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Sweden Proposes Tax Break For Start-Ups

by Ulrika Lomas, Tax-News.com, Brussels

29 December 2016


The Swedish Government is to ease tax rules for start-up companies to better enable them to recruit skilled workers.

Under the proposals, announced by the Finance Ministry on December 20, shares granted to employees as part of their pay packages would not be considered remuneration for tax purposes, and therefore would not attract social security contributions. These shares would then be taxable as a capital gain when sold.

Small and start-up companies in Sweden, particularly in the technology sector, have long been calling for changes to the taxation of employee stock options, which are subject to income tax and social security contributions, for a combined rate of almost 70 percent.

Earlier in the year, Spotify co-founders Martin Lorentzon and Daniel Ek implored the Government to change these tax rule, stating that existing regime makes it "impossible" for Swedish companies to reward employees with stock options.

"In the US, stock options are taxed to the employee as income from capital at a rate of 15-20 percent, in Germany the level is 25 percent. In Sweden it is considered today as income from employment and thus taxed at 70 percent," they wrote.

The new rules would apply to companies that are no more than 10 years old and employ no more than 50 staff.

The Government intends for the changes to be introduced on January 1, 2018, although the amendments first need state aid approval from the European Commission.

TAGS: capital gains tax (CGT) | Finance | tax | small business | business | European Commission | share schemes | employees | social security | Germany | Sweden | individual income tax | Europe

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