On 22 September 2025, the government submitted the budget bill to Parliament. With the ongoing prolonged recession, several tax measures are proposed to strengthen household finances. Among other things, reductions are proposed for taxes on work, pensions, sickness and activity compensation, electricity, and food. According to the government, the budget aims to strengthen the financial situation of working households. The proposals are set to enter into force on 1 January 2026. Below, we summarize a selection of the government’s key tax proposals.
Proposed measures for businesses:
The government sees an increase in the number of businesses as a crucial factor in promoting innovation, creating more jobs, and strengthening economic prosperity. The budget bill presents a special business package aimed at reducing the cost of hiring young people and lowering taxes for small business owners.
- Simplifications and improvements to the so-called 3:12 rules, which govern taxation of owners of closely held companies. Several amendments are proposed, but the most significant change concerns the calculation of the threshold amount that determines how much of a company’s profit can be distributed at a lower tax rate.
- Temporary reductions in employer contributions for young people between 18 and 23 years. Employers’ contributions for youth will be cut by about one-third during parts of 2026 and the whole of 2027, with the aim of reducing businesses’ hiring costs. The proposal is set to enter into force on 1 April 2026 and remain in effect until 31 December 2027.
- Introduction of a tax credit for donations from legal entities to non-profit organizations. The tax credit corresponds to the donation amount multiplied by the corporate tax rate. However, the deductible base is capped at SEK 800,000 per calendar year.
Proposed measures for individuals:
According to the government, high inflation and rising interest rates have reduced households’ financial flexibility. The budget bill therefore includes several measures aimed at improving household finances.
- Lower tax on work through an increase in the earned income tax credit for those earning over SEK 16,000 per month.
- Lower tax on pensions through an enhanced basic allowance. According to the government, this means that taxes for a given income are reduced equally for pensioners and employees.
- Strengthened tax reduction on sickness and activity compensation, aimed at narrowing the gap between those receiving such benefits and those who are employed.
- Tax exemption for the benefit of charging passenger cars (class I), light trucks, motorcycles, mopeds, and bicycles at a charging point or electrical outlet provided by the employer at the workplace is proposed to be made permanent. Furthermore, an expansion of the right to deduct fuel expenses for business trips is proposed for those with plug-in hybrid company cars who charge them at the employer’s premises without paying for the electricity.
- The deduction threshold for commuting between home and work is proposed to be further increased—from the current SEK 11,000 to SEK 15,000.
- Reduced electricity tax nationwide by 9.875 öre/kWh (including VAT).
- The government proposes reducing the special income tax for residents abroad (SINK) from 25% to 20%. The proposed changes are intended to make the SINK system more attractive. The government proposes that SINK be lowered in two steps: in 2026, from 25% to 22.5%, and in 2027, from 22.5% to 20%.
Proposed measures on VAT:
- Temporary reduction of VAT on food from 12% to 6% between 1 April 2026 and 31 December 2027. The aim is to support households by alleviating the impact of previous high inflation through a reduced tax burden. The measure is expected to fully pass through to food prices and reduce households’ tax burden by about SEK 16 billion in 2026 and about SEK 21 billion in 2027.
- Reduction of VAT on admission to dance events from 25% to 6% starting 1 July 2026. The purpose is to achieve consistency within the cultural sector and promote dance. Dance events include arrangements where visitors are given the opportunity to dance to music, such as nightclubs, live dance music events, and similar. The measure is expected to reduce households’ tax burden by about SEK 0.22 billion in 2026 and thereafter by about SEK 0.44 billion annually.
- Introduction of measures against VAT fraud, including extended powers for the Swedish Tax Agency in connection with applications for VAT registration, the ability to deny registration, the ability to deregister, and the authority to mark a VAT number as invalid in VIES. The Tax Agency will also gain the power to decide that excess input VAT should not be credited in certain cases where there is a risk of tax evasion.
- The government also proposes introducing the turnover method as the main rule for allocating input VAT on mixed activities in joint acquisitions, effective 1 January 2027. Rules are also proposed to allow the use of other methods in cases where they provide a more accurate reflection.
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