Price Waterhouse Skattejurister AB
Although the Government reintroduced a number tax rules the former government abolished such as the double taxation of corporate profits (firstly at the company level and secondly, when distributed, at the shareholder level) Sweden is still a favourable country for foreign investors from a tax point of view.
Corporate Tax
Corporate income is subject to corporate income tax at 28 % (effectively some 26% after appropriations to a new tax deferral scheme introduced this year, the accruals reserve)
Profit distributions
Distributed profits by way of dividends to shareholders, are taxed in the hands of the recipient without any credit for the corporate tax paid by the corporation. However, intercompany dividends are normally tax exempt. Dividends paid to non-resident shareholders are in principle subject to a 30 % dividend withholding tax, but double tax treaties waive the tax or provide relief.
There is no withholding tax on interest payments. Royalties are deemed to derive from a Swedish business and are treated as income from permanent establishment in Sweden. Royalties are therefore, in principle, taxed in the same way as branch income. Under most double tax treaties, however, taxation is completely waived or reduced.
Capital gains
Foreign corporations would only be exposed to taxable capital gains on the disposition of Swedish real property in their direct possession. Where the property is owned through a registered branch, the gains are taxed as branch income under rules which are the same as for limited liability companies.
No taxable gain is realized in Sweden where a foreign parent company sells or otherwise disposes of its investment in the shares of a Swedish subsidiary.
Portfolio investments in Swedish shares are treated in the same way as investments in subsidiary shares. However, the dividend withholding tax rate is generally higher.
Branch
The income of a foreign branch is part of a company's overall income and is included and accounted for in Sweden with the application of Swedish accounting principles. The internal Swedish tax legislation does not distinguish between foreign and domestic source income or loss, and it accepts foreign tax as a deductible expense. Alternatively, the internal legislation allows a credit against the Swedish tax for foreign tax paid. Income of a foreign branch is, however, generally addressed in every double tax treaty and where a treaty provision offers relief for foreign tax, either by credit or by exemption of income, the deduction for foreign tax or the internal tax credit is forfeited.
Price Waterhouse Skattejurister AB - Stockholm+46 8 723 98 00
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For further information please contact Staffan Andersson Price Waterhouse Skattejurister AB - Stockholm +46 8 723 98 00, or enter text search 'Price Waterhouse' and 'Business Monitor'.
