A new year always brings with it new legal changes. Below we have summarised some of the more important legislative changes that will come into effect on January 1st 2020.

 

Lowered Share Capital Requirement For Limited Companies

The minimum share capital for Sweden registered non-publicly traded limited companies is lowered from SEK 50,000 to SEK 25,000, in an effort to encourage the incorporation of more small businesses. Existing companies that wish to decrease their share capital following this legislative change will, however, first need to register their new share capital policy with Bolagsverket  (the Swedish Companies Registration Office). Any unauthorized decrease by more than 50% in a company’s share capital compromises its limited-liability status and can make it subject to forced liquidation.

Lowered Taxes on High Incomes

As part of the political deal through which the liberal parties allowed the Social Democrats and Environmentalist Party to form a new government in January of 2019, the Swedish parliament now abolishes the additional personal income tax of 5% which has previously been taken out by Sweden’s central government on the highest income categories for working professionals and pensioners. This tax was originally introduced as a temporary measure during a financial crisis in 1995 but has under different names been retained until now, despite many financial analysts claiming that it is harmful to the Swedish economy and tax revenue as a whole. These assessments have been based on the theory of the Laffer curve, which states that sufficiently high marginal tax rate will encourage taxpayers to lower their productivity.

As of 2019, the additional 5% tax was taken out on any portion of an income which exceed SEK 703,000 per year (an average of SEK 58,583 per month) for individuals below 65 years of age, and on any portion of an incomes exceeding SEK 733,300 for individuals of 65 years of age or older.  Individuals within these income categories will, through this legal change, benefit from a lowering of their taxes from 2020 and onwards, but in some Swedish municipalities, the impact of this will be lessened by local tax raises.

Adjustments of Local Tax Rates

The majority of all direct personal income taxes taken out in Sweden are taken out on behalf of the local municipalities and county administrations, which are free to determine their own tax rates. Local tax rates change over time depending on the needs of each region, but for the tax year of 2020, a higher number of taxpayers then usual will experience slight increases in their taxation due to rising costs associated mainly with healthcare and integration.

Of Sweden’s 290 municipalities, 61 will experience raised taxes in 2020, and the increases for the average taxpayer in these municipalities will vary between 0,15% and 1,85% depending on the municipality. The inhabitants of four municipalities will, on the other hand, receive tax cuts of between 0,05% and 0,3%.

In an effort to increase the financial equality in the country, and partially compensate individuals for the increased travel costs, etc. that commonly arise outside the larger cities, a small fixed tax rebate of SEK 1,650 per taxpayer and year has also been introduced for the inhabitants of the 80 municipalities which has the country’s lowest population density. Together with small increases in the basic allowance deductions benefiting all taxpayers, a slight decrease in taxation will be evident in the municipalities and regions which have not actively raised the taxes for 2020.

 

Raised Traffic Congestion Charges in Stockholm

Since August 1st 2007, travels with motor vehicles through the central parts of Stockholm have been subject to a congestion charge intended to encourage a diminishing of the daytime traffic through the central parts of Stockholm. The exact fees vary depending on time and part of town. A similar system exists in Gothenburg.

From January 1st, 2020, the time during which congestions charges are taken out in Stockholm will be extended with half-an-hour in the morning, which means congestion charges will be taken out from 6:00 AM until 7:29 PM during most business days. The fees themselves are also raised, and the maximum cost per car and day is raised from SEK 105 to SEK 135. Just as before, the licence plate number of all vehicles passing through any of the zones subject to congestion charges will be filmed registered, and the registered owner will then invoiced for the fee owed. Cars with more than SEK 5,000 in overdue congestion charges can be banned from traveling on Swedish roads until the debt is paid in full, and measures have been implemented to increase the Swedish authorities ability to demand payment from foreign-registered vehicles.

 Lowered Income Tax for Senior Citizens

The Swedish Parliament has, in recent years, introduced a number of measures to improve the finances of senior citizens in Sweden. As part of this effort, the taxes for all individuals of 65 years of age or older earning between SEK 211,000 and SEK 1,400,000 per year will, from January 1st, 2020, be lowered by an increase in the grundavdrag (basic allowance deductions) for this group. The largest monthly tax decrease brought about by this change will be SEK 759 and benefits individuals receiving average earnings from salary and/or pension of SEK 41,666 per month.

