What are the 3:12 rules?

The 3:12 rules govern how shareholders of small companies are taxed on dividends and capital gains in the event of a sale of the company. The rules are important to ensure that co-owners do not convert higher-taxed labor income into lower-taxed capital income. Let's start by understanding who is subject to these rules.

‍

Who is covered by the 3:12 rule?

If you are a shareholder in a limited liability company in which you or a related party operates, you are subject to the 3:12 rules. This is true even if you only own a small part of the company. For example, if you own a family business where both you and your children work, you are all covered by the rules.

‍

Limit amounts and taxation

A central concept within the 3:12 rules is the limit amount. This amount determines how much of the dividend is taxed at 20%. Let's take a closer look at what the limit amount means and how it is calculated.

‍

What is the limit amount?

The limit amount is the amount that may be taxed at the preferential rate of 20%. Thus, dividends up to the limit amount are taxed as capital income, while dividends above that amount are taxed as wages, which implies a higher tax rate.

‍

What is the simplification rule?

One way to calculate the limit amount is by using the simplification rule. This rule is particularly beneficial for smaller companies with few employees.

‍

How does the simplification rule work?

The simplification rule means that the limit amount is calculated at a flat rate. This consists of 2.75 income base amount (ibb), which for the 2024 tax year is 204,325 SEK. If you are going to take dividends this year, however, you are looking at the income year 2023. The flat rate amounts to SEK 195,250.

‍

Flat rate (2.75 IBB) per tax year:

‍

• Flat rate according to the simplification rule for the income year 2023:195,250 SEK.
• Flat rate according to the simplification rule for the income year 2024:204,325 SEK.
• Flat rate according to the simplification rule for the income year 2025:209,550 SEK.

‍

The lump sum applies regardless of the size of the company or salary payments, and is divided between the shareholders based on their shareholdings.

‍

Limitations and benefits

You can only use the simplification rule for one corporation per year, even if you own several. This can be a disadvantage if you have multiple companies. On the other hand, the simplification rule is simple to use and does not require advanced computation.

‍

What is the main rule?

Another way to calculate the limit amount is to use the main rule. Here, the limit amount is calculated either on the basis of the acquisition value of your shares in the company, or on the basis of the company's salary payments, which under certain conditions entitles you to receive dividends of 50% of the company's total wage base. Thus, the general rule may provide for a higher limit amount, especially in companies with many employees.

‍

How does the main rule work?

The main rule means that the limit amount is calculated on the cost of your shares and, as I said, under certain conditions, the company's salary payments. In order to count on wages, you or a related party must own at least 4% of the capital in the company and collect a certain minimum wage from the company.

‍

{{cta}}

‍

Salary Withdrawal Requirement

In order to be able to count on wages, you need to charge a certain minimum wage, which you do by fulfilling the wage withdrawal requirement. It is therefore very important that you, as an entrepreneur or co-owner, receive the right salary.

‍

Recommended reading: How much salary should you take out in 2024 to maximise your dividend

‍

For 2024, the salary withdrawal requirement is the lowest of:

‍

• SEK 445,800 (6 basic income amounts) + 5% of the company's total wage base for the previous year
• Or SEK 713,280 (9.6 income base amount).

‍

Calculation example

Let's say that your acquisition value of the company's shares amounts to 100,000 and salary payments for 2023 amounted to SEK 3 million. 5% of salary payments (3 million) equals SEK 150,000. This means that the salary withdrawal requirement will be 445 800 + 150 000 = SEK 595 800. If you or a relative collects this salary, you can use the main rule. This means that you are entitled to a salary based distribution space of SEK 1.5 million.

‍

If, on the other hand, you or a related party take a lower salary of SEK 595,800, you miss out on your salary-based distribution space of SEK 1.5 million. However, you can still use the main rule, but since the acquisition value of your shares is only SEK 100,000, the simplification rule will be more beneficial as it entitles you to SEK 195,250 in dividend space for the income year 2023.

‍

Save the hassle with Balance

The 3:12 rules can be cumbersome, but collecting the right salary is incredibly important in order to maximize your dividends. If you need help with planning or have any questions, do not hesitate to contact us at Saldo. Our accounting consultants are here to help you!

‍

‍

‍

Frequently Asked Questions about the 3:12 Rules

‍

What is the difference between the simplification rule and the main rule?

The simplification rule uses a flat rate to calculate the limit amount, while the main rule is based on the cost value of your shares and the company's salary payments.

‍

How do I know which rule to use?

Compare the two rules and choose the one that gives the highest limit amount. If you have a small company with few employees, the simplification rule may be easier to use.

‍

What happens if I withdraw more dividends than the limit amount?

Dividends above the limit amount are taxed as salary, which means a higher rate. It is therefore important to plan your dividend carefully.

‍

Can I change which rule I use every year?

Yes, you can switch between the simplification rule and the master rule every year depending on what is most beneficial for your company.

‍