On 13 October the Swedish Parliament voted to introduce a new temporary law regarding tax reductions for investments in equipment acquired during 2021.
The possibility of obtaining a tax reduction applies to both natural and legal persons with income from business operations. The possibility of a tax reduction applies to equipment acquired during the 2021 calendar year and retained for a certain period of time. The tax reduction is 3.9 per cent of a specifically calculated basis, and can be offset against municipal and state income tax, property levies and property tax. The reduction can be used in the declaration for the financial year ending 31 December 2022, or can be saved for subsequent years if it cannot be utilised during that year.
The basis for the tax reduction is made up of the acquisition value of equipment stated in Chap 18, Section 1 of the Swedish Income Tax Act (machinery and equipment intended for permanent use) that was acquired during the 2021 calendar year. This means that neither intellectual property rights dealt with in the same way as equipment nor tangible effects that no longer belong to the business at the end of the 2022 financial year – or if the financial year is not concluded at the end of the year, the first financial year concluded after that date is included in the basis – are covered. Expenditure on equipment that may be deducted directly or on equipment of lasting value is also not covered. There are also special regulations on leasing, sale-and-lease-back transactions and transactions within an associated enterprise.
The purpose of the tax reduction is to provide incentives for entrepreneurs to increase investments and bring them forward. However, because the law only targets investments made in 2021, companies only have a limited time to act on this. In practice this means that companies planning to invest in tangible effects within the parameters of the act should seek to ensure that they are delivered and/or completed before the end of the year.
If you are a company that has invested in or plans to invest in equipment during 2021 and have questions on how your company is affected or whether you can utilise the reduction, please feel free to contact one of our tax-law experts.