Sweden’s parliament on 1 March 2017, adopted the government’s proposal on transfer pricing documentation and country-by-country reporting. The adoption amounts to the ratification of OECD’s guidelines for transfer pricing documentation and country-by-country reporting in Swedish tax legislation.
Transfer pricing documentation
The new measures, effective 1 April 2017, adopt transfer pricing documentation rules that reflect the standards in the OECD’s base erosion and profit shifting (BEPS) Action 13 final report. The legislation complies with OECD’s recommendations so that the transfer pricing documentation will consist of a Master file and Local files.
Documentation requirements
The new documentation requirements are effective for financial years beginning 1 April 2017 or later. The Master file must be prepared by the time when the tax return of the parent company is due, and the Local file must be prepared by the time the tax return of the local entity is due.
Companies will be exempt from the requirement to file transfer pricing documentation if the year prior to the subject financial year, the company had less than 250 employees and either have reported revenues not exceeding SEK 450 million or total assets not exceeding SEK 400 million.
In addition, the legislation expands the scope of those taxpayers required to prepare transfer pricing documentation to include: (i) Foreign companies with permanent establishments in Sweden; and (ii) Swedish companies with permanent establishments abroad.
Swedish unlimited partnerships (pass-through entitles) if there are transactions with a foreign company and the unlimited partnership’s profits, are taxed in a Swedish company that is in a group with both the unlimited partnership and the foreign company
Swedish companies, unlimited partnerships or permanent establishments that are not required to prepare transfer pricing documentation are nonetheless required to price all internal transactions at arm’s length.
Country-by-country reporting
Similarly, there are new rules introduced for country-by-country (CbC) reporting and for the automatic exchange of those CbC reports with tax authorities both in the EU and in countries and jurisdictions which have signed the multilateral agreement on automatic exchange of information for CbC reports—the Multilateral Competent Authority Agreement (MCAA). The CbC report will be due by 31 December 2017 at the latest (pertaining to financial years commencing 1 January 2016 or later).
Under the new rules, multinational groups for the year prior to the financial year with revenues exceeding SEK 7 billion will be required to submit certain data every year for each jurisdiction