Background
After much deliberation, the Riksdag decided to adopt the budget reservation put forward by the Moderates and the Christian Democrats. It contains finalised legislative proposals on an increased basic deduction for pensioners, a raised threshold for state income tax, and a strengthened employment tax credit. Furthermore, there are a number of changes in the tax area that are to take effect on 1 July 2019.
Increased tax deduction for earned income
The earned income tax credit is increased by 10 billion kronor in 2019. The maximum tax reduction is 210 kronor per month. This requires an income of approximately 30,000 kronor per month or more.
Raising the threshold
The threshold for paying state tax is raised by 1,400 kronor. Legally, it is the so-called tax brackets that are determined, meaning income after the basic deduction. On taxable income above the lower tax bracket, state income tax of 20 percent is paid.
On income above the upper income bracket threshold, the state income tax is five percentage points higher, the so-called "värnskatt" (surtax). The lower income bracket threshold for 2019 will be 490,700 SEK and the upper income bracket threshold will be 689,300 SEK. This means that the breakpoint for state income tax will be 504,400 SEK, which corresponds to a monthly income of approximately 42,000 SEK. The breakpoint for the "värnskatt" will be 703,000 SEK, i.e. approximately 58,600 SEK in monthly income.
Tax reduction for pensioners
The basic allowance for people over 65 will be increased. For people with low incomes, the tax will be reduced by around 100 kronor, while those with an income of 30,000 kronor will receive a tax reduction of around 600 kronor.
The difference compared to the interim government's budget is that pensioners with incomes below 17,000 kronor will also have their taxes reduced.
Changes to be introduced on 1 July 2019
The budget contains a number of proposals for which there are not yet legislative proposals. These will therefore be introduced on 1 July 2019:
– Abolition of special payroll tax for persons over 65 years of age.
– Improved tax rules for generational transfers in closely held companies.
– Expansion of the RUT deduction by raising the cap to 50,000 kronor and expanding the range of services to include, for example, home supervision during travel or absence, laundry services, moving household items within the same residence, collection of garden waste, and planting in the garden.
Abolition of the flight tax.
– Lower indexing of petrol tax.
– Increased tax reduction for agricultural diesel.
– Abolition of the growth support for sole traders.
– Abolition of the tax deduction for trade union fees from 1 April.
– Increased VAT on nature tours.
Reintroduction of tax relief for gifts to charitable organisations.
The government shall process all these points and report back in the spring.
Source: Wolters Kluwer – Tax Information
