What is Expansionsfond (Expansion Fund for Sole Traders)?
Expansionsfond is a Swedish tax deferral mechanism available to sole traders (enskild firma) and partnerships, allowing them to defer tax on reinvested profits at the corporate rate of 20.6% rather than the personal income tax rate of up to 52%. The expansion fund becomes taxable when withdrawn, at which point the remaining 31.4% personal tax differential applies.
Current Rate (Inkomstår 2025)
20.6% corporate rate on allocation; differential ~31.4% applies on withdrawal
Example
A sole trader earns SEK 500,000 net profit and is in the 52% marginal tax bracket. She allocates SEK 200,000 to an expansionsfond, paying only 20.6% (SEK 41,200) now instead of 52% (SEK 104,000). When she later withdraws the fund, she pays the remaining differential.
How Expansionsfond (Expansion Fund for Sole Traders) works in Sweden
The expansionsfond was designed to address a fundamental inequity in Swedish tax law: that sole traders reinvesting profits in their business face full personal income tax rates (up to 52%) on those profits, while limited companies only pay 20.6% bolagsskatt. The expansionsfond bridges this gap for unincorporated businesses.
**How it works**
A sole trader allocates a portion of their business profit to the expansionsfond. This reduces taxable personal income in the current year. However, unlike the periodiseringsfond (which has no upfront tax cost), the expansionsfond requires payment of a flat 20.6% expansionsfondsskatt on the allocated amount upfront. Think of it as pre-paying corporate-rate tax while deferring the remaining personal tax.
The maximum allocation each year is the lower of: - 125.94% of capital employed in the business (eget kapital justerat) - No specific annual cap based on income percentage (unlike periodiseringsfond's 25% cap)
**The tax on withdrawal**
When funds are withdrawn from the expansionsfond, they are added back to personal taxable income. However, the 20.6% expansionsfondsskatt already paid is credited back (refunded), so only the remaining differential between the personal rate and 20.6% is paid at that point. For a sole trader in the 52% bracket, this means paying an additional approximately 31.4% on withdrawal.
The fund can also be withdrawn to transition into an AB structure — the funds can be transferred to a newly incorporated company in exchange for shares, subject to specific rollover relief rules.
**Comparison with periodiseringsfond**
Periodiseringsfond: defers income fully, must reverse within 6 years, small interest charge. No upfront tax cost.
Expansionsfond: no mandatory reversal deadline (can hold indefinitely), requires upfront payment of corporate-rate tax. Better for long-term capital retention in the business.
Many sole traders use both tools in combination.
Related terms
Periodiseringsfond is a Swedish tax equalisation reserve that allows companies and sole traders to defer up to 25% of their taxable income into a reserve, reducing the current year's tax. The reserve must be reversed (added back to income) within 6 years. An annual interest charge of 1.5% multiplied by the government lending rate applies.
Inkomstskatt is Swedish personal income tax on employment, self-employment, and certain other income. It combines a municipal (kommunalskatt) flat rate of approximately 32% with a national (statlig) surcharge of 20% on income above SEK 598,500 (2025). The effective top marginal rate is around 52%.
F-skatt (F-skattsedel) is a Swedish tax approval status for self-employed individuals and businesses, indicating that the holder is responsible for paying their own preliminary tax. When a client pays an F-skatt holder, the client is not required to withhold tax (A-skatt), making F-skatt essential for freelancers and sole traders.
Confused by Sweden accounting jargon?
AccountsOS explains Sweden terms in plain English and applies the right rules to your books automatically.
Try Free