Government proposal on simplification of the 3:12 rules

The government’s proposal

The rules on taxation of closely held companies, also known as the 3:12 rules, determine how dividends and capital gains are taxed for owners of closely held companies. The rules have long been criticised for being complicated and difficult to apply. The government has now published its legislative consultation paper containing the final proposal for changes to the 3:12 rules. The proposal affects the opportunities to receive dividends or capital gains at a 20 per cent tax rate. The rules are proposed to enter into force on 1 January 2026 and include the following:

New basic amount: A new model for calculating the threshold amount is proposed, replacing the main rule and simplification rule with a single calculation rule. The proposed threshold amount corresponds to four income base amounts (SEK 322,400 for 2025) divided among the shareholders’ holdings. A shareholder who owns shares in several companies would only be able to use a single threshold amount in total, allocated proportionally among the companies. Previously, the threshold amount was 2 ¾ income base amounts.

Abolition of interest on the saved dividend allowance: It is proposed to abolish interest on the saved dividend allowance. The higher threshold amount is considered to compensate for this. However, all shareholders may increase the threshold amount by an interest rate corresponding to the government lending rate plus nine percentage points on the portion of the acquisition cost that exceeds SEK 100,000.

Abolition of the salary withdrawal requirement and capital share requirement plus introduction of a salary deduction: It is proposed that the salary withdrawal requirement and the capital share requirement (“the four per cent barrier”) be abolished. Instead of a salary withdrawal requirement, a salary deduction of eight income base amounts (SEK 644,800 for 2025) is to be introduced for each shareholder. This means that all shareholders in closely held companies that employ staff would be able to count the company’s salary base in their calculations, regardless of ownership share or their own salary withdrawal. At the same time, the salary deduction reduces the shareholder’s own salary-based allowance.

Furthermore, it is proposed that remuneration to employees in companies owned through an alternative investment fund should not be included in calculating the salary base.

Shorter qualifying period: The current waiting period is proposed to be reduced by one year, from the current five-year limit (the tax year plus the five preceding or following tax years) to a new four-year limit (the tax year plus the four preceding or following tax years). This is primarily significant when assessing how long a share is considered a qualifying share after a shareholder ceases to be actively involved in the company, as well as for the “same or similar activity” rule.

Abolition of indexation and capital base rules: The rules that previously allowed indexation of the acquisition cost for older shares (acquired before 1990 or 1992), as well as the capital base rules, are being abolished. However, under transitional provisions, these abolished rules may still apply to tax years beginning before 1 January 2029.

The legislative consultation paper implements most of the proposals from the government inquiry SOU 2024:36 Förenkla och förbättra! [Simplify and improve!]. However, some of the inquiry’s proposals have been excluded, including:

No overall ceiling: The inquiry proposed combining the different ceilings for dividends and capital gains into a single overall ceiling of 90 income base amounts for both dividends and capital gains. The majority of consultation bodies were in favour of the proposal, but the government has chosen not to move forward with it.

No limitation of the category of related parties: The inquiry proposed that the category of siblings (including their spouses and descendants) should no longer be considered related parties for the purposes of closely held company taxation. Several consultation bodies stressed that the definition of related parties should not be applied differently in rules on closely held company taxation, and the government has not proceeded with the proposal.

No requirement for control information: The inquiry’s proposal that closely held companies must submit control information about shareholdings was criticised by most consultation bodies on the grounds that it would increase the administrative burden for such companies. The government acknowledged the criticism and chose not to proceed with this proposal.

Lindahl’s comments

The provisions on taxation of closely held companies are among the most complex and opaque in Swedish tax law. While the government’s proposal contains welcome simplifications, not all business owners will be celebrating. For those who have accrued dividend allowance over several years, the abolition of interest may represent a tangible setback.

Overall, Lindahl welcomes the ambition to simplify. More predictable rules, simpler models, and fewer lock-in effects are good for growth. However, we miss some of the proposals from the inquiry, such as the introduction of a common ceiling for dividends and capital gains, the reclassification of siblings as non-related parties, and the codification of the level of outside ownership.

Raising the minimum level of the threshold amount is a positive step, as is allowing more shareholders to count wages in dividend calculations. At the same time, the deduction of eight income base amounts might significantly affect those with low personal wage withdrawals, even though the higher threshold amount benefits them.

If you have any questions about how your company may be affected by the proposed changes to the 3:12 rules, feel free to contact one of our tax lawyers.