Sweden: Proposal to limit use of losses, acquisitions of loss-making companies

The intention of the bill is to counter the trading in loss-making companies.

Acquisitions of loss-making companies

A bill introduced in the parliament (Riksdag) would impose a new limitation rule with regard to acquisitions of loss-making companies when acquired or divested for purposes of taking tax advantage of the loss.

The Supreme Administrative Court (Högsta förvaltningsdomstolen) in June 2021 issued a judgment concerning loss-making companies and acquisitions of such companies that are intended to circumvent the tax evasion rules. In the case, a loss-making company had sold all its assets through intra-group transactions and then had only one receivable from its parent company and a deferred tax receivable attributable to losses from previous years. The loss-making company was then acquired by another entity, and after the change of ownership, the buyer assumed responsibility for the debt owed by the loss-making company to the parent company.

Shortly after the judgment, the government in June 2021 submitted to the Riksdag a “stop letter” (a type of procedure used in exceptional instances, when it is determined that application of a tax provision has unintended consequences and may lead to a significant tax loss for the state) that addresses trading involving loss-making companies and sets forth a special limitation rule with regard to the ability to use losses from previous years. Read TaxNewsFlash

The government now has taken the next step in the process and submitted a bill that sets forth the special limitation rule. Under the proposal, the ability to deduct deficits stemming from losses incurred in previous tax years would not be available in the event of a change in ownership if the loss deficit is the predominant reason for the change of ownership.

The intention of the bill is to counter the trading in loss-making companies.
 

Read a December 2021 report (Swedish) prepared by the KPMG member firm in Sweden

 

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