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1 basic structure
1.1 Is there a uniform tax system or is the regime multi-level (e.g. federal, state, city)?
There is a single national corporate tax system in Sweden. Sweden does not levy local corporate income tax as all corporate income taxes are levied at the national level.
1.2 What taxes (and tax rates) apply to companies that are tax resident in your country?
Companies registered with the Swedish Trade Register are taxable in Sweden and are taxed on their worldwide income. Foreign corporations are subject to national income tax on income generated in Sweden from a permanent establishment, real estate in Sweden, income from Swedish business associations, royalties and some other sources.
The national corporate tax rate for 2020 is 21.4%; This will be reduced to 20.6% from 2021.
Other taxes that companies are subject to are VAT, social security contributions and property tax.
1.3 Is the taxation based on receipts, profits, specific trade income, assumed profits, or any other tax base?
A company's taxation is based on its accounting records, which have been prepared in accordance with generally accepted accounting principles. This means that the company's annual financial statements should be the starting point for determining the tax base with applicable tax adjustments, as tax legislation differs from accounting on some points. A tax is then levied on the calculated tax base.
1.4 Is there any other treatment based on the type of taxable income (e.g. gains on assets versus trade income or dividend income)?
All corporate income is treated as a business activity. Expenses earned to maintain or generate income are generally deductible from income to determine the taxable base.
Dividend income and profits from the sale of shares can be tax-free under the Swedish participation exemption system.
1.5 Is the regime a global or territorial regime or a mixture?
The tax base is calculated from the global income of companies.
1.6 Can losses be used and / or carried forward for tax purposes and must all of these be within the jurisdiction (ie foreign losses cannot be used domestically and vice versa)?
Tax losses can usually be carried forward indefinitely. Restrictions may apply in the event of a change of ownership (direct / indirect). A change of ownership occurs when one company gains a controlling influence over another company (e.g. through the acquisition of more than 50% of the voting rights or through an agreement or the like). Restrictions apply to the carryforward of losses that occurred in fiscal years prior to the change in ownership. Losses from the financial year in which the change of ownership occurs remain unaffected. There can be two types of restrictions in the event of a change of ownership: a group contribution limit and an amount limit.
There are also restrictions on mergers.
1.7 Is there a concept of beneficial ownership of taxable income or is only the designated or legal owner of the income taxed?
There is no legal definition of “beneficial ownership” in Sweden, although the term is used in double taxation treaties and a similar expression is used in Swedish in the rules governing the limitation of interest deduction (see question 5.3).
1.8 Do tax rates change depending on the taxpayer's income or balance sheet size?
No, prices for Swedish companies are not changing.
1.9 Are companies other than companies subject to corporation tax (e.g. partnerships or trusts)?
Profits from partnerships are taxed separately by the partners. The partners are also liable for debts that the partnership cannot pay. The partnership is taxable on VAT, property tax and special income tax on pension costs. However, the taxation rules for partnerships and corporations are largely the same.
Sole proprietorship is the business of individual entrepreneurs and is taxed by the owner on a basis similar to a limited liability company.
Trusts classified as Swedish legal persons are taxed as corporations.
2 special regulations
2.1 What special regulations are there (e.g. for fund companies, corporate zones, free trade zones, investments in certain sectors such as oil and gas or other natural resources, shipping, insurance, securitization, real estate or intellectual property)?
Sweden has no special tax regime. Certain forms of tax relief are available in some areas (e.g. R&D, renewable energy, residential investment) but are not classified as special tax regimes.
2.2 Are there facilities for corporate restructuring or intra-group transfers of companies and other assets? Please provide details of the conditions of participation.
Capital gains made when a Swedish company sells shares held for business purposes are normally not taxable under the participation exemption rules. The same principles apply to dividends paid from holding shares for business purposes.
Shares are generally considered to be held for business purposes if they:
- are not listed on the stock exchange (for foreign stocks, the company must also be a Swedish limited company);
- where listed, held for at least a year and held at least 10% of the company's votes; or
- are related to the owner's business.
For a foreign company to be equivalent to a Swedish company, it must be equivalent in both tax and legal terms. In terms of taxation, the foreign company must be liable for tax in the country in which it is incorporated (the tax rate is generally not important). In terms of legal structure, the legal structure of the foreign company should be similar to that of a Swedish limited company.
2.3 Can a taxpayer opt for alternative tax regimes (e.g. different methods for calculating the tax base, e.g. income or profit-related or cash or account-based)?
Swedish companies cannot choose another tax system.
2.4 What are the rules for taxing companies with a different functional or reporting currency than the jurisdiction in which they are resident?
