Sweden proposes Pillar Two safe harbours and longer transition relief

The government has asked parliament to add a new round of OECD Inclusive Framework reliefs to the Swedish top-up tax actRiksdagen, lagen (2023:875) om tilläggsskatt. Government bill 2026/27:4Riksdagen, submitted to the Riksdag on 8 October 2026, implements the Inclusive Framework administrative guidance of June 2024, January 2025, January 2026 and May 2026, including four of the five simplifications in the January 2026 side-by-side package. The amendments would enter into force on 1 January 2027Riksdagen and first apply to fiscal years beginning after 31 December 2026Riksdagen. The reporting entity could elect to apply most of the provisions retroactively from fiscal years beginning after 31 December 2024, and the new safe harbours and incentive rules from fiscal years beginning after 31 December 2025.

Two permanent safe harbours would apply where the ultimate parent is resident in a state whose parallel minimum-tax system the Inclusive Framework has approvedRiksdagen. Under the Side-by-Side Safe Harbour in new 8 kap. 18 a §, the top-up amount under the huvudregel and kompletteringsregeln för tilläggsskatt (the Income Inclusion Rule and the Undertaxed Profit Rule) is deemed to be zero for group entities whose parent is resident in an approved Qualified Side-by-Side Regime stateRiksdagen, covering both domestic and foreign income; the group's share of any joint-venture top-up amount is covered too. Under the Ultimate Parent Entity Safe Harbour in new 8 kap. 18 b §, the top-up amount under kompletteringsregeln is deemed to be zero for entities in the parent's home state where that state holds an approved Qualified UPE System for domestic incomeRiksdagen. The reporting entity elects each safe harbour for a fiscal year, first usable for years beginning 1 January 2026 or later. The United States and the Internal Revenue Code of 1986 were listed as an approved side-by-side regime in January 2026; no state has yet been approved as a UPE-system state.

A new substance-based incentive safe harbour in 4 kap. 17 a–17 d §§ would let the reporting entity elect to increase aggregate adjusted covered taxes by the tax effect of a kvalificerat skatteincitamentRiksdagen, lowering the top-up amount. Only generally available, expenditure-based or production-based incentives qualify; income-based incentives such as patent boxes do not. The increase is capped at the higher of 5.5 per cent of payroll costs and 5.5 per cent of depreciation on tangible assets in the state, or alternatively 1 per cent of the carrying value of tangible assets under a five-year election. Qualifying and marketable transferable tax credits that meet the incentive definition may be recharacterised as qualifying incentives under a separate annual election.

The transitional country-by-country safe harbour would run one year longerRiksdagen, covering fiscal years beginning before 1 January 2028 and ending no later than 30 June 2029Riksdagen, with a 17 per cent effective-rate test for years beginning in 2027. The transitional relief from kompletteringsregeln in the parent's home state, available where the corporate rate is at least 20 per cent, would also cover 52- and 53-week fiscal years beginning no later than 31 December 2025 and ending before 4 January 2027.

Transition-year deferred-tax exclusions are tightened and the transition year becomes the first year the group is within the act's scope for that state. The revenue-threshold test after a demerger would be applied per resulting group against EUR 750 million, reductions of adjusted profit under deductible-dividend systems would be floored at zero, and the tax-credit definitions would gain an umbrella definition of skattetillgodohavande.

Legal basis: the proposed amendments to lagen (2023:875) om tilläggsskatt — the act implementing Council Directive (EU) 2022/2523 — in proposition 2026/27:4, giving effect to the OECD/G20 Inclusive Framework administrative guidance.