UPDATE 1-Sweden to cut corporate tax rate below EU average

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STOCKHOLM, March 21 (Reuters) - Sweden plans a further cut in its corporate tax rate that will take it below the European Union average, in a bid to boost business activity, Finance Minister Magdalena Andersson said on Wednesday.

The rate will fall to 21.4 percent from Jan. 1 and to 20.6 percent in 2021, compared with an EU average of 21.5 percent.

Sweden has lowered the rate in several steps since 2009, when it stood at 28 percent and was among the highest in the bloc. It is currently 22 percent.

“This will benefit small- and medium-sized businesses, where much of the new employment will be generated,” Andersson told a news conference.

Sweden holds national elections in September and Andersson said her centre-left minority government had discussed the cut with the opposition and was confident it would pass in parliament.

Andersson said that, to make the corporate tax system more transparent, the government would also restrict tax breaks on companies’ debt repayments.

“Aggressive tax planning with interest rate deductions (on debt repayments) will become more difficult, which increases the legitimacy of the tax system,” she said.

Sweden still has some of the highest income taxes in Europe. (Reporting by Stockholm Newsroom; editing by Niklas Pollard and John Stonestreet)