Swedish-Swiss tax treaty and tax
treaty overide in Swedish courts
Mattias Dahlberg, professor of fiscal law, Faculty of
Law, Uppsala university
E-mail: mattias.dahlberg@jur.uu.se
Tel.: 0046 18 471 1980
Swedish approach to tax treaties
• Tax treaties are bilateral or multilateral treaties
• Treaties of international law
• Sweden is a dualistic country in relation to
international treaties
• ”Golden rule” of Swedish tax treaty law: treaties
can only limit, never extend Sweden’s taxing
rights according to (strictly) internal law
The 1965 tax treaty between
Sweden and Switzerland
• In general: an old treaty with a general need for
revision
• No exchange of information according to the
treaty, only limited exchange according to the
protocol
Recent Swedish case law on the
Swedish-Swiss tax treaty
• The Swedish Supreme Administrative Court
(”Regeringsrätten”) has decided on the
compatibility of the Swedish CFC legislation
(2004) with the Swedish-Swiss tax treaty, RÅ
2008 ref. 24.
• CFC = Controlled foreign company. CFC taxation
means the taxation of Swedish owners of foreign
low-taxed companies concerning undistributed
profits.
RÅ 2008 ref. 24 (cont.)
• The Swedish Supreme Administrative Court
identified a potential conflict between the
Swedish-Swiss tax treaty and the Swedish CFC
legislation.
• When deciding which legislation should prevail,
the Supr. Adm. Court concluded that the CFC
legislation was both lex specialis (’more special’)
and lex posterior (’later in time’) than the 1965
tax treaty. Consequently, the CFC legislation
should prevail.
Critical comment
• Tax treaties are instruments of international law,
and Sweden’s tax treaties express not only
Sweden’s objectives but also the objectives of
the other treaty concluding state, in this case
Switzerland.
• Cf. Articles 27 and 31 of the Vienna Convention
on the Law of Treaties.
• In this case the Supreme Adm. Court has
wrongly ignored the other treaty concluding
state.
The Swedish ”ten year rule”
• An individual resident in Sweden that transfers
his or her residence from Sweden will be liable to
tax in Sweden on capital gains from the
alienation of shares and similar instruments,
during a period of ten years from the transfer of
residence. Oftenly, this period is reduced in
Swedish tax treaties.
• In 2007 the internal Swedish rule was extended
to include also certain foreign financial
instruments.
The Swedish ”ten year rule” (cont.)
• The question is whether this extension to foreign
instruments ”overrides” Swedish tax treaties,
which oftenly limit the period for tax liability in
Sweden on capital gains on the alienation of
SWEDISH shares.
• The Swedish Board for Advance Tax Rulings
(”Skatterättsnämnden”) has in two cases, one
concerning Switzerland, decided that the
extended national rule should prevail over the
Swedish tax treaties.
Conclusions
• The 1965 Swedish tax treaty is in need of
revision.
• The Swedish Supreme Administrative Court case
from 2008 on the Swedish-Swiss tax treaty
constitutes a tax treaty override. It means that
the lex posterior and lex specialis principles
should prevail irrespective of the view of the
treaty partner. In my view, a breach of Sweden’s
international obligations.