Sweden proposes a withholding tax exemption on dividends for foreign governments and entities equivalent to domestic public bodies, effective 1 July 2026, following a Supreme Administrative Court ruling to align with EU capital movement rules.
The Swedish Ministry of Finance has released a proposal on 27 January 2026, introducing a withholding tax exemption for dividends paid to foreign governments and foreign entities equivalent to Swedish regions, municipalities, or municipal associations.
The exemption will apply to dividends paid by Swedish limited liability companies, European companies registered in Sweden, and Swedish investment and special funds.
The change follows a Supreme Administrative Court ruling which determined that taxing foreign public pension institutions while exempting domestic ones violates the EU principle of free movement of capital.
To qualify for this exemption, the foreign entity must reside within the European Economic Area or a jurisdiction that maintains a tax information exchange agreement with Sweden.
This policy ensures tax neutrality between domestic and international public bodies, preventing the circular movement of state funds.
The legislative amendment is proposed to enter into force on 1 July 2026.
