New Legislative Proposal: Tax Credit for Swedish Corporate Charitable Donations

On 26 June 2025, the Swedish Government submitted a legislative proposal to the Council on Legislation ("Lagrådet") introducing a new tax credit for Swedish companies making donations to charitable causes. Historically, such donations have been treated unfavourably under Swedish tax law, making this proposal particularly relevant for Swedish companies.

Current Tax Treatment of Corporate Charitable Donations in Sweden

For a considerable time, Swedish companies have faced significant tax disadvantages when making charitable donations. This is due to the so-called prohibition on deductions for gifts, which has led the Supreme Administrative Court (Högsta förvaltningsdomstolen, HFD) to restrict the deductibility of charitable contributions.

The Court has clarified its position in a number of landmark rulings, such as the "Falcon case" and the "Max case". In the latter, the Court held that a deduction could only be granted if the company received a form of compensation such as public exposure of the sponsorship or, at the very least, could demonstrate that the gift or sponsorship had led to increased sales of the company’s products.

In practice, this has made it significantly difficult for Swedish companies to support charitable causes in a tax-efficient manner.

Are There Alternative Tax-Efficient Structures for Corporate Giving

Beyond the limited avenue of deducting sponsorship costs under Swedish tax law, another strategy has been for shareholders to assign the right to receive dividends, often referred to as the coupon, to a charitable foundation or similar entity.

According to established case law from the Swedish Supreme Administrative Court, such an arrangement may result in the shareholder not being deemed the correct tax subject, thereby avoiding tax liability on the dividend. This means, for example, that a charity foundation may in some cases receive the dividend tax-free. However, it is important to note that the company’s profits are still subject to Swedish corporate income tax prior to the distribution, making this structure less than optimal. Nevertheless, it remains more tax-efficient than if an individual shareholder were to receive the dividend and be taxed personally before making a donation.

What Does the New Tax Credit Proposal Entail

The Swedish Government’s proposal is structured as a tax credit rather than a deduction. Corporate tax credits are less common than those available to individuals in Sweden. In brief, the proposal allows a company to receive a reduction in its corporate income tax liability where the donation meets the following criteria:

• The donation must amount to at least SEK 2,000 per donation occasion within a calendar year

• The tax credit must be claimed in the corporate tax return no later than the calendar year following the year in which the donation was made

• The donation must be made to an approved recipient and intended to promote either social welfare services or scientific research

The credit is capped at donations of SEK 800,000 per calendar year. With the current corporate income tax rate of 20.6 percent, the maximum potential tax credit is SEK 164,800 per year.

From a legislative standpoint, the system mirrors the existing framework for individual donors in Sweden. This means that the same approved organisations will qualify for both individual and corporate tax credits.

When Will the New Rules Enter into Force?

Under the proposal, the legislation would enter into force on 1 January 2026. Accordingly, only donations made in 2026 or later would fall within the scope of the new rules.

Comment from nomadtax

The proposed introduction of a tax credit for corporate charitable donations is a welcome and positive development, signalling a modernisation of Sweden’s longstanding conservative stance on corporate philanthropy. Allowing companies to support charitable causes with some degree of tax relief fosters a more socially engaged business environment.

From an international perspective, Sweden has long lagged behind comparable jurisdictions. In the United Kingdom and the United States, well-established systems allow for the deductibility of charitable donations by both individuals and corporations. In the Netherlands, companies can deduct donations to recognised charitable organisations up to a certain ceiling.

While the Swedish proposal adopts a more cautious approach by introducing a tax credit rather than a full deduction, it nonetheless represents a clear shift from the previously restrictive case law. This marks a significant policy change in the direction of encouraging corporate social responsibility.