Tax-free Compensations During Temporary Work Assignments

From the 1st of January 2022, Employees who are temporarily assigned by their employer to work sites more than 50 kilometers from their normal place of work, for a period of up to one month, will be eligible for tax-free expense reimbursements. Such reimbursements have previously been available for employees sent on business trips.

The Swedish legislation is relatively restrictive with regards to what types of expenses an employer can reimburse their employees for without tax consequences. Employees who are sent by their employers on a business trip are typically eligible for the reimbursement of hotel costs as well as certain expenses for food and other necessities, but certain gray areas exist in the legislation. During the covid-19 pandemic, in particular, many employees within, for example, the healthcare sector, have been reassigned to locations other than their normal place of work. Many such assignments fall outside the Swedish Tax Authority's definition of a business trip, especially in cases where the tasks performed by reassigned are indistinguishable from locally employed staff. For the avoidance of doubt, employees who are temporarily assigned by their employer to work sites more than 50 kilometers from their normal place of work for up to one month will, therefore, from the 1st of January 2022, be given the same eligibility for tax-free expense reimbursements as employees on more traditional business trips.

Tax-free reimbursements will be allowed for such increased expenses as the employee has become subject to for reasons of their reassignment. These may include costs for housing and travel, as well as other expenses. The purpose of the reimbursement is not, however, to decrease the employee's normal private living expenses, and professional advice should be engaged when determining if a specific cost can be covered by the employer without tax consequences. An employee's own home will, furthermore, in most cases, not be regarded as a potential place of work under the new legislation. Herby, most employees, will not become eligible for tax-free reimbursements for reasons of them being required to work from home or, reversely, when returning to their normal place of work. The employee's own home can, however, be classed as a place of work under the new legislation in the case of construction workers for whom their own home is their only fixed base of operation, as well as for certain categories of civil servants and emergency relief workers.  

Tax Reduction for Equipment Bought During 2021

As part of the stimulus packages introduced to combat the economic effects of the ongoing pandemic, the Swedish parliament has declared that business investments in lasting equipment and machinery made during the fiscal year of 2021 will be subject to a tax reduction. The tax reduction will correspond with 3.9% of the purchase price of all equipment and machinery of such type as are customarily depreciated over a period longer than one fiscal year, on the condition that the taxes paid on the profits declared by the individual business for the fiscal year of 2021 are sufficient to cover the reduction. Another condition is that the equipment must remain the property of the business which acquired it until the end of the next fiscal year.

Both businesses incorporated as limited companies and self-employed individuals will be able to benefit from the tax reduction. Companies whose current fiscal year ends later than the 31st of December 2021 will be able to apply the tax reduction on purchases made up until the end of their current fiscal year.

Changed Rules for Rental Apartments

To improve the conditions on the Swedish market for rental apartments, the Swedish parliament is introducing a number of legislative changes, which will take effect on the 1st of January 2022.

To ensure a reasonable housing standard, the regional Rent Tribunals (Swe. "Hyresnämnder"), which makes rulings of landlord-tenant disputes, are given the mandate to order the landlord of apartment buildings to make improvements if the present standard is found to be lower than what could be reasonably expected of a Swedish apartment building. Tenants who have permanently lost their apartments due to, for example, fire will also, going forward, have the right to demand a replacement rental apartment from their landlord if the latter's position is such that they could reasonably accommodate such a request. The question of if an individual landlord can be reasonably expected to provide a replacement apartment will depend on factors such as the size of the landlord's apartment portfolio and the rate at which their apartments become available for rental.
The Swedish rent control rules for private individuals renting out apartments will also be subject to minor adjustments at the start of the new year. The maximum rent a private individual can legally charge has in recent years been calculated as the sum of the landlord's cost of providing the apartment, plus a reasonable return on their invested capital based on present interest levels. Since the market interest rates have remained low to non-existent, this principle has created a great level of uncertainty both among private landlords and the courts regarding what rents are currently allowable under Swedish law.

To encourage private individuals to rent out unused apartments, the Rent Tribunals will, from the start of 2022 and onwards, also factor in the value of the apartment standard when establishing if a specific rent is reasonable. This principle has long since been the norm for corporate landlords. Private individuals will, hereby, to a greater degree, be able to ascertain the correct rent level by checking what local real estate companies are charging for apartments with an equivalent standard of living.  Apartment rentals will, however, continue to be tightly regulated by Swedish law, and any party which offers an apartment for rental should take care to ensure that the size of the rent does not exceed the level currently allowed by the Rent Tribunal. Under Swedish law, any part of an apartment rent that is found to exceed the reasonable rate for the apartment in question must be repaid to the tenant with interest.

Expanded Tax Relief for Staff Stock Options

Under Swedish law, the main rule is that staff stock options are to be subject to full employer social fees and personal income tax at the time the option is exercised. The Swedish government has, however, since 2018 operated a program through which employee stock options can be given tax-free by smaller companies if they are excised within 3 to 10 years from the day they are issued. Profits made through employee stock options falling under said program are only subject to the Swedish capital gains tax of 30%, instead of being subject to the standard employer social fees of 31.42% and the personal income tax of up to 55.5%.

