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Sweden: Foreign pension funds, refund claims of withholding tax

Sweden: Foreign pension funds, withholding tax

The Swedish Supreme Administrative Court rejected claims of foreign pension funds for refunds of Swedish withholding tax. The pension funds had based their claims of discrimination under EU law, but the court rejected these claims on grounds of non-comparability. Still, the court held there is a possibility to deduct certain expenses related to the receipt of dividend income.


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The cases are: Pensioenfonds Metaal en Techniek and Veritas cases


The first case concerned a Dutch pension fund that claimed that the Swedish withholding tax rules were discriminating with respect to foreign pension funds. Under the Swedish rules, foreign pension funds are subject to a 15% withholding tax on their gross dividend income, whereas Swedish pension funds pay a 15% tax on a deemed capital net income ("yield tax"). This tax was intended to achieve neutrality from the point of view of different pension products and assets subject to changing economic conditions, and presupposed that Swedish pension funds are taxed on deemed income from their worldwide assets. Read more about this case when it was pending before the Court of Justice of the European Union in 2016: TaxNewsFlash-Europe

The Swedish Supreme Administrative Court held that the taxpayer was not comparable to Swedish pension foundations or life assurance companies so there was no restriction on the free movement of capital. 

The second case concerned a Finnish pension insurance company that was engaged in compulsory employment pension insurance, and claimed discrimination in relation to the tax-exempt Swedish governmental pension funds and secondarily in relation to Swedish pension foundations. Despite similarities between the Finnish compulsory employment pension insurance and the Swedish income-based retirement pension business (both involve managing funded capital), the Supreme Administrative Court observed significant differences between the businesses and concluded that the Finnish fund and Swedish governmental pension funds operated under different conditions organizationally as well as with regard to function and purpose, and therefore were not in objectively comparable situations.


Read a March 2017 report prepared by the KPMG member firm in Sweden

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