary to maintain essential public functions. 

One of the few new tax proposals concerns the enhanced earned income tax credit for older individuals. The government proposes increasing the qualifying age from 66 to 67. The proposal has been included as an exception to the general principle against new policy on the basis that it is considered politically uncontroversial and cannot be implemented during an ongoing budget year. 

For corporate taxpayers, however, the Budget Bill contains no major changes to the general corporate income tax framework.

While the Budget Bill itself contains few new tax initiatives, a number of previously enacted measures will continue to apply or take effect during 2027.

The special income tax rate for non-residents, commonly referred to as SINK, will decrease from 22.5% to 20% from 1 January 2027.

This represents the second stage of an already enacted reduction, following the decrease from 25% to 22.5% in 2026. The lower rate will be relevant in particular for non-resident employees, directors and other individuals receiving qualifying Swedish-source income.

The temporary reduction of the VAT rate on food from 12% to 6%, which took effect on 1 April 2026, will continue throughout 2027.

Under the legislation currently in place, the VAT rate is scheduled to return to 12% from 1 January 2028.

The previously enacted temporary reduction in employer social security contributions for qualifying young employees will also continue to apply during part of 2027.

Under the current rules, the temporary relief is scheduled to expire on 30 September 2027.

The Budget Bill also reflects the expiry during 2027 of temporary reductions in energy and carbon taxes on petrol and diesel.

At the same time, the previously announced increase in excise duties on certain tobacco products, which had been expected to take effect from 1 January 2027, has not been included.

Although these changes are relatively narrow, they may be relevant to businesses operating in the transport, energy, retail and consumer goods sectors.

For many businesses, the proposals not included in the Budget Bill may ultimately prove more significant than the measures that are.

A number of previously announced or contemplated tax reforms remain unresolved. In particular, businesses should continue to monitor developments in the following areas:

• Input VAT allocation. Proposed changes to the rules for allocating input VAT deductions in businesses conducting both VATable and VAT-exempt activities have not been included in the Budget Bill. The existing rules therefore continue to apply for the time being. The omission should not, however, necessarily be interpreted as meaning that the proposal has been abandoned.
• R&D incentives. Potential improvements to Swedish tax incentives for research and development remain relevant, particularly for technology-intensive businesses and multinational groups with significant R&D functions in Sweden.
• Foreign experts and highly qualified employees. Further changes intended to make Sweden more competitive when attracting international talent also remain to be considered by the incoming government.

The fact that these measures have not been included in the transitional budget is unsurprising given its limited political scope. It does, however, mean that businesses considering investments, reorganisations or recruitment decisions will need to continue monitoring the legislative position.

The 2027 Budget Bill is unusual not because it fundamentally changes Swedish tax policy, but because it introduces so little new policy.

This largely reflects the current political situation. The caretaker government has itself emphasised that a transitional budget should generally not contain new policy and should instead be based on the most recently adopted budget, subject to limited exceptions. 

The result is a Budget Bill that provides relatively little indication of the direction Swedish tax policy will take during the next parliamentary term.

The key question is therefore no longer what the government has included in the 2027 Budget Bill, but which of the reforms currently waiting in the wings will be taken forward by the next government, and in what form.

Please contact our Tax team if you would like to discuss how the 2027 Budget Bill or any of the pending tax reforms may affect your business.