Report earnings in a trading or limited partnership
Everyone who has had income from business activities reports this in an income tax return. Partners in the business must submit an N3A annex with their income tax return. The company files its own return, Income Tax Return 4.
Partners in trading and limited partnerships are taxed on their share of the profits. The company must provide the Swedish Tax Agency information on the activities carried out during the year and how they were distributed among the partners. If the company has real estate or employees, the company must file property tax/municipal property tax as well as special payroll tax and tax on returns from pension funds for employees.
If the trading or limited partnership makes a loss
In the company, it is possible carry forward a deficit in the business and apply it in the future. The deficit is entered in next year's tax return and reduces next year's income. The deficit can be saved for as long as you wish.
As a partner in such a partnership, it is possible for you to offset a loss against income from services or other earned income during the first five years of active business activities. Special rules govern the amount that can be offset.
Possibility of allocating profits in your tax return
As a partner in a trading partnership, you may be able to defer taxation until later years by allocating funds to an expansion fund or tax allocation reserve. In some cases, you can also obtain a lower tax rate by taxing part of the profit in the income category capital instead of in the income category business through interest allocation. This is called tax adjustments.
Tax allocation reserve
The rules regarding tax allocation reserve mean that you can defer the taxation of the business income to a later year. You can thus obtain a kind of tax credit. The tax allocation reserve can also be used to even out the results between different years and thus achieve more even taxation. If you know you will have a loss in a particular year, you can allocate money to the tax allocation reserve in years leading up to this and then reverse it to taxation in the year with loss. In this way, you can offset profit against loss.
The allocated amount does not have to be deposited in any account; it can be used freely. You can allocate up to 30 percent of your business income, and allocated amounts must be reversed to taxation no later than the sixth year after allocation. You may reverse all or parts of the tax allocation reserve earlier than this.
Note that you must reverse all of your tax allocation reserves at once if you stop running your business (for example, if you close or sell it) or you declare bankruptcy. The respective partner allocates funds to the tax allocation reserve in their tax return. The trading partnership must not post the tax allocation reserve in their accounting or make any allocations to the tax allocation reserve in the annual accounts.
Positive interest allocation
If you are a partner in a business, you may deduct a standard rate of interest, 8,62 percent (tax year 2024).
The interest is calculated on the equity in the business at the beginning of the tax year. You must include the deducted interest as interest income in the income category capital, and at the same time may deduct an equal amount in the category business.
Positive interest allocation may be done if there is positive capital of more than SEK 50,000 in the business.
Negative interest allocation
The reverse applies if you have a capital deficit. This is seen as borrowing capital from the business. You should therefore apply a standard rate of interest in the business, 2.94 percent for income year 2022. Expect 2.62 percent for tax year 2024.
You can deduct this amount under income from capital, and the same time you will be taxed on an equal amount in the business.
Negative interest allocation may be done if there is a net debt of more than SEK 50,000 in the business.
Expansion fund
Partners can allocate profits to funds at a low tax rate. This means that the profits not taken out of the business are taxed in much the same way as a limited company. Allocation to the expansion fund is voluntary and is done in the tax return. The capital base limits the allocation, and it may not be so large that you report a deficit due to the allocation.
If you cannot submit your return by the deadline
If you or the company is unable to submit the tax return on time, it is possible to apply to the Swedish Tax Agency for an extension. To be granted an extension, there must be special reasons.
If you use an accounting or bookkeeping agency, they may have been granted an agency filing extension, which allows them to submit the partner's tax return after the standard deadline. An agency filing extension cannot be granted for the company's tax return.
VAT and PAYE tax returns
All companies that are registered for VAT must submit a VAT return. The VAT return can be submitted quarterly or monthly. In some cases, it may be submitted once a year.
If your company is an employer, you must submit a PAYE tax return if the company was obliged to pay employer's contributions and make tax deductions. You must also submit a PAYE tax return if the company made tax deductions without being obliged to make deductions.
Read about and submit VAT return at the Swedish Tax Agency (in Swedish)
Read about and submit PAYE tax return at the Swedish Tax Agency (in Swedish)