Sweden’s Ministry of Finance has proposed a new voluntary R&D tax incentive allowing businesses to claim an additional deduction of 200% of eligible wage costs. The enhanced deduction is proposed to take effect from 1 January 2027 and is designed to support domestic R&D investment while limiting potential Pillar Two impacts.
Sweden’s Ministry of Finance has proposed a new voluntary tax incentive that would allow businesses to claim an additional deduction of 200% of eligible R&D wage costs, taking the total deduction to 300% when combined with the ordinary deduction.
The proposal was submitted to the Council on Legislation on 13 August 2026 and is intended to increase R&D investment and strengthen Sweden’s international competitiveness.
200% additional deduction
The enhanced cost deduction would apply to qualifying wage-related expenses for personnel engaged in R&D. At Sweden’s standard corporate tax rate of 20.6%, the additional deduction would provide a direct tax benefit equal to 41.2% of eligible R&D wage costs.
The incentive would cover salaries, fees, benefits and other remuneration subject to social security contributions under Chapter 2 of the Social Security Contributions Act.
The deduction would be limited to a company’s own employees. External consulting fees and purchased R&D services would not qualify for the hiring company, although consulting or staffing firms could claim the deduction for their own R&D personnel.
The R&D work would have to be carried out within a state belonging to the European Economic Area (EEA).
R&D eligibility
The proposed rules would use the R&D definitions under law (2023:747) on employer social security contribution reductions.
An employee would generally need to spend at least 50% of actual working hours on R&D during a calendar month to qualify for that month.
A so-called “inertia rule” would allow the deduction where the 50% threshold was not met in a particular month, provided it had been met in each of the previous four calendar months and the employee had not changed duties.
Pillar Two treatment
The government considers the proposed incentive to meet the conditions for an “expenditure-based qualified tax incentive” under the G20/OECD January 2026 administrative guidelines.
This treatment is intended to limit the impact of the incentive under the global minimum tax, which applies a 15% effective tax rate. The qualified incentive would be treated as an addition to adjusted tax costs, reducing the risk that Swedish R&D activities generate top-up tax liabilities, subject to applicable substance-based limitations.
The enhanced deduction would be voluntary, allowing businesses to refrain from claiming it where other rules, including the global minimum tax, make the incentive less beneficial.
Fiscal impact and timing
The reform is estimated to reduce public revenue by SEK 7.0 billion in 2027, SEK 6.8 billion in 2028 and about SEK 7.1 billion annually from 2033 onwards.
Around 3,600 corporate groups and independent firms are estimated to have R&D personnel expenses, including 2,642 small and medium-sized enterprises (SMEs). Manufacturing, automotive, IT, and scientific and technical services are among the main sectors expected to benefit.
The proposal would raise Sweden’s R&D tax subvention rate for profitable companies from about 11% under the existing social security relief to around 40%.
The legislation is proposed to enter into force on 1 January 2027 and would apply for the first time to tax years, or financial years for Swedish partnerships, beginning after 31 December 2026.
