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Sweden: Transfer pricing and financial transactions

Sweden: Transfer pricing and financial transactions

The Swedish tax agency has issued guidance that generally adopts the position of the Organisation for Economic Cooperation and Development (OECD) regarding transfer pricing for financial transactions.


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The OECD report was released in February 2020. Read TaxNewsFlash

The Swedish tax agency issued its guidance (Swedish) concerning the pricing of financial transactions in April 2020. In issuing this guidance, the Swedish tax agency stated that prior to the OECD report on financial transactions, there was little or no specific guidance on how to determine arm’s length prices for financial transactions. For this reason, the Swedish tax agency stated that it considers the OECD report as merely containing clarifications on how to apply the arm’s length principle in relation to financial transactions, with the implication being clear that the Swedish tax agency may apply the position taken in the OECD report, even for transactions entered into before its publication.

The Swedish tax agency accepted that one topic sufficiently and clearly addressed in Swedish case law before publication of the OECD report is the pricing of financial guarantees (section D of the OECD report). Accordingly, this means that the positions taken by the OECD report cannot be applied retroactively for these transactions.

Swedish case law regarding financial guarantees implies that a related party only had to charge another related party for a guarantee in exceptional circumstances—only when issuing guarantees was part of the core business of the guarantor, or the guarantor had incurred specific costs or relinquished specific income for the guarantees. The Swedish tax agency now considers this case law to be obsolete on a going-forward basis, and will require the remuneration for guarantees to be analyzed exclusively based on the position taken in the OECD report. However, the prior case law will still apply for guarantees issued prior to the publication of the new Swedish guidance (that is, before 17 April 2020).

KPMG observation

With the release of the guidance on financial transactions by the Swedish tax agency, transfer pricing professionals expect greater scrutiny by the Swedish tax agency in this area.

As noted above, the Swedish tax agency considers that the OECD report contains only clarifications of the arm’s length principle and therefore can be applied retroactively. This view is consistent with how the Swedish tax agency has interpreted other updates to the OECD Transfer Pricing Guidelines. For example, following the release of guidance on intangibles published by the OECD in 2015, the Swedish tax agency initiated several tax audits, and during the course of those audits, the principles and examples from the updated OECD guidance were used as the basis for adjusting the taxpayers’ income, even for previous years. Given this pattern, taxpayers need to consider assessing their risk exposure, and look to see how consistent their current and prior transfer pricing policies align with the position taken in the OECD report on financial transactions.

The Swedish tax agency considers that the principles announced in the new OECD report must prevail going forward, even in areas when there is already long-standing Swedish guidance, such as for financial guarantees. The Swedish tax agency has not indicated if there are any other areas for which Swedish case law has been sufficiently clear (before the publication of the OECD report) to prevent the position taken in the OECD report from being applied retroactively. If there are any such areas, tax professionals hope that this treatment would be clarified in additional future guidance from the Swedish tax agency.

Read a May 2020 report prepared by the KPMG member firm in Sweden

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