Increased Retirement Age

As a response to rising life expectancies, the Swedish public pension system raises the earliest age from which an individual can draw upon their public pension, from 61 to 62 years of age. At the same time, the labor legislation is changed so that the age from which an individual can be relieved of their position for reasons of old age is raised from 67 to 68 years of age. The traditional retirement age in Sweden is 65 years of age, but the number of individuals that work longer than that is steadily increasing due to a combination of improving health among senior citizens and slightly lower returns from pension funds due the increasing number of living pensioners they are to support.

New Migration Rules for Foreign Students and Researchers

As part of Sweden’s implementation of the EU directive 2016/801/EU, Sweden now introduces somewhat more lenient rules for individuals applying for a Swedish residence permit for the purpose of research, studies, internships, voluntary service, pupil exchange schemes or educational projects and au pair.
•    Applicants will be able to have future grants and stipends, which they have already secured, taken into consideration when proving that they can support themselves during their stay in Sweden. This diminish the need to possess large personal bank assets at the time of application, which was previously an absolute requirement. Applicants will, however, now need to show that they can support themselves during the whole period for which they are to reside in Sweden and not just for ten months per year, as was previously the case. For the year 2020, the minimum income/asset requirement for residency permit applicants within these categories has been set to SEK 8,514 per month.
•    Individuals who are part of an international educational or research program that requires them to spend time in Sweden intermittently during a longer time period can now be granted renewable residency permits with a duration of up to two years, which allows them to travel freely in and out of the country as need arise. Previously, such individuals typically had to obtain a new permit for each specific visit in Sweden, the duration of which was limited by the length of the stay.
•    Individuals who have completed studies or research programs for which they have held a Swedish residency permit now have the option of applying for a 12-month residence permit for the purpose of looking for work in Sweden or investigation the possibility of starting a business here.

 

Increased Possibilities for Periodization and Exit Taxation Postponement when leaving Sweden

In an effort to avoid international tax planning, the Swedish tax legislation prescribes that Swedish private or corporate tax subject can be taxed upon such capital gains they have made while residing in Sweden if they move out of the country, even if the assets themselves are not sold at that point in time. This type of exit taxation can lead to complications, due to the changing value of the assets and the overlapping jurisdictions of the involved countries. To decrease the number of such problematic situations, and to better align the Swedish legislation with the EU Directive 2016/1164, regarding rules against tax avoidance practices, the Swedish legislators now introduces more lenient rules for when such exit taxes can become subject to payment respites or periodization in scenarios involving moves from Sweden to other countries within the European Economic Area.

If applied for and granted, a tax respite of this type can help a tax subject avoid double taxation or incorrect valuations, but taxes which are delayed in such a manner are subject to interest. The Swedish Tax Authority also has the option of demanding that collateral be offered by the tax subject, as a guarantee that the taxes will be paid when the respite expirers.  

Compulsory Cash Handling for Banks and Other Financial Institutions

The use of cash has dramatically decreased in Sweden in recent decades, due to significant advances within the electronic payment industry and the technology-friendly attitude among the general population. Not all consumers or companies are, however, willing or able to follow this trend. In an effort to protect businesses and consumers who are still using cash, the Swedish parliament has now introduced minimum levels of cash services which banks and similar financial service providers licenced in Sweden must provide when operating on the Swedish market. A key obligation under the new legislation is that any service provider offering bank accounts to business or consumers in Sweden will be obligated to offer realistic options in all parts of the country for any of their customers wishing to deposit or withdrawing cash. Financial service providers found to be in violation of the new rules will be subject to fines.

The job of policing the new regulations, and help develop a functional case-law, has been delegated to the governmental agencies Post- och telestyrelsen (the Swedish Post and Telecom Authority) and Finansinspektionen (the Swedish Financial Supervisory Authority).