In general, a withholding tax of 30% is levied on dividends paid to foreign shareholders. However, nearly all of Sweden's numerous double tax treaties provide for a reduced withholding tax. No withholding tax is levied on interest or royalties.

Treaty Withholding Tax Rates

The following table provides treaty withholding rates for dividends and royalties.

Interest payments are not subject to withholding tax under Swedish law.

                        Dividends                Royalties (a)

                 Normal Treaty    Reduced     Normal Treaty    Reduced

Residence of     Rate             Rate (b)    Rate             Rate (c)
Recipient        %                %           %                %

Argentina        30               0           15               0
 
Australia        15               0           10               0

Austria          10               5           10               0
  
Bangladesh       15              10           10               0

Barbados         15               5            5               0

Belarus          10             0/5 (e)       10               5

Belgium          15               5 (j)        0               0

Bolivia          15               0           15               0

Botswana         15               -           15               0

Brazil           25              15           15               0

Bulgaria         10               0            5               0

Canada           15               0           10               0
 
China            10               0           10               7

Cyprus           15               5            0               0

Czechoslovakia(d)10               0            5               0

Denmark          15               0            0               0

Egypt             0               0            0               0

Estonia          15               5           10               5

Faroe Islands    15               0            0               0

Finland          15               0            0               0

France           15               0            0               0

Gambia           15             0/5 (f)     12.5               5
 
Germany          15               0            0               0

Greece            0               0            5               0

Hungary          15               5            0               0

Iceland          15               0            0               0

India            25              15           20               0

Indonesia        15              10           15              10

Ireland          15               5            0               0

Israel           15               5           30               0

Italy            15              10 (j)        5               0

Jamaica        22.5              10           10               0

Japan            15              10           10               0

Kenya            25              15           20               0

Korea            15              10           15              10

Latvia           15               5           10               5

Lithuania        15               5           10               5

Luxembourg       15               5 (j)        0               0

Malaysia          0               0            0               0
  
Malta            15               5           10               0

Mauritius        15               5           15               0

Mexico           15             0/5 (g)       10               0

Morocco           0                0           0               0

Namibia          15             0/5 (h)       15               5

Netherlands      15               0            0               0

New Zealand      15               0           10               0
 
Norway           15               0            0               0

Pakistan         30              15           10               0

Peru             30               0           20               0

Philippines      25              15           25              15

Poland           15               5           10               0

Romania          10               0           10               0

Russian          15               5            0               0
Federation

Singapore        15              10            0               0

South Africa     30               0           15               0

Spain            15              10 (j)       10               0

Sri Lanka        15               0           10               0

Switzerland       5               0            0               0

Tanzania         25              15           20               0

Thailand         20              15           15               0
  
Trinidad and     20              10           20               0
Tobago

Tunisia          20              15           15               5

Turkey           20              15           10               0

USSR (d)         15               -            0               0
 
United Kingdom    5               0            0               0

United States    15               5            0              

Venezuela        10               5           10               7

Vietnam          15            5/10 (i)       15               5

Yugoslavia (d)   15               5            0               0

Zambia           15               5           10               -  

Zimbabwe         20              15           10               0

Non-treaty       30               -            - (a)           0
countries

(a) Royalties paid to non-residents are not subject to withholding tax as such but are taxed as Swedish-source income at the normal corporate tax rate of 28%. However, under most income tax treaties, the rate of tax is 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) Under certain treaties if specific conditions are satisfied, the rate of tax is further reduced. The relevant treaty should be consulted.
(d) Sweden will apply the treaties with Czechoslovakia, the USSR and Yugoslavia to the republics comprising these former countries unless a law is enacted providing otherwise.
(e) The 0% rate applies if the recipient owns 100% of the capital of the payer and the profits out of which the dividends are paid are derived from agriculture, forestry, fishing, industry or tourism. The 5% rate applies if the beneficial owner of the dividend is a company that owns at least 30% of the capital of the payer.
(f) The 0% rate applies if the beneficial owner of the dividends is a company that owns 80% of the capital stock of the payer. The 5% rate applies if the beneficial owner is a company that owns at least 15% of the voting power of the payer.
(g) The 0% rate applies if the recipient is a company that holds at least 25% of the voting power of the payer and if 50% of the voting power of the recipient is held by residents of the recipient's country of residence. The 5% rate applies if the recipient holds at least 10% of the voting power of the payer.
(h) The 0% rate applies if the recipient is a company that owns at least 50% of the payer and if 50% of the recipient is owned by residents of the recipient's country of residence. The 5% rate applies if the recipient is a company that owns at least 10% of the payer.
(i) The 5% rate applies if the beneficial owner of the dividend is a company that owns at least 70% of the capital of the payer or has invested the equivalent of at least US$ 12 million in the payer. The 10% rate applies if the beneficial owner is a company that owns at least 25% of the capital of the payer.
(j) No withholding tax is imposed on dividends paid to a parent company resident in another EU state if the recipient owns at least 25% of the capital of the payer.

The contents of this article are intended as a general guide to the subject matter. Specialist advice should be sought for your specific circumstances.

For further information contact Per Snellman on Tel: +468 613 9000 0r Fax: +468 791 7511; or enter a text search 'Ernst & Young' and 'Business Monitor'.