Sweden’s Ministry of Finance proposes Side-by-Side and UPE safe harbours, extends transitional measures, and introduces substance-based tax incentives. Changes take effect in 2027, with options for retroactive application.
Sweden’s Ministry of Finance (MoF) has proposed amendments to the Additional Tax Act (2023:875) to implement the side-by-side arrangement agreed by the OECD Inclusive Framework on 5 January 2026.
The changes aim to align Swedish law with OECD/G20 global minimum tax (Pillar Two) guidance and reduce administrative burdens for multinational groups.
Key amendments include:
New simplification rules (Safe Harbours)
- Side-by-Side Safe Harbour: Additional tax under the main and supplementary rules is set to zero for group entities if the parent is in a jurisdiction with an approved parallel minimum tax system for domestic and foreign income.
- Ultimate Parent Entity (UPE) Safe Harbour: Additional tax under the supplementary rule is set to zero in the parent company’s jurisdiction, provided it has an approved parallel system for domestic income.
- Extension of temporary rule: The Transitional CbC Report Safe Harbour is extended by one year to cover fiscal years beginning before 1 January 2028.
Substance-based tax incentives
- New rules allow groups to increase adjusted tax costs corresponding to the tax effect of qualifying expenditure-based or production-based incentives.
- Benefits are capped based on personnel costs or tangible asset values in the jurisdiction to ensure alignment with economic substance.
Deferred tax and transition rules
- Exclusions: Certain deferred tax assets arising from post-November 2021 elections or agreements with authorities are excluded from transition-year effective tax rate calculations.
- CFC Systems: Deferred tax under blended CFC regimes will not be included during the transition.
- Definition of transition year: Defined as the first fiscal year a group falls under the Additional Tax Act in a specific jurisdiction.
Group structure and tax credit clarifications
- Demergers: Revenue threshold assessments after a demerger will be made for each new group, with the calculation for the second to fourth years including the demerger year.
- Tax credits: “Tax credit” (skattetillgodohavande) is formally defined as a credit allowing reduction of covered taxes in the granting jurisdiction.
The amendments are proposed to take effect on 1 January 2027, applying to tax years beginning after 31 December 2026. Reporting entities may choose retroactive application of most provisions for fiscal years starting after 31 December 2024, with safe harbour and substance-based rules applicable from fiscal years beginning after 31 December 2025.
Earlier, MoF launched a public consultation on proposed tax incentives for research and development (R&D) personnel costs and its interaction with OECD Pillar Two rules on 24 February 2026. The proposals aim to provide the incentive as either an increased cost deduction or a refundable tax credit, limited to expenses for salaries, fees, benefits, and other compensation for R&D personnel. It also examined alignment with the new substance-based tax incentive rules under the OECD’s Side-by-Side Package, adopted on 5 January 2026.
