Proposal would allow companies to deduct more sponsorship and brand-building costs, while excluding representation, political and religious activities.
The Swedish government has submitted a bill to the Council on Legislation proposing to expand the corporate income tax deduction for sponsorship and similar expenses, with the aim of making the tax treatment of such costs clearer and more favourable.
The proposal would allow companies to deduct certain commercially motivated expenses incurred to improve or maintain the reputation of their business activities, even where no direct benefit is received in return.
Under the proposed new provision in the Income Tax Act, the extended deduction would apply in addition to the existing general deduction rules. It is intended to cover sponsorship and similar measures that currently fail to qualify because they do not provide a direct, measurable counter-performance or lack a sufficiently close connection to the company’s core business.
To qualify, the activity must be communicated externally to a relevant target group, and companies must demonstrate that the expense forms part of their brand-building or long-term business strategy rather than proving an immediate increase in sales.
The government said the proposal reflects the growing importance of strong brands and business reputation for long-term profitability and competitiveness. It also expects the changes to encourage greater support for civil society by improving the tax treatment of sponsorship involving sports, culture, social sustainability projects and other socially beneficial activities.
The proposal also clarifies that expenses meeting the new reputation-based criteria should not be treated as non-deductible gifts under existing tax rules.
The expanded deduction would not apply to expenses relating to representation or similar purposes, political activities or religious activities, which remain outside the scope of the proposal.
The new rules are scheduled to enter into force on 1 January 2027 and will apply to tax years beginning after 31 December 2026. The government estimates the measure will reduce annual tax revenue by approximately SEK 530 million from 2027.
