The Swedish government's Budget Bill for 2024

Today on 20 September 2023, the Swedish government presented its Budget Bill for 2024 (prop. 2023/24:1). As expected, the Budget Bill is restrained in its proposed reforms and aimed at fighting the ongoing inflation while supporting households.

The following is a short summary of some of the fiscal policies and proposals of the Budget Bill, most of which presented prior to today in the time leading up to the Budget Bill's presentation. Schjødt's quarterly newsletter, set to be published in early October, will elaborate on some of the news in the Budget Bill, alongside other tax related news of this year's third quarter.

The government proposes that the value of redemption shares (Sw. inlösenaktier) and similar assets shall be taxed as dividend. This means that the allocation of redemption shares to shareholders will be treated as dividend in connection with a company’s reduction of the share capital for repayment to the shareholders with withdrawal of shares, or through the company acquiring its own shares. The proposal is further extended to define the allocation of redemption shares as dividend in accordance with the terminology of the Withholding Tax Act, which applies for non-resident shareholders.

The changes are proposed to enter into force on 1 January 2025 and apply on redemption shares that are allocated after 31 December 2024.

The Budget Bill includes the introduction of the new Top-up Tax Act that implements the minimum tax directive (Council Directive (EU) 2022/2523) into Swedish law. The directive shall ensure a global minimum tax level for multinational enterprise groups and certain large‑scale domestic groups with the aim to ensure that the business income of such groups is taxed at a minimum rate of 15%. The rules are set to apply to entities located in an EU member state, where the group has an annual revenue of at least EUR 750 million.

The new act is proposed to enter into force on 1 January 2024.

Under the current regulations, the energy and carbon dioxide tax on gasoline would have amounted to a total of SEK 7.02 in 2024. The tax is reduced from this level by SEK 1.31. This means, given that no indexing will apply, that the total tax will be SEK 0.75 lower (incl. VAT) compared to the 2023 level. In 2025, the tax on gasoline will be further reduced from the adjusted level by SEK 0.75 (including VAT).

The tax on diesel is lowered towards the EU's minimum tax level in 2024. This entails a reduction of approx. SEK 0.43 per litre (incl. VAT) compared to the level that would have applied in 2024 under the current regulations, but a slight increase compared to the 2023 level.

In addition to the proposal for reduced tax on gasoline and diesel, the government is also implementing measures to support the agricultural sector. The government proposes that the extended tax reduction for so-called agricultural diesel should also apply in 2024.

The changes are proposed to enter into force on 1 January 2024 and 1 January 2025, respectively.

To reduce the administrative burden on small businesses, the government is proposing to increase the turnover threshold for VAT from SEK 80,000 to SEK 120,000 per calendar year, which will mean that fewer small businesses will need to report VAT (but may still opt in to do so).

In order to create equal conditions for small businesses established in Sweden and other EU states, it is further proposed that taxable persons established in other EU states may apply the increased turnover threshold.

The changes are proposed to enter into force on 1 January 2025.

To promote employment in the construction sector during a challenging economic situation, the government proposes a temporary increase in the cap for home improvement deductions (Sw. ROT-avdrag) during 2024.

The proposal means a temporary increase in the cap for home improvement deductions from the current SEK 50,000 to SEK 75,000 per person during 2024, and the temporary introduction of separate caps for home improvement and cleaning deductions (Sw. RUT-avdrag). The temporarily increased cap is suggested to apply for the entire year 2024. However, it will only be possible to utilise SEK 50,000 in home improvement deductions (ROT) during the first half of 2024.

The changes are proposed to enter into force 1 July 2024.

The government presents two proposals to improve businesses' ability to attract key expertise. According to the proposals, the period during which foreign experts, researchers, and key personnel can receive tax relief should be extended from five to seven years. The government also suggests expanding the mandate of the 3:12 committee to review how the 3:12 rules can be changed to make it easier to retain expertise through qualified employee stock options.

The changes are proposed to enter into force on 1 January 2024 and apply on stays in Sweden that has commenced after 31 March 2023. The extended 3:12 review is proposed to be completed and presented on 31 May 2024.

The tax reduction on income is primarily targeted at full-time workers with low to moderate incomes. On average, the tax reduction will amount to approx. SEK 2,600 per person and year. The proposal is financed by temporarily pausing the indexing of the threshold for state income tax in 2024. The income threshold for state income tax shall be set at SEK 598,500.

The changes are proposed to enter into force on 1 January 2024.

On 1 March 2020, the additional tax on plastic carrier bags entered into force. The purpose of the tax was to reach the EU’s target for consumption of such plastic carrier bags.

The tax has, however, been deemed not necessary to achieve the EU’s consumption target, while also having certain negative effects, such as administrative costs for authorities and taxpayers, and that it may also lead to a total increase in consumption of resources. Therefore, the government now proposes that the tax on plastic carrier bags is abolished.

The abolishment shall apply as of 1 November 2024.