Proposal for improved and simplified 3:12 rules for closely held companies

A committee has developed proposals for simplified tax rules for closely held companies. We will review the proposed changes, their potential impact on these companies, and the possible implementation timeline.

Background to the Investigation and Rules

The rules for closely held companies were introduced to counteract income shifting (where income is taken out as lower-taxed dividends instead of salary) for shareholders active in the company. These rules determine whether dividends and profits on shares should be taxed as employment income or capital income.

A committee was tasked with proposing simplified and improved rules regarding the taxation of owners of closely held companies, also known as the 3:12 rules. The aim of the new rules is to promote entrepreneurship and improve the conditions for small and medium-sized enterprises (SMEs), enhancing their ability to grow, hire, and attract capital.

Proposed Changes

The committee has now submitted the following proposals:

• A new model for calculating the threshold amount is introduced, i. e., the limit for when dividends and profits are taxed as employment income for the owner. In the proposed model, the current simplification rule and main rule are replaced with a common rule to be used by all shareholders. All shareholders will be credited with an increased basic amount per company similar to the current simplification rule, proposed to be 4 income base amounts per company (304,800 SEK in today's base amount), to be distributed equally among the shares in the company.
• Everyone who has invested more than 100,000 SEK in the company will be credited with interest on the excess investment in the company when calculating the threshold amount. The interest on and upvaluation of saved dividend space is proposed to be abolished.
• The current requirement for shareholders to take out a certain salary and hold at least 4% of the shares to credit a salary space when calculating the threshold amount is removed, replaced with a standard deduction, a so-called salary deduction. The salary-based space will be 50% of the portion of salaries in the company that exceeds 8 income base amounts (equivalent to 609,600 SEK at the 2024 level) and is distributed among the shareholders. This means that all shareholders in closely held companies that hire employees will be able to credit salary space, regardless of the size of the ownership stake or personal salary withdrawal.
• A common cap of 90 income base amounts for employment income taxation for dividends and capital gains is introduced, covering the shareholder and their relatives.
• The related-party rules are tightened so that siblings are no longer considered related parties and do not affect a shareholder's taxation. The intention is to increase predictability as the owner can account for fewer related parties.
• The qualification period is proposed to be shortened by one year. For a so-called qualification company, this would mean that the company only needs to be dormant for four years for the ownership to become "disqualified." After these four years, dividends from the company will not be taxed as employment income.

Expected Effects of the Proposals

The proposals entail several important changes for closely held companies and their owners, affecting 540,000 shareholders in 400,000 companies, and are estimated to result in a total tax reduction for shareholders in closely held companies of 1.1 billion SEK. The threshold amounts, used to calculate the taxation of dividends and capital gains, are expected to increase by 15%, primarily benefiting owners of small companies and companies that hire staff. Another advantage of the proposals is that they simplify the rules and reduce the administrative burden for entrepreneurs, potentially leading to time and cost savings.

The proposals are now sent out for consultation before a bill can be presented to the Parliament for a decision on legislative changes. The proposals are suggested to come into effect on January 1, 2026.