Key tax factors for efficient cross-border business and investment involving Sweden.
With the following countries, territories and jurisdictions:
||Czech Rep.||Jamaica||North Macedonia||Tanzania|
||Egypt||Kazakhstan||Pakistan|| Trinidad & Tobago
||Faroe Islands||Rep. of Korea
|Bosnia & Herzegovina||Georgia||Luxembourg||Serbia||Venezuela|
Generally, limited liability companies are used.
At least SEK 50,000.
A company is resident in Sweden if it is registered with the Swedish Companies Registration Office. Resident companies are taxed on their worldwide income. Non-resident companies are taxed only on their Swedish source income.
Income tax returns must be filed every year.
The corporate tax rate is 21.4 percent as from January 1, 2019 (reduced to 20.6 percent from January 1, 2021).
30 percent but exemption/reduction if shares held for business reasons and also exemption/lower rates for EU countries and for treaty countries.
Royalties paid to non-residents are not subject to WHT but normally subject to income tax by assessment, net of directly-related expenses. The applicable corporate income tax rate is currently 21.4 percent. Exemptions are available for payments to certain EU affiliates. The rate may also be reduced under certain tax treaties.
Dividends on business-related shares are tax exempt. Unquoted shares are normally considered to be business-related. Quoted shares are normally considered to be business-related if they;
Business-related shares may only consist of shares in a limited liability company or shares in an economic association. Even foreign counterparts of Swedish limited liability companies (i.e. ABs) and Swedish economic associations may be included, provided they are considered equivalent to a Swedish limited liability company or a Swedish economic association.
Shares held as inventory generally do not qualify for the exemption (unless within the EU/EEA).
Normally tax exempt in the same manner as dividends. Special rules apply to the sale of a shell company.
Losses may be carried forward indefinitely. No carry-back is allowed. Losses carried forward may expire or be restricted after a substantial change in ownership of the company’s share capital, at a merger, or on a settlement with creditors.
Consolidated balance sheets are not recognized for tax purposes in Sweden. However, the law allows shifting of income through group contributions. In the case of a qualifying group contribution, the company paying such contribution is entitled to deduct the amount from its taxable income and the recipient company must include such contribution in its taxable income. The requirements for allowable group contributions are:
As of July 1, 2010, a resident company may deduct final losses from its subsidiary resident in another EEA state if certain criteria are met. One criterion that has to be met is that the subsidiary has been liquidated.
Real estate transfer tax is triggered upon the transfer of immovable property. The standard rate is 1.5 percent. If the transferee is a legal entity, the rate is 4.25 percent.
Yes, on transfer of immovable property (see above) and mortgage loans.
Controlled Foreign Company taxation rules apply to individuals or legal entities which, directly or indirectly, own at least 25 percent of the capital or the voting rights in a low taxed foreign legal entity at the end of the financial year. “Low taxed” is defined as a tax at a rate below 55 percent of the normal Swedish tax rate of 21.4 percent, i.e., below 11.77 percent. However, a company resident and subject to tax in a “white listed” country is not regarded as a low taxed entity, unless an exemption applies (significant amendments to the white list apply from January 1, 2019). The rules do not apply if the taxpayer shows that a foreign legal entity resident within the EEA constitutes an actual establishment, e.g., with premises and staff in that country.
OECD Guidelines apply.
Rules on transfer pricing documentation apply.
No; however, as of January 1, 2013, a revised interest deduction limitation regime is effective (further amended as of January 1, 2019).
As of January 1, 2019, a general EBITDA-based interest deduction limitation has been introduced in the corporate sector, with the cap being calculated as 30 percent of earnings before interest, tax, depreciation and amortization (EBITDA). The limitation applies to negative net interest expenses as defined under Swedish tax law, i.e. the difference between interest income and interest expenses.
Furthermore, the current interest deduction limitation rules for certain intra-group loans are amended. Interest deduction on such debt should be granted if the beneficial owner of the interest income within the group (i) is resident within the EEA, (ii) is resident of a state with which Sweden has a tax treaty not limited to certain income or (iii) is subject to a corporate tax of at least 10 percent. However, no tax deduction should in any case be granted if the underlying purpose of the loan exclusively or almost exclusively (90-95 percent or more) is to obtain a substantial tax benefit for the group.
A transaction may be considered an act of avoidance, and therefore disregarded for tax purposes, if the following conditions are met:
Moreover, there is an exit rule that states that when an asset or service is taken out of the business it is taxed as if it had been sold at market value.
As of January 1, 2019, a prohibition to deduct interest costs in certain cross-border transactions is effective (anti-hybrid-rule). Deduction of interest on loans between affiliated companies will be disallowed when:
These rules are a result of OECD’s work within the framework of the BEPS project.
The standard rate is 25 percent, and the reduced rates are 12 and 6 percent.
Source: Swedish tax law and local tax administration guidelines, updated 2019.
KPMG in Sweden
T +46 31 614860
KPMG in Sweden
T +46 31 614746