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The Swedish parliament has approved the government proposal to raise the deductions that companies can make from their employer contributions if they have employees working in research and development (R&D). The maximum total deduction from employer contributions for everyone working in R&D for a company is increasing from SEK 600,000 to SEK 1.5 million per month. The reason for the deduction is to incentivise companies to invest in R&D, which can contribute to Sweden’s international competitiveness.
Who can make R&D deductions?
In order to be eligible for an R&D deduction, certain conditions must be met regarding the age of the employees, working hours and the R&D work itself. The work must be carried out systematically and the R&D must have a commercial purpose. Sweden’s Social Security Contributions Act defines what is meant by R&D to satisfy the criteria for tax relief. If you’re interested in reading more about these changes, please read the legal guidance issued by the Swedish Tax Agency.
The ceiling for deductions increase on 1 July 2023
The increased deduction can apply to salaries paid after 30 June 2023. This means that the deduction can be made on the employer’s declaration that is due by August 17th 2023. If you’re a customer of Azets and already make deductions for R&D, you do not need to do anything to increase your existing deduction – we’ll adapt the system accordingly.
Bear in mind that the R&D deduction relates to the current month. In other words, the allowances reported on the employer’s declaration for July refer to R&D work carried out during that same month. It may therefore be helpful to check that the R&D work for the month meets the criteria for the deduction before submitting the declaration to the Swedish Tax Agency. To avoid any later corrections to submitted tax returns or other reports, it may be a good idea to ensure that all people, departments and any payroll partners involved in the payroll process and the employer’s declaration know which work procedure applies. Would you like help reviewing your existing processes? Please don’t hesitate to contact us at Azets.
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