Corporation Taxation System in Sweden
Corporate Income Tax Rate at a Glance
Corporate Income Tax Rate (%)
Capital Gains Tax Rate (%)
Branch Tax Rate(%)
Withholding Tax (%)
Dividends
Interest
Royalties from Patents etc
Branch Remittance Tax
Net Operation Losses (years)
Carry back
Carry forward
28
28
28
20 (a)
0
0 (b)
0
0
Unlimited
(a) This withholding tax applies to non residents. In general no withholding tax is imposed on dividends
paid to foreign companies other than companies regarded as tax-haven companies. If the payer is a
company listed on the stock exchange, an exemption is granted only if the recipient holds at least 10 %
of the voting rights of the payer for more than one year.
(b) Royalties paid to non residents are not subject to withholding tax but are taxed as Swedish-source income at the normal corporate rate of 28 % of the net income. However, under most treaties the tax rate
is reduced. Sweden has enacted legislation implementing the European Union directive on interest and
royalties (2003/49/EC).
Taxable Income
Income from all business activities is aggregated as one source of income – income from
business. Corporate income tax is levied on all corporate income of company incorporated in
Sweden. Non resident corporations are only subject to tax on Swedish-source income.
Corporate income tax is based on taxable business income computed according to the accrual
method of accounting.
Capital Gains
No special assessment exists for capital gains, but special rules apply to the calculation of the
amount of capital gains and losses. In general capital gains on business related shares are exempt from tax (see Dividends below). Taxable capital gains income is aggregated with other
corporate business income. Capital gains are subject to tax when transactions are closed, regardless of the holding period or when payment is received.
Dividends
In general, dividends received from Swedish companies on business related shares are exempt
from tax. Dividend distributions on other shares are fully taxable. Shares are deemed to be
business related if they are not held as current asset and if the following requirements are met:
- The shares are unlisted
- The shares are listed and the recipient of the dividends owns at least 10 % of the voting power of the payer for more than one year or,
- The shares are held for organizational purposes.
Dividends received from foreign companies are exempt from tax if the dividends satisfy the
conditions for exemption with respect to dividends on shares in Swedish companies and if the
distribution foreign company is equivalent to a Swedish limited liability company (AB).
Relief for Losses
Losses may be carried forward indefinitely. Losses may not be carried back. The tax law includes restriction the use of old losses of acquired companies. In general the possibility of
offsetting the losses of an acquired company through a group contribution may in certain circumstances be restricted during a five-year period. The rules also include a restriction under
which the amount of losses that may be used is limited to twice the amount paid for shares.
Special restrictions also apply to the possibility of using losses with respect to mergers.
Foreign Tax Relief
Under Swedish law, a Swedish company may usually claim a credit against corporate income
tax liability for comparable taxes paid abroad. Sweden applies a so called overall tax credit
system. However, certain tax treaties may override internal foreign tax credit rules and instead
exempt foreign-source income from Swedish tax.
Group contribution
There is no consolidated treatment whereby all companies in a group may be treated as a single taxable entity. However, rules permit income earned by companies in a corporate group to
be distributed within the group through the use of group contributions, which are deductible
for the paying corporation and taxable income for the receiving corporation. In general, group
contributions may be made between Swedish group companies if ownership of more than 90
% exists during the entire financial year. This rule applies even if a foreign parent or subsidiary is in the group structure. A Swedish permanent establishment of a foreign company resident in an European Economic Area state is treated as a Swedish company for purposes of the
group contribution rules.
Thin capitalization
No thin capitalization rules exist in Sweden. The companies act, however, requires the compulsory liquidation of a company if more than 50 % of the share capital is lost without replacement of new capital.
Controlled foreign companies
A Swedish company that holds or controls directly or indirectly at least 25 % of the capital or
voting rights of a foreign low-taxed entity (CFC) is subject to current taxation in Sweden on
its share of the foreign entity’s worldwide profits in the ownership or control exists at the end
of the Swedish company’s fiscal year. Foreign companies are considered to be low taxed if
their net income is taxed at a rate of less than 15.4 % on a base computed according to Swedish accounting and tax rules. However, the CFC rules do not apply to foreign entities resident in jurisdictions on the so-called “white list”. If Sweden has entered into a tax treaty with
a jurisdiction on the white list, an additional requirement for the exemption is that the foreign
entity and its income be eligible for treaty benefits.
Transfer Pricing
The Swedish law on transfer pricing is based on the arm’s length principle. As a result, in
general, the OECD transfer pricing guidelines apply. Under new rules which are effective
from 1 January 2007, a Swedish company that is part of a multinational group must have formal transfer-pricing documentation in place with respect to cross-border transactions.
Dividends
Residence
of recipient
Royalties
Dividends
Reduced
Rate
(b)(d)
5
10
5
10
5
5(c)
5
0
10(c)
5
5
0
0
5
5
0
0
0
5(c)
0
5
0
Normal
Treaty
Rate
5
15
10
10
10
5
10
0
15
15
25
5
10
10
0
5
0
14
10
0
0
0
12.5
0
5
0
0
Reduced
Rate
Residence of
recipient
Albania
Argentina
Australia
Austria
Bangladesh
Barbados
Belarus
Belgium
Bolivia
Botswana
Brazil
Bulgaria
Canada
China
Cyprus
Czechoslovakia (e)
Denmark
Egypt
Estonia
Faeroe Islands
Finland
France
Gambia
Germany
Greece
Hungary
Iceland
Normal
Treaty
Rate
15
15
15
10
15
15
10
15
15
15
25
10
15
10
15
10
15
20
15
15
15
15
15
15
0
15
15
10(c)
0
5(c)
0
7
0
5
5
-
India
Indonesia
Ireland
Israel
Italy
Jamaica
Japan
Kazakhstan
Kenya
Korea
Latvia
10
15
15
15
15
22.5
15
15
25
15
15
10
5
5
10
10
5(c)
5
5
15
10
10
15
0
28
5
10
10
10
20
15
10
10
0
10
5
Lithuania
Luxembourg
Macedonia
Malaysia
Malta
Mauritius
Mexico
Morocco
Namibia
Netherlands
New Zealand
Norway
Pakistan
Philippines
Poland
Portugal
Romania
Russian Fed.
Singapore
South Africa
Spain
Sri Lanka
Switzerland
Taiwan
Tanzania
Thailand
Trinidad and
Tobago
Tunisia
Turkey
Ukraine
UK
USA
Venezuela
Vietnam
Yugoslavia
Zambia
Zimbabwe
Non treaty
Countries
Royalties
Normal
Treaty
Rate
15
15
15
15
15
15
15
0
15
15
15
15
30
10
15
10
10
15
15
15
15
15
15
10
25
20
20
Reduced
Rate
(b)(d)
5
5
0
0
0
5
5(c)
5(c)
0
0
15
0
5
0
5
10
7.5(c)
10
0
15
15
10
Normal
Treaty
Rate
10
0
0
8
0
15
10
0
15
10
19
10
10
15
10
10
10
0
0
0
10
10
0
10
20
15
20
Reduced
Rate
20
20
10
5
15
10
15
15
15
20
30
15
15
5(c)
0
0(g)
5
10(c)
5
5
15
-
15
10
10
0
0
10
15
0
10
10
0
5
7
5
-
(a) Royalties paid to non residents are not subject to withholding tax, but are taxed as Swedish-source income at the
normal corporate rate of 28 %. Under certain treaties the rate of tax may be reduced.
(b) The reduced tax rate applies if a parent owns at least the minimum percentage of the paying company prescribed
by the relevant treaty.
(c) The rate of tax is further reduced if specific conditions are satisfied.
(d) No withholding tax is imposed on dividends paid to foreign companies owing at least 25 % of the capital of the
payer.
(e) Sweden applies the treaty with former Czechoslovakia to the Czech Republic and the Slovak Republic.
(f) Sweden applies the treaty with former Yugoslavia to Bosnia-Herzegovina, Croatia, Serbia and Montenegro and
Slovenia. Sweden has entered into a treaty with Macedonia.
(g) The protocol treaty between Sweden and US entered into force 31 August 2006. The provisions on withholding
taxes in the protocol apply to amounts paid or credited on or after 1 October 2006. Under the protocol the
withholding tax rate for dividends may be reduced to 0 %, subject to the new limitation-on-benefits article.
5
5
0
0
Contacts
Sara Bolmstrand
Ernst & Young AB
International Tax Services (ITS)
P.O. Box 7850, 103 99 Stockholm
Sweden
Visiting Address:
Jakobsbergsgatan 24
Messenger/Delivery Address:
Lästmakargatan 21
Web: www.ey.com/se
Manager
Direct/Mobile: +46 8 520 591 13
Fax: +46 8 520 511 13
E-Mail: sara.bolmstrand@se.ey. com
Carl Pihlgren
Ernst & Young AB
Corporate & International Tax Services
Jakobsbergsgatan 24
P.O. Box 7850
SE-103 99 Stockholm
Sweden
Messenger/Delivery Address:
Lästmakargatan 21 A
Web: www.ey.com/se
Partner
Office: +46 8 520 590 00
Direct: +46 8 520 595 22
Mobile: +46 703 51 77 12
Fax: +46 8 520 515 22
E-Mail: carl.pihlgren@se.ey.com