Sweden's innovative capacity requires targeted R&D incentives 

Sweden is today one of the world’s leading knowledge-based nations. A key factor behind this is the business sector’s strong commitment to research and development (R&D). Companies account for nearly three-quarters of all R&D, and their investments have grown steadily over the past decade (Statistics Sweden 2023). 

This trend is particularly evident in the tech sector. In a short period of time, the tech sector has become a key driver of research and development in Sweden. Companies in the sector now account for a rapidly growing share of the business sector’s total R&D investments, amounting to one-quarter of the business sector’s total R&D.  

At the same time, there are signs that the pace of investment is slowing. In such a situation, the design of government incentives becomes crucial. For many companies, particularly in the tech sector, R&D is highly labor-intensive. This means that tax incentives linked to labor costs take on particular importance. 

The current R&D tax credit works, but it doesn't go all the way 

Statistics from the Swedish Tax Agencyshow that the current R&D tax credit is used extensively in knowledge-intensive industries. Particularly prominent are computer programming and IT consulting, scientific research and development, and technical consulting. Together, these account for more than half of the credit’s utilization between 2014 and 2025. 

This confirms that the incentive is effective in those sectors of the economy where R&D is actually being conducted. At the same time, uptake is lower among both smaller companies in the start-up phase and larger firms with extensive R&D activities. This means that the current design of the incentives does not fully harness the innovation potential that exists in the business sector. 

To strengthen Sweden’s competitiveness, incentives such as the following are therefore needed: 

Two models – different strengths 

In the report SOU 2026:1 Tax Incentives for Research and Development , two main proposals are presented: an increased cost deduction and a refundable tax credit. 

These models have different patterns of distribution.  

An increased tax deduction provides strong incentives for profitable companies and positions Sweden in a competitive international position. This is particularly important for attracting major investments and R&D operations that strengthen Sweden as a knowledge-based nation. The symbolic value of positioning Sweden in the top tier internationally should not be underestimated. 

The refundable tax credit also allows for support to be provided to companies without taxable profits, such as startups, scaleups, and companies in the expansion phase. 

The tech sector encompasses this entire spectrum. Since innovation occurs across the board—in everything from startups to established companies—one-sided incentives risk stifling progress and preventing important R&D from being carried out. 

A broader and more flexible solution is needed 

TechSverige supports the commission’s goal of strengthening R&D incentives in Sweden. However, for these incentives to have their full impact, a solution is needed that reflects the breadth of the business community. 

We see two possible paths forward in the continued preparation of the proposal: 

One concrete and effective measure is to remove the cap on the current R&D tax credit. This would enable more companies to take full advantage of the incentive, even in years when they do not turn a profit. At the same time, it would create more stable and predictable conditions for long-term investments. 

Clear rules and consistent enforcement are essential 

The effectiveness of incentives depends not only on their level, but also on how the regulations are applied. There is a clear need for improvement in this area.  

The definition of R&D must reflect how research and development are actually conducted today. In a digital economy, software development, data, and iterative processes are central components of innovation efforts. The interpretation of the regulations must therefore be dynamic and keep pace with technological developments. For this reason, it is absolutely essential to implement the changes proposed in the interim report SOU 2025:3.  

Reasonable administrative requirements are also necessary. If the regulations become too complex or unpredictable, they risk limiting their use in practice. 

Funding must not undermine the objective 

In conclusion, we would like to emphasize that funding for new R&D incentives is crucial. Cutting funding for innovation agencies or tightening interest deduction rules risks directly undermining companies’ ability to invest. It would be like giving with one hand and taking away with the other, effectively undermining the reform’s purpose. 

Sweden must choose a path 

Sweden is at a crossroads. Either we create a modern, competitive, and targeted system for R&D incentives, or we risk losing investment to other countries. 

In a short period of time, the tech sector has become a driving force behind Sweden’s innovation and a crucial industry for Sweden as a knowledge-based nation. With the right conditions in place, it can continue to drive development, create jobs, and strengthen our international competitiveness. 

This requires policymakers to face reality and design incentives that work for the entire business community. 

Read more in TechSverige’s response to the report SOU 2026:1 Tax Incentives for Research and Development – A New Incentive Based on Expenditures for R&D Personnel, as well as supplementary comments on the report: 

Ana Andric
Economic Policy Expert, TechSverige

Peter Kjäll
Economic Policy Expert, TechSverige