The main rule is that Swedish companies should use the Swedish krona as the currency of account. Foreign currency transactions must be converted into Swedish kronor. There are several ways in which these conversions can be performed.
Income tax returns and other control returns submitted to the Swedish tax authorities must be submitted in Swedish kronor. If a company uses the euro as its invoice currency, special conversion rules apply. The Swedish Tax Authority publishes on its website the average exchange rate between the euro and the Swedish krona, which is valid for each financial year.
2.5 How are intangible assets taxed?
Goodwill and intangible assets developed by the company itself are not deductible. Goodwill and intangible assets arising from a transfer of assets and consequently acquired by another person may be written off for tax purposes using the same principles as the depreciation of equipment and inventory.
Sweden does not have a patent box regime.
2.6 Are there any company-level deductions for pension contributions?
As a rule, the pension costs to be borne by an employer for an employee are deductible for the employer insofar as they are the lower of:
- 35% of the employee's salary; and
- 10 price base amounts (47,300 x SEK 10 = SEK 473,000 for fiscal year 20).
If the pension expense exceeds the lowest of the two amounts, the excess amount is treated as non-deductible in the income tax return.
2.7 Are taxpayers from different sectors (e.g. banks) subject to different or additional taxes or surcharges?
Taxpayers in all sectors use the same general principles to calculate their business income. However, certain differences may apply to deductibility rules and the like in certain sectors, e.g. B. in banking.
2.8 Are there other ancillary taxes (e.g. solidarity surcharges, education tax, corporation tax, transfer tax)?
Sweden does not levy ancillary taxes. However, property tax is levied on both legal entities and natural persons who own real estate.
2.9 Are there any corporate tax deductions for equity?
3 Investment in capital assets
3.1 How are investments in capital assets treated – does the tax treatment follow the accounts (e.g. depreciation) or are there specific rules for the tax depreciation of investments in capital assets?
The tax treatment does not follow the accounts for capital gains and losses. Instead, each asset is taxed according to the specific tax regime that applies to that asset. Since taxation is not based on accounting, how transactions are posted is not tax-related.
3.2 Are there research and development loans or other tax incentives for investments?
Employers can deduct up to 19.59% of social security contributions for people who work in research and development (R&D). However, the total allowance for all employees involved in research and development is limited to SEK 450,000 per month.
This applies to both Swedish and foreign companies that pay social security contributions in Sweden. It does not matter through which legal person or to what extent the company carries out its business. One of the prerequisites for claiming the allowance is that R&D is systematic and skilled work. Work is considered to be systematic and skilled if its results are used to develop new goods, services or production processes or to significantly improve existing ones.
3.3 Are inventories subject to special tax or valuation rules?
Securities that represent inventories because they are part of a securities transaction are taxed at acquisition value or fair value. A valuation at fair value means that changes in value are offset and have an impact on taxation as taxable income or deductible costs.
Inventories are subject to special tax regulations with regard to depreciation.
3.4 Are derivatives subject to certain tax regulations?
Financial futures and options are specifically defined in the Income Tax Act. They are not subject to any specific tax rules, but are taxed according to the rules applicable to the underlying premise. Other derivatives, such as swap agreements, are taxed depending on the extent to which they fall under any of the definitions contained in tax legislation (e.g. futures or options).
4 Cross-border treatment
4.1 On what basis are non-resident companies liable for tax in your jurisdiction?
Non-resident companies are subject to tax on permanent establishment income, real estate in Sweden and dividend distributions from Swedish companies.
License fees from Sweden are not subject to withholding tax. However, it is assumed that the recipient has a tax residence in Sweden. Therefore, Swedish royalties are taxed as if the company were resident for tax purposes in Sweden and therefore subject to Swedish local taxation in accordance with Swedish national law or the agreed tax rate.
4.2 What withholding or excise taxes apply to payments made by corporation taxpayers to non-residents?
Foreign companies are usually subject to a Swedish withholding tax of 30% on dividend distributions from Swedish companies. There are certain exceptions to this rule where the withholding tax rate can be reduced from 30% to 0% due to Swedish law, the EU Parent-Subsidiary Directive or an applicable tax treaty.
4.3 Do duplicate or multilateral tax treaties override domestic tax treatment?
Yes, double and multilateral tax treaties are incorporated into Swedish law and take precedence over national law, unless the treaty extends the tax liability set out in national law. In interpreting such laws, the tax treaty takes precedence.
4.4 Are there unilateral reliefs or credits for foreign taxes in the absence of contracts?
It is possible to credit foreign taxes according to domestic tax legislation.
4.5 Do incoming companies get a tax boost to the asset base?
Assets are valued according to different principles, which can lead to an increase in a company's migration to Sweden.
4.6 Are there exit taxes (on assets sold or companies moving to another place of residence)?
When the tax liability on income from a business in Sweden ends in whole or in part, or when the business is transferred to another country, the company is liable for tax. This means that the sale of assets or services is calculated and taxed according to their market value.
5.1 Are there anti-avoidance rules for corporate taxpayers – if so, are they jurisdiction (jurisprudence) or statutory or both?
Yes, corporate taxpayers are subject to statutory avoidance regulations. There are also anti-avoidance rules based on case law.
5.2 What are the main “general” anti-avoidance rules or regulations, based either on laws or cases?
Sweden imposes anti-avoidance rules primarily on transactions that were carried out in order to obtain significant tax advantages. Certain transactions can therefore be considered invalid if the following tax avoidance criteria are met:
- The transaction resulted in a significant tax benefit.
- The taxpayer was directly or indirectly involved in the transaction.
- The reason for the execution of the transaction was primarily the realized tax advantage; and
- The transaction is contrary to the purpose of the rules that have been exceeded or are directly applicable.
5.3 What are the main rules to avoid tax avoidance (e.g. controlled foreign companies, transfer pricing (including small capitalization), anti-hybrid rules, restrictions on loss or interest deduction)?
Controlled Foreign Companies (CFCs): The Swedish CFC rules state that if the income is considered to be low taxed and certain other conditions are met, Swedish companies that control a non-Swedish company cannot be subject to Swedish taxation of the income earned in that Swedish company. In order to be subject to the CFC rules, the Swedish company must have a controlling influence over the foreign company (ie 25% of the shares or voting rights). Income is considered low tax if it is not taxed at all or if it is taxed at a tax rate of less than 11.77% for 2020 (55% of the current corporate tax rate of 21.4%) The threshold will be 11.33% ( as the corporate tax rate will be reduced to 20.6%). The foreign company's net income should be calculated on the basis of Swedish tax regulations, with minor exceptions for tax reserves and tax loss carryforwards other things. Even if the net income is taxed at a rate of less than 11.77%, there are exemptions from CFC taxation if the foreign company is taxable in a geographic area covered by Appendix 39a of the Income Tax Act (“White List”) & # 39;), unless one of the exceptions listed in the list applies (& # 39; the exception to the exception & # 39;).
Interest deductions: On January 1, 2019, Sweden introduced new rules for interest deductions. The new rules apply to both external and internal loan agreements.
Interest on intra-group loans can be deductible if the beneficial owner of the interest income is resident for tax purposes in:
- the European Economic Area (EEA); or
- a country outside the EEA with which Sweden has a double taxation treaty that is not limited to certain income, provided that the company is covered by the treaty.
Otherwise, the beneficial owner of the interest income must be taxed at a minimum tax rate of 10%, with the interest income being the sole income and not creating the debt "exclusively or almost exclusively" in order to create a substantial tax benefit for the group.
To the extent that a deduction is permitted under the above conditions, the new rules contain a general interest cap rule that applies to all loans (both internal and external) and only allows a 30% deduction of tax income before interest, taxes, depreciation and amortization ( EBITDA). However, the EBITDA interest cap rule only applies to net interest costs of more than SEK 5 million at group level.
See question 1.6 on loss restrictions.
The Swedish anti-hybrid rules generally apply to most transactions between affiliates that result in double deductions or allowances with no tax on the related income. The Swedish regulations are in line with the EU directives on hybrid mismatches (2016/1164 and 2017/952).
5.4 Is there a decision-making process available for certain corporate tax issues or desired domestic or cross-border tax treatment?
Companies and individuals can apply to the Swedish Board of Advance Tax Rulings for a preliminary ruling on tax issues. The judgment will be binding on both the courts and the Swedish tax authorities if the taxpayer applies the measures accordingly.
Swedish taxpayers can apply for upfront pricing arrangements for their transfer pricing arrangements. These can be unilateral, bilateral or multilateral and are based on the work of the Organization for Economic Cooperation and Development (OECD).
5.5 Is there a transfer pricing system?
The transfer pricing regime in Sweden complies with the OECD guidelines. Sweden therefore applies the arm's length principle to intra-group transactions. Accepted transfer pricing methods include Cost Plus, Comparable Uncontrolled Price, Profit Sharing, Transaction Net Margin Method, and Resale Price Method.
When certain regulations are met, legal entities are required to prepare transfer pricing documents to ensure that the intra-group transactions of multinational companies are armored.
5.6 Are there any statutory limitation periods?
Yes, the limitation period is six years from the end of the income tax year (the tax year corresponds to the financial year).
6.1 What are the deadlines for filing corporate tax returns and paying the related tax?
All businesses are required to file an annual income tax return. The filing date is determined by the company's fiscal year. Companies with fiscal years ending in December 2019 must file their tax return on July 1, 2020 in the case of a printed return and on August 3, 2020 for the digital return.
6.2 What are the penalties for violations at company and management level?
For corporate tax purposes, tax penalties are levied up to a maximum of 40% of the tax that was not paid due to incorrect or insufficient information. However, if the wrong or insufficient information concerns a timing issue, a 10% tax penalty will be applied.
If the income tax return is incomplete or not submitted, the Swedish tax authorities can decide on the amount to be paid based on the information available.
The late filing fee for a corporate income tax return is SEK 6,250, plus SEK 6,250 if the late filing exceeds three months.
6.3 Is there a system for reporting information on an international or other supranational level (e.g. country-specific reporting)?
Multinational companies with an annual worldwide turnover of more than SEK 7 billion are required to submit a country report in one country each year. All Swedish companies that are part of such a group must notify the Swedish tax authorities of which company the report is being submitted by and in which jurisdiction it is being submitted. In some cases it is the responsibility of the Swedish company to prepare the report and submit it to the Swedish tax authorities.
7.1 Is tax consolidation allowed on either a tax liability or a payment basis or both?
Swedish companies cannot choose to consolidate financial statements for tax purposes. Tax consolidation is instead done through the exchange of group contributions. Group contributions are taxable for the recipient and tax deductible for the payer and thus imply a transfer of untaxed profits. The requirements include the following:
- During the entire financial year or since the subsidiary started operating, there must have been a participation of more than 90% between the recipient and the payer in the entire corporate chain.
- The companies in the business chain between the recipient and the payer should be Swedish limited companies, foreign companies based in the European Economic Area or foreign companies resident in a state that has a tax treaty with Sweden that contains an anti – discrimination clause;
- The recipient and the payer must file their corporate tax return at the same time. and
- Both the recipient and the payer must include the contribution in their corporate tax return and disclose it in full.
In addition, a group contribution requires that a transfer of value be recorded from a tax perspective (e.g. a transfer of cash or the recording of debts / receivables on the companies' balance sheet)
Both upstream and downstream group contributions can be made. Upstream group contributions, however, require sufficient distributable reserves in the contributing company.
8 Indirect taxes
8.1 Which indirect taxes (e.g. goods or services tax, consumption tax, broadcasting tax, value added tax, consumption tax) could a corporation taxpayer be exposed to?
Sweden charges Value Added Tax (VAT) on goods and services in accordance with EU rules. The general VAT rate is 25%, with a reduced rate of 12% for groceries, restaurants, catering, some repairs of goods, hotels and other tourist services. A reduced rate of 6% applies to concert tickets and newspapers, among other things. For example, sales tax is not levied on prescription drugs, certain financial services, and insurance premiums.
Stamp duty is levied on the sale of real estate at 1.5% for private individuals and 4.25% for legal entities and is calculated based on the highest real estate tax assessment and the purchase price.
8.2 Are there any transfer or other taxes payable in connection with the transfer of shares in any business entity?
Sweden does not levy transfer taxes.
9 Trends and Predictions
9.1 How would you describe the current tax landscape and trends in your jurisdiction? Are new developments expected in the next 12 months, including the proposed legislative reforms?
The Swedish government is currently focusing on tax evasion, avoidance and abuse in line with the Organization for Economic Co-operation and Development and the European Union. Recent major pieces of legislation that have impacted the Swedish tax landscape include:
- the implementation of the EU Directive 2011/16 on cross-border tax regulations, which introduces mandatory disclosure for certain cross-border transactions;
- new rules before interest, taxes, depreciation and amortization on interest deduction restrictions; and
- the implementation of the economic employer concept.
The government has also proposed a new withholding tax law that will affect dividend distributions and similar cross-border payments by Swedish companies.
10 tips and traps
10.1 What are your top tips for navigating the tax regime and what potential sticking points would you highlight?
The Swedish tax landscape has evolved significantly in recent years. Due to the recent focus by the government and the Swedish tax authorities on tax abuse, particularly in connection with cross-border transactions, it is important to think ahead and plan accordingly when dealing with Swedish taxes in order to avoid any immediate or future pitfalls.
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