As a general up-date, the Swedish individual tax system still features the municipal 30% flat rate tax and a maximum graduated state tax of 25% (for income in excess of SEK 209,100) for earned income and business income (a basic deduction is available before arriving at taxable income), and a 30% flat state tax for income from capital sources, including capital gains. The wealth tax is levied at 1.5% on net wealth in excess of SEK 800.000. Social security charges are levied at approximately 33%, payable by the employer (or the self-employed). Customary Union-insurances amount to some further 7-8%. A further 5% is payable by the employees within certain brackets.

Also individual owners of foreign closely-held-companies have from this year become subject to the special tax provisions applicable to owners of Swedish closely-held-companies, ie a partial taxation of dividend income and capital gains taxation as earned income at a higher tax rate (max 55%), than the normal 30% tax on income from capital sources.

A change with the effect of tightening up dividend taxation and capital gains taxation for individual owners of closely-held-companies has also been enforced and apply from this year.

A special tax-credit entitlement for venture capital injected by way of new-issues in non-quoted companies has been enforced and allows for a tax credit at 30% of acquisition cost, under detailed rules and limitations.

A limited entitlement to set-off losses of newly started business operations against earned income and business income during the first five years, has been introduced.

Changes in respect of the hitherto beneficial Swedish tax treatment of individuals with offshore life insurances was enforced and apply in part already from last summer. The main changes are that the special premium tax apply also for lump sum premiums to "second hand" offshore life insurances, and that the net wealth tax is applicable. An introduction of a special yield tax in this context has apparently been postponed, at least for the moment.

This is a summary highlighting recent developments within the area of Swedish tax and related legal matters. The changes apply - if nothing else is stated - as from January 1, 1996. Detailed advice should be sought on your own specific situation and the applicability of rules reported on. Price Waterhouse is available to follow-up any queries you may have regarding the new rules, or any other matter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information please contact Staffan Andersson Price Waterhouse Skattejurister AB - Stockholm +46 8 723 98 00, or enter text search 'Price Waterhouse' and 'Business Monitor'.