The Swedish Government appoints inquiry into the taxation of board fees

The Swedish Government has decided to appoint an inquiry to review the taxation of board remuneration and other assignments of a personal nature. The objective is to create a more predictable and consistent framework while also taking into account companies' ability to attract and retain external board expertise.

The taxation of board remuneration has long been a subject of discussion. Under current case law, board fees are generally taxed as employment income in the hands of the individual board member. As a result, board remuneration cannot normally be invoiced through the board member's own limited liability company or a similar entity.

This differs from the tax treatment of many other assignments of a personal nature and often creates complexity in international situations.

The Government notes that the current rules may result in increased costs and administrative burdens for companies engaging external board members. At the same time, the framework may affect the incentives for experienced professionals to accept board positions.

Among other things, the inquiry will:

• review the taxation of board remuneration and other assignments of a personal nature;
• propose amendments to the Income Tax Act to ensure that board remuneration is taxed in a manner equivalent to other assignments of a personal nature;
• consider companies' need to attract and retain external board expertise; and
• propose how any resulting decrease in public tax revenues should be financed.

The inquiry is to report its findings no later than 31 October 2027.

The terms of reference indicate that the Government intends to reconsider the current special treatment of board remuneration.

For companies engaging external board members, changes to the rules could provide greater flexibility and reduce administrative complexity. For individuals operating through their own companies, the outcome of the inquiry may affect how board assignments are structured in the future.

While it is still too early to draw firm conclusions regarding the future regulatory framework, the terms of reference suggest that the Government wishes to explore whether the rules can be better aligned with modern working practices and business conditions without compromising the neutrality and fairness of the tax system.

The inquiry is a welcome development in light of the uncertainty and classification issues that have characterised this area for many years. It will be particularly interesting to see how the investigator intends to achieve the objective of ensuring equivalent tax treatment of board remuneration and other assignments of a personal nature.

For companies that rely on external board expertise, the inquiry's conclusions could have significant practical implications.

We will continue to monitor developments and provide updates as the inquiry presents its analysis and proposals.

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The article in Swedish