R&D tax incentives – current rules, proposed changes and our reflections and comments

In recent years, the rules governing the R&D tax incentive have been subject to considerable scrutiny and debate. The rules have been made more favourable on several occasions, for example through increased thresholds and reduced working time requirements. However, many companies continue to be denied the relief due to insufficient documentation or because the Swedish Tax Agency (Skatteverket) and the courts consider that the qualifying requirements have not been met. In such cases, more generous thresholds provide little practical benefit.

In June 2023, the Government appointed an inquiry to evaluate the existing rules and propose amendments to the framework. In January 2025, an interim report (SOU 2025:3) was published, setting out the inquiry's work and conclusions. On 19 January 2026, the Government’s special investigator presented a proposal for revised R&D tax incentives (SOU 2026:1). Below, we provide a brief overview of the current rules, the proposed changes, and our reflections.

Current rules

The current regime is structured as a reduction in employer social security contributions for companies whose employees carry out qualifying and systematic research and development activities for commercial purposes.

Research refers to work aimed at generating new knowledge, while development refers to work intended to achieve significant improvements to existing products or services. In addition, research outcomes, whether generated internally or externally, must have been essential to the development work. Employees must devote at least 50% of their working time to research or development activities.

Where the conditions are met, employer social security contributions are reduced by 20% of the payroll costs relating to employees engaged in research and development activities, subject to an annual cap of SEK 36 million per group.

The current rules have proven difficult for both businesses and the Swedish Tax Agency to apply and interpret. This is largely due to the lack of clarity surrounding the statutory definitions of "research" and "development", making it challenging for both parties to determine whether the qualifying conditions have been satisfied.

At a press conference on 19 January 2026, it was proposed that the current reduction in employer social security contributions should be replaced by either an enhanced tax deduction or a refundable tax credit to be claimed through the corporate income tax return. One of these alternatives will ultimately be adopted, but both will first undergo further evaluation and consultation.

As under the current regime, the new rules are intended to apply to all types of business activities, and the qualifying expenditure will continue to be based on payroll costs relating to employees engaged in R&D activities. In principle, substantially the same supporting documentation will be required as under the current rules.

Alternative 1 – Enhanced tax deduction

Under this proposal, companies would be entitled to an enhanced tax deduction equal to 200% of qualifying expenditure in addition to the actual cost incurred. This would result in a total deduction of 300% of eligible payroll costs relating to employees engaged in research and development activities within the EEA.

Companies operating at a loss would not receive an immediate tax benefit. However, they would generate a larger tax loss carry-forward that could be utilised against future taxable profits. The deduction would be claimed in the corporate income tax return.

Alternative 2 – Refundable tax credit

The second proposal is a refundable tax credit equal to 20% of salaries, benefits, fees and other remuneration paid to personnel engaged in research or development activities within the EEA.

The tax credit would reduce the company's corporate tax liability. Where the calculated credit exceeds the available tax liability, the excess amount would be refunded to the company. This means that loss-making companies would be able to benefit directly from the incentive.

According to the Government’s investigator, the enhanced deduction proposal is primarily aimed at profitable larger businesses, while the refundable tax credit is intended to support smaller companies, particularly newly established businesses and start-ups.

Azets' reflections and comments

Any simplification and clarification of the current rules is welcome. However, in our experience, the structure of the incentive itself, namely its design as a reduction in employer social security contributions, has not been the main source of criticism.

Instead, the key issues are the interpretation of the concepts of "research" and "development" and the extensive documentation requirements imposed by the Swedish Tax Agency during audits and reviews. These aspects require greater clarity and simplification to provide employers with a more predictable framework for determining whether they qualify for the incentive. It was not evident from the press conference on 19 January 2026 how either of the proposed alternatives would significantly improve predictability.

At present, the Swedish Tax Agency and the courts require extensive and highly detailed documentation relating to R&D projects, employees' responsibilities and the work performed. In many cases, companies are asked to provide documentation containing commercially sensitive information and trade secrets, which businesses may be reluctant to disclose due to concerns about confidentiality and public access.

As a result, some companies choose not to pursue their case against the Swedish Tax Agency, despite believing that they meet the qualifying conditions, and consequently forgo the available relief.

Furthermore, the fact that the current rules are difficult to apply, difficult to interpret and therefore lacking in predictability means that companies may incorrectly claim the relief in their employer reporting. This can have significant financial consequences, as employers may not only be denied the relief but may also be required to repay previously claimed reductions. In addition, tax surcharges are generally imposed. The proposed new rules are expected to come into force on 1 January 2027.

Considering whether you qualify for the R&D incentive? Contact Azets for an initial meeting to review the requirements and assess your eligibility.