Many would say that the landscape for cross-border tax planning has shifted during the last couple of years. With the persistent flow of new regulations, directives and rulings from the EU courts, businesses must constantly adapt their strategies to stay competitive.
Despite that recent modifications, e.g. restrictions on intragroup interest, have brought about considerable changes in the Swedish tax landscape, Sweden is still offering a reliable and advantageous tax regime for international business operations. Key advantages include:
- Participation exemption regime. Companies may qualify for tax exemption on income from capital gains and dividends. If both the holding company and the subsidiary are qualifying entities under the participation exemption regime, income from capital gains on the disposal of shares in — as well as dividends paid by — the subsidiary are tax exempt. Shares in foreign legal subsidiaries may qualify if the legal entity corresponds to a Swedish limited liability company.
- Competitive corporate income tax rate. Sweden´s corporate tax rate of 20.6% is competitive compared to both EU and non-EU corporations.
- Advantageous rules on intra-group transactions. As Sweden employs principles of tax neutrality regardless of corporate form, Swedish tax law contains numerous regimes to facilitate intra-group restructuring and financing without immediate tax consequences.
- Low requirements on minimum share capital. The main legal entity used for holding and financing purposes is the Swedish limited liability company (Sw. Aktiebolag) which can be established with a minimum share capital of SEK 25,000. The Swedish limited liability company has both legal competence and the formal capacity to act as a party before authorities and courts, and it is a legal entity for Swedish tax purposes.
- No thin capitalisation rules. Unlike many other countries within the EU, Sweden does not apply thin capitalisation rules. This adds flexibility to financing structures, enhancing strategic financial planning.
- No withholding taxes on outbound interest payments. The absence of withholding taxes on outbound interest payments enables smoother cross-border financial transactions.
- Extensive network of double tax treaties. Sweden has approximately 90 tax treaties in effect which offers important benefits for international businesses. In this context, it is worth mentioning that the treaties generally include articles reducing tax burdens on dividends and capital gains. In many treaties, the exemption rules under the participation exemption regime is also reflected.
Even with the evolving European tax landscape, Sweden continues to hold its position as a key hub for holding companies. Hence, for corporations looking to optimise their global strategies, it is still recommended to examine the possibilities and advantages of establishing part of the structure in Sweden.
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