Reinforcement of deductions for research and development in Sweden (FoU avdrag) from July 1 2021
The proposal for an extended deduction was adopted
Reinforcement of deductions for research and development in Sweden (FoU avdrag) from July 1 2021.
The deduction for research and development in Sweden has been strengthened since 2020, through a further reduction in employer’s contributions for people working with research and development. Now it is enough that the employee has worked at least 50% of the working time with R&D for being able to make the deduction. This is a reduction compared to the previous required working hours, which was at least 75%.
In April 2020, the reduction in the total fee collection doubled from 10 to 20 percent at the same time as the ceiling for the reduction was raised. Now the ceiling is raised again from SEK 450,000 to SEK 600,000 per month. The amendments entered into force on 1 July 2021 and apply to compensation paid after 30 June 2021.
For a person who works with research or development, when calculating the employer’s contributions on taxable remuneration, a deduction of 10 percent of the contribution basis for the person should be made.
In a group with several people who meet the conditions, it is primarily the parent company that should make the deduction. Parts not utilized by the parent company may be used by the subsidiaries.
The documentation is important to be able to get the reduction. If the documentation is not sufficient, the Swedish Tax Agency considers that it is a question of ordinary product development, which is not based on research or leads to significant improvement, which does not give the right to a reduction.
Furthermore, case law is scarce and prejudicial judgments are lacking. However, all companies that conduct research and development have the same right to a deduction / reduction of employer contributions.
Conditions for the R & D deduction (FoU avdrag)
Deductions from the employer’s contributions may be made for employees who engage in systematic and qualified research or development for commercial purposes for at least 50% of their working hours and at least 15 hours per month. Employees who have reached the age of 65 when the year begins are not covered.
The form of employment does not matter. Nor does the fact that the persons have performed the work in Sweden or in any other country have a bearing on the reduction of the fees.
For example deductions can be allowed for work carried out by researchers and qualified product developers. Technical or medical experts who, with their knowledge and experience, perform tasks as part of research or development activities can also be included.
Sole traders cannot receive a reduction in employer contributions due to their own research work. The same applies to partners in trading partnership.
Systematic and qualified R&D work
Deductions from employer’s contributions are allowed only for systematic and qualified research or development.
The following indicates what is meant by this:
| Research |
systematic and qualified work to develop new knowledge for commercial purposes. |
|---|---|
| Development |
systematic and qualified work to use research results for commercial purposes to develop new goods, services or production processes or significantly improve those that already exist. |
| Significantly improve |
make a change that leads to a significant improvement in, for example, quality, use, design, manufacture or supply. In addition, the development work must be a direct consequence of a research result. Ordinary product development is not covered. |
| Systematic work |
to examine, implement or follow up facts according to a certain method (plan). |
| Qualified work |
it must have a real research or development content, ie the support must be limited to actual and direct work with research or development. Various support and peripheral functions are thus not included. |
All listed criteria's for either research or development must be met. This applies to every employee for whom deductions are made from employer’s contributions.
When the Swedish Tax Agency assesses the right to a deduction, the employee's work tasks and the larger context in which the work is included must also be taken into account.
Retirement pension contributions must always be paid
It is not possible to "save" a deduction for another month, for example by making no deduction in January and two in February.
Also, the deduction may not interfere with the retirement pension contributions in the employer’s contributions. This means that the fees for a person can never be less than 10.21% of the compensation.
Accountor's tax advisors are happy to help you.
