The government’s report SOU 2026:1 presents two promising options for new tax incentives for research and development (R&D) aimed at strengthening Sweden’s innovative capacity. One of the proposals will be selected and is proposed to take effect on January 1, 2027, as a complement to the current R&D tax relief. We discussed what these proposals entail in our previous article; now we would like to share Leyton’s perspective on what is needed for the new proposals to work in practice.
Our global experience shows that such incentives can be highly valuable. Combined with the current R&D tax relief, there is significant potential for Sweden to rank among the very top of the most attractive countries for innovation, provided it is implemented correctly and R&D is given a clearer definition.
The Reality for Companies
Leyton Sweden works daily with both companies conducting R&D and the Swedish Tax Agency. We see that today’s regulations are complex, and that the Tax Agency’s interpretation of what actually counts as R&D varies. Three interrelated problems constitute the biggest obstacles for companies conducting qualified R&D.
- An unclear definition of R&D. A company cannot predictably know whether it is eligible for the deduction or not.
- Different application by different case workers. Similar cases are not treated equally.
- Processing takes a long time. It can take up to two years to receive a decision.
The Swedish Tax Agency has also noted these problems, as evidenced by its comments on other investigations concerning the R&D deduction. The regulations are unnecessarily resource-intensive for both parties, and many — especially small businesses — cannot manage this burden without external, professional assistance. Ultimately, companies risk being denied deductions to which they are entitled.
Court cases involving the current R&D tax credit confirm the lack of predictability. Of all cases decided in the past six months, only one company was successful, which suggests there is a structural problem in the regulations. Since the new incentive — regardless of which one is chosen — is based on the same definition as today’s R&D tax relief, there is a risk that the same difficulties will persist if the definition is not clarified. A fundamentally good idea can thus be undermined if its implementation does not work as intended.
A solution to the definition problem is actually already on the table: the SOU 2025:3 report, which proposes a new and much clearer definition of R&D. This change would lay the groundwork for more reliable implementation.
The new proposals
All incentives — both the current one and the two alternative, new proposals — relate to personnel costs. In the new proposals, however, the focus shifts from the employer level to the company level. This is positive, as it would directly support companies in their profit-making efforts, rather than merely reducing the cost of employment as such. This is because, strictly speaking, reduced employer contributions constitute an employment policy measure rather than an innovation incentive.
The effectiveness of the two alternatives in the report is thus high. The combination of the current incentive and one of the new ones is very promising, especially together with the proposed new definition of R&D (according to SOU 2025:3). This would present significant opportunities for Sweden to encourage and attract R&D activities.
While both proposals in the report are effective, Leyton Sweden leans toward the refundable tax credit.
- An expanded cost deduction seems straightforward since the company’s R&D-related costs are already handled in the income tax return and can simply be multiplied by two and added. This should be manageable without major difficulties during cost calculation.
- A refundable tax credit, however, appears to be fairer. It benefits all companies, regardless of size or profitability, and is thus also available to startups and innovation-driven companies that are not yet profitable. Under Option 1, such a company would have benefited only in a theoretical future profit scenario.
Summary
Leyton Sweden welcomes both proposals in the report, although we favor the refundable tax credit. Together with the current deduction, it has great potential to make Sweden one of the world’s most attractive countries for innovation. The prerequisite for realizing this potential is that companies can predict their entitlement to the incentives. A major step in that direction would be to provide a clearer definition of R&D, which can easily be achieved by implementing the proposal already included in SOU 2025:3.