During the period from the 1st of January 2018 until the 31st of December 2021, only companies with less than 50 employees and a turnover no higher than 80 million SEK have been allowed to issue tax-free. The recipients have furthermore been required to have regular employment with the issuing company, not just a board position. From the 1st of January 2022 and onwards, tax-free staff options can be issued as long as the issuing entity has less than 150 employees and the turnover is no higher than 280 million SEK. Board members and deputy board members without regular employment with the company will furthermore qualify for receiving tax-free staff options. The requirement for the options to be exercised 3 to 10 years after their issuance remains unchanged. Additional distinctions do exist between different types of staff options, and professional advice should always be engaged before staff options are issued.

 

Increased Basic Deduction for Working Tax Payers

The Swedish personal income tax has, during the last decade, slowly decreased while still being high compared to many other jurisdictions. On the 1st of January 2021, the Basic Tax Deduction (Swe. "Grundavdrag"), which most Swedish tax subject receives in one form or another, will once again be increased. Through this measure, all Swedish tax subjects with taxable full-time employment will benefit from a small tax decrease of SEK 150 per month. The tax situation of an individual tax subject will, however, as always, be affected by many different factors.

 

Increased Basic Deductions for Seniors

As part of the Swedish parliament's long-term commitment to improve the finances of Sweden's elderly, the Basic Tax Deduction (Swe. "Grundavdrag") will be further increased for all tax subjects 65 years of age or older. This increased Basic Tax Deduction is estimated to decrease the taxation of the elderly by up to SEK 7500 per year, the maximum deduction benefiting individuals with an annual retirement and/or salary income of SEK 536 000.

Increased Tax Reductions for Recipients of Sickness-Benefits

To further improve the finances of the victims of long-term illnesses and disabilities, the taxes payable on sickness benefits and related activity support for the disabled will be reduced. The average annual tax decrease is expected to amount to SEK 10,000 per qualified individual.

Climate Declaration Process Introduced for New Buildings

From the 1st of January 2022, a new process will be introduced through which applicants for new buildings permits will be required to declare the expected environmental impact of each building as part of the permit process. The climate declaration process does not in itself limit what buildings can be constructed in Sweden, but the process is intended to support an increased environmental focus during the permit process. Private individuals who are applying for permission to build a home for themselves and their families will not be affected by the new legislation.

 

International Crimes of Aggression Criminalised

To ensure Sweden's compliance with 2010 additions to the Rome Statute of the International Criminal Court, Sweden will, on the 1st of January 2022, formally criminalize so-called Crimes of Aggression. Any person who has planned, initiated, or executed aggressions using the military force of a state in violation of the Charter of The United Nations can, from now on, be prosecuted in Sweden for Crimes of Aggression in accordance with the Rome Statute. Crimes of Aggression will be punishable with prison for a minimum of 4 years, with life imprisonment being meted out for severe violations of international law.

The Tax on Ads and Commercials is Discontinued

On the 1st of January 2022, the Swedish tax on ads and commercials will be discontinued. Previously, a tax of 6.9% has been payable on top of the portion of the advertisement cost exceeding SEK 100,000 per tax subject and year.

Minor Cases of Littering Becomes Subject to Fines

On the 1st of January 2022, Sweden is discontinuing the previous exception, which freed minor cases of littering from fines. Going forward, the act of throwing, for example, chewing gum or cigarette-buts on the street or out in nature will be punishable with a fine of SEK 800.

Tax-Free Bicycle Benefits

From the 1st of January 2022 and thereafter, employers will have the option of providing their employees with tax-free access to bikes for the purpose of transportation. Bike benefits will be tax-free to such an extent as the annual value of the benefit does not exceed SEK 3000 per employee, on the condition that the benefit is made available to all employees in the company.

Stricter Definition of Close Companies

Under Swedish law, companies controlled by a close circle of shareholders are subject to a complex set of so-called close company rules (Swe. "Fåmansbolag"). The original purpose of these statutes is to stop individual shareholders from taking unfair advantage of the Swedish tax code, but the option of decreasing the taxation of certain dividends from 30% to an effective rate of 20% has also come to be included for the purpose of encouraging entrepreneurs. To avoid the circumvention of the close-company rules through advanced tax planning, the definition of individual ownership will, on the 1st of January 2022, be extended to include shares owned by trusts benefiting in part or in whole specific individuals and/or their families. This legislative change is not expected to have any effect on the vast majority of all Swedish close companies.

 

Increased Tax Deductions on Charitable Donations

Swedish tax subjects who donate money to government-approved charities can benefit from a tax reduction corresponding with 25% of the donated amount, up to an annual maximum amount. On the 1st of January 2022, the maximum tax reduction for charitable donations is increased from SEK 3,000 per year to SEK 12,000 per year. Applications for tax reductions are processed by the charitable organization receiving the donation, a process for which they need to receive the Swedish person number or tax coordination number of the donor.

New Certification Criteria for Bio-Fuels

On the 1st of January 2022, a new certification process is introduced for any biofuels traded within Sweden. If a biofuel, such as, for example, biodiesel or fuel pellets, are to benefit from any tax reduction or environmental certification, they must, from now on, first, have their origin certified as biological sustainable. The purpose of this process is to ensure that no parties trading in biofuels extracted from sensitive biotopes will benefit from Sweden's various environmental programs.