The Swedish government in early September 2018 published a legislative proposal (2017/18:296) that would impose “stricter rules” on companies subject to low taxation. The purpose of the proposal is to make it more difficult to use tax planning that involves companies in foreign jurisdictions.
These proposed changes follow suggestions made by the tax agency to expand the Swedish CFC (controlled foreign corporation) rules. Under the CFC rules, income of foreign entities subject to low taxation may in some instances be subject to taxation in the hands of Swedish shareholders.
The government’s proposal would generally align the Swedish rules with an EU directive (Council Directive (EU) 2016/1164 or the anti-tax avoidance directive (ATAD)) that addresses tax avoidance practices that directly affect the functioning of the internal market.
The changes are proposed to be effective 1 January 2019.
Possible implications of the proposed CFC changes could be that any possibilities to escape Swedish CFC taxation on the basis of the ”white list” would be reduced, and this, in turn, could trigger ”actual establishments” becoming more relevant (a possible intention of the proposal). It is expected that the changes concerning contingency reserves could likely extend future CFC taxation in Sweden to insurance businesses located in certain low tax jurisdictions.
Read a September 2018 report prepared by the KPMG member firm in Sweden
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