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Swedish Parliament Reintroduces Tax Deduction for Donations to Nonprofit Organizations

(July 10, 2019) On June 4, 2019, the Swedish Parliament passed legislation reintroducing tax deductions for donations to nonprofit organizations. (Återinförd skattereduktion för gåvor till ideell verksamhet: Skatteutskottets betänkande 2018/19:SkU21 [Tax Reduction for Gifts to Charitable Activities Reintroduced: Tax Committee Report 2018/19:SkU21], SVERIGES RIKSDAG (June 4, 2019); Press Release, Sveriges Riksdag, Skatteavdrag för den som ger pengar till ideell verksamhet (May 16, 2019), Sveriges Riksdag [Swedish Parliament] website.)

The new rules allow for the deduction of 1,500 Swedish krona (SEK) (about US$160) for donations made to nonprofit organizations. (Skatteutskottets betänkande 2018/19:SkU21: Återinförd skattereduktion för gåvor till ideell verksamhet [Tax Committee Report 2018/19:SkU21: Tax Reduction Gifts to Nonprofit Organizations Reinstated], Swedish Parliament website.) In order for the donation to qualify, it must be made to a nonprofit that the Tax Authority has approved as a donation recipient. The Law on Approval of Donation Recipients for Tax Reduction Donations requires that all nonprofits that wish to receive such donations register by applying to the Swedish Tax Authority. (9 § Lag om godkännande av gåvomottagare vid skattereduktion för gåva [Act on Approval of Donation Recipients for Tax Reduction Donations] (SFS 2019:453), Swedish Parliament website.) Only nonprofits based in Sweden, the European Economic Area (EEA), or countries with which Sweden has an information-sharing provision in its tax treaty are eligible for donations. (Skatteutskottets betänkande 2018/19: SkU21, supra, at 6.)

Sweden previously allowed income-tax deductions for charitable gifts between January 1, 2012, and January 1, 2016. (Lagom ändring i inkomstskattelagen (1999:1229) [Act on Amendments to the Income Tax Act] (SFS 2011:1271), Government Offices website; Lagom ändring i inkomstskattelagen (1999:1229) [Act on Amendments to the Income Tax Act] (SFS 2015:775), Government Offices website.) The reintroduction of the tax reduction provision was a result of the Swedish Parliament’s voting in favor of the opposition budget in the fall of 2018. One of the reasons provided for reintroducing the provision was its effectiveness, as donations to nonprofits increased during the time the Law was in force. (Skatteutskottets betänkande 2018/19: SkU21, supra, at 8.)

The new rules took effect on July 1, 2019. (Återinförd skattereduktion för gåvor till ideell verksamhet: Skatteutskottets betänkande 2018/19:SkU21, supra; Lag om godkännande av gåvomottagare vid skattereduktion för gåva (SFS 2019:453).) The Swedish Law Council, which comments on the constitutionality and legal effects of laws, had no comments on the legislation when it was originally proposed. (Lagrådet, Utdrag ur Protokollet (Mar. 20, 2019), Swedish Law Council website.)