Global Daily Tax News, Sweden Announces Tax Breaks In 2026 Budget, (Sep 23, 2025)

The Swedish Government has released the nation's 2026 Budget, announcing plans to offer tax relief to businesses and individuals.

The Budget provides that tax on labor and pensions will be reduced by strengthening the earned income tax credit and the increased basic tax credit. Further, VAT will be temporarily lowered on food, from 12 percent to 6 percent, from April 1, 2026, until December 31, 2027, and tax will be reduced on electricity.

The Government has also announced plans to cut the rate of VAT on admission to dance events from 25 percent to six percent, from July 1, 2026.

The Budget features a cut to employer contributions by a third for companies hiring young people between the ages of 19 and 23, between April 1, 2026, and September 30, 2027.

Further, the special income tax for Swedes living abroad will be cut in two stages, from 25 percent to 22.5 percent in 2026, and to 20 percent in 2027.

The Government has also committed to deliver simplifications and improvements to the 3:12 regulations. These rules set out how much profit a stakeholder can withdraw as a dividend and pay 20 percent tax, with the remainder taxed as income at progressive rates.

The Government set out plans for reform of the 3:12 regulations in May this year. It proposed making the tax system simpler, in particular by merging the two calculation methodologies: the main rule and the simplified rule. Under those proposals, the amount liable to tax at 20 percent would be calculated based on salaries paid by the company and its subsidiaries. The Government previously said it anticipates that the 20-percent tax rate will be applied more broadly, typically limited to a closely held company's distributions up to approximately SEK320,000 (USD33,636). The changes would become effective from January 1, 2026.

Finally, the Government has said vehicle tax will be waived on caravans.