Sweden’s Finance Minister received a report outlining two alternative tax schemes aimed at encouraging domestic R&D, including a super-deduction and a refundable tax credit, with implementation proposed from January 2027.
Sweden’s Minister of Finance (MoF) has received the final report from the Inquiry Officer evaluating the country’s research and development (R&D) tax incentive system on 19 January 2026 outlining two alternative approaches aimed at stimulating domestic investment and supporting economic growth.
It examines the current R&D incentives and proposes a new scheme under Swedish tax legislation, primarily based on companies’ R&D spending and offering income tax reductions.
Overview
The report proposes a new tax incentive to encourage private investment in R&D in Sweden. Rather than recommending a single model, the Inquiry presents two alternative approaches for reducing corporate income tax, both focused on R&D personnel costs.
Two alternative proposals
The Inquiry did not advocate for one model over the other, as each has distinct advantages and targets different types of companies:
- Option 1: Super-deduction (Förhöjt kostnadsavdrag)
- Mechanism: Companies receive an additional deduction on top of actual R&D costs.
- Size: Proposed at 200% of qualifying costs, resulting in a total deduction of 300%.
- Impact: For a company paying standard corporate tax, this provides a 41.2% tax relief on salary costs.
- Note: Primarily benefits profitable companies; loss-making companies can use it only to increase deficits for future years.
- Option 2: Refundable tax credit (Återbetalningsbar skattereduktion)
- Mechanism: Companies reduce their tax by a calculated amount. If the credit exceeds the tax owed, the surplus is paid out.
- Size: Proposed at 20% of qualifying costs.
- Impact: Provides an immediate liquidity boost, even for loss-making companies such as startups.
- Global Tax Advantage: Structured as a “qualified refundable tax credit,” making it favourable under international Global Minimum Tax (GloBE/Pillar 2) rules.
Qualifying criteria
Both proposals share common definitions and limits to ensure simplicity and predictability:
- Expenditure base: Limited to salaries, fees, and benefits for personnel working on R&D, as staff costs are the dominant expense across sectors.
- Geographical limit: Work must be performed within the European Economic Area (EEA). While the incentive aims to stimulate Swedish R&D, EU rules prevent restricting it exclusively to domestic activities.
- R&D definition: Aligns with the existing social security contribution reduction (FoU-avdraget) to ensure consistency.
Economic and fiscal impact
- Firms affected: Around 3,600 companies or corporate groups, including roughly 2,600 small and medium-sized enterprises (SMEs).
- Cost to public finances: Estimated at approximately SEK 8.1 billion per year from 2028.
- Timeline: The Inquiry recommends implementation of the new rules from 1 January 2027.
International context
The Inquiry compared R&D incentives in Denmark, Norway, Finland, Germany, and the UK to ensure Sweden’s proposal remains internationally competitive. While Sweden maintains high R&D spending, its public tax support is relatively low compared with other OECD countries.
