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New legislation on Transfer Pricing Documentation and CbC

New rules on Transfer Pricing Documentation and CbC

On March 1 the parliament passed the Government's proposal for Transfer Pricing Documentation and Country-by-Country Reporting. The regulations will enter into force on April 1, 2017.



Annika Lindström

Partner & Head of Tax & Legal

KPMG i Sverige


Relaterat innehåll

Under the new legislation Swedish Transfer Pricing Documentation regulations are adapted to the OECD’s new standard which were presented in the BEPS Action 13 Final Report.

Furthermore, under the new legislation, new regulations are introduced for Country-by-Country Reporting and automatic exchange of those reports between tax authorities both in the EU and between tax authorities in those countries and jurisdictions which have signed the multilateral agreement on automatic exchange of information for Country-by-Country Reports, the Multilateral Competent Authority Agreement (“MCAA”).

Transfer Pricing Documentation

The legislation complies with OECD’s recommendations and the Documentation should consist of a Master File and Local Files. The new documentation requirements will enter into force for financial years which start on April 1, 2017 or later. The Master File shall be prepared by the time the tax return of the parent company is due to be submitted, and the Local File shall be prepared by the time the tax return of the local entity is due to be submitted.

Companies will be exempted from the obligation to prepare Documentation if the year before the financial year in question, the Group to which the company belongs had less than 250 employees and either have reported revenues not exceeding SEK 450 million or total assets not exceeding SEK 400 million.

The legislation increases the scope of those obliged to prepare Documentation to also include foreign companies with permanent establishments in Sweden, Swedish companies with permanent establishments abroad and Swedish unlimited partnerships (pass-through entites – “Handelsbolag”). For an unlimited partnership to be obliged to prepare Documentation it must have transactions with a foreign company and the unlimited partnership’s profits are taxed in a Swedish company which is in a group with both the unlimited partnership and the foreign company. The obligation to prepare Documentation lies with the unlimited partnership, and not the shareholders.

For companies which are obliged to prepare Documentation, insignificant transactions are exempted from the full Documentation obligation, i.e. transactions which are insignificant either in value or with respect to the risk of incorrect pricing. An assessment of whether a transaction is to be regarded as insignificant shall be done on a case-by-case basis. The transactions which pertain to the company’s main activities or amount to a significant value cannot be regarded as insignificant if they exceed SEK 5 million per counterpart and financial year.

It should be noted that even Swedish companies, unlimited partnerships or permanent establishments which are not required to prepare Documentation are nonetheless obligated to price all internal transactions at arm’s length.

Country-by-Country Report

The Country-by-Country Report shall be submitted by December 31, 2017 at the latest, but pertains to financial years commencing January 1, 2016 or later. Under the new legislation multinational groups which the year prior to the financial year have reported revenues exceeding SEK 7 billion shall submit certain data every year for each jurisdiction in which they are active. Normally, it will be the parent company of the multinational group which submits the Country-by-Country Report to the tax authority of the country in which it is active.

If there is no requirement to submit a Country-by-Country Report in the country in which the parent company is a resident, or if the tax authority in that country fails to share the Country-by-Country Report with the Swedish Tax Agency, the Swedish subsidiary may be obliged to submit the Country-by-Country Report on behalf of the parent company.

N.B. the Swedish company shall submit a notification to the Swedish Tax Agency by April 30, 2017 for financial years which have ended before April 1, 2017 informing them of which group entity shall submit the Country-by-Country Report on behalf of the group.

Automatic exchange of Country-by-Country Reports

The legislation entails the introduction of regulations on automatic exchange of Country-by-Country Reports between tax authorities in the EU and the states which have signed the multilateral treaty, MCAA on exchange of Country-by-Country Reports. MCAA is part of the effort being made to increase the transparency of multinational companies for local tax authorities.

KPMG’s comments

The new legislation complies with the rules developed by the OECD for Transfer Pricing Documentation and Country-by-Country Reports within the scope of BEPS Action 13.

For taxpayers with a calendar year as their financial year, the implication for Swedish purposes is that the Master File and Local File will need to be prepared for financial years commencing on January 1, 2018. For taxpayers with split financial years the Documentation requirements may apply as soon as 2017. It is important that taxpayers bear in mind that many countries’ legislations are already in force and require the new Documentation obligations according to BEPS Action 13 to be fulfilled from financial year 2016. Please note that depending on which country the activities are performed in, foreign companies may have an obligation to prepare and submit the Master File and Local File as soon as 2017.

The Swedish obligation for Country-by-Country Reporting will, as anticipated, apply as early as for financial years 2016. Therefore it is important that groups which fulfill the requirements for Country-by-Country Reporting prepare themselves for this reporting obligation. Swedish companies which are within the scope of the Country-by-Country Reporting need to notify the Swedish Tax Agency of which legal entity within the group will be submitting the Report. The Swedish Tax Agency has announced how the notification is to be submitted, read more at the Tax Agency's website (in Swedish). Please note that many other countries also have communicated how notifications are to be submitted as well as when they are due with the local tax authority.

With the introduction of these rules, we expect an increase in the number of queries from the Swedish Tax Agency which may result in more tax litigations. It is important that the information in all documents gives a correct and consistent portrayal of the group, the company and the transactions, in order to minimize the risk of being questioned by tax authorities with regards to transfer pricing policy and ultimately double-taxation. We therefore recommend that companies take a holistic view when preparing Transfer Pricing Documentation and Country-by-Country Reports owing to the new legislation.

Please feel free to contact us if you would like to know more about how the new legislation may affect your company.

Link to the article in Swedish

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