Sweden: Proposal for major corporation tax reforms

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The Swedish Government on 20 June 2017 issued a statement proposing important changes in the area of corporate taxation. The main proposals are summarised below:

  • According to the announcement the deductibility of the net interest expense would be limited to 35% of taxable EBIT, while a limitation to 25% of taxable EBITDA is presented as an alternative.
  • The corporate income tax rate for legal entities would be reduced from 22% to 20%.
  • New rules are proposed to prevent deductions relating to hybrid mismatches. The rules should implement parts of BEPS Action 2 and ATAD (Anti Tax Avoidance Directive). Additional proposals are to be expected later to fully implement the restrictions from Action 2 and ATAD.
  • According to the announcement, each company in a group may decide to apply a safe harbour rule which allows a deduction of the net interest expense of SEK 100,000 (approximately € 10,000). The limit applies to group level so that the total amount that can be deducted within a group under the Safe Harbor rule is limited to SEK 100,000.
  • The introduction of tax rules for finance leases and the new leasing obligation would be applicable to assets such as inventory, machinery and equipment, buildings, fixed installations/ground installations and land.
  • Temporary limitation on the utilisation of tax losses carry forward. It is proposed that there will be a temporary restriction during two (EBIT-rule) or three years (EBITDA-rule) in respect of the utilisation of tax losses carry forward. Only 50% of the taxable profit will be possible to set off against losses. Any unused losses may be carried forward indefinitely.
  • Standardised income from emergency residences for non-life insurers

It is proposed that most new provisions should enter into force on 1 July 2018.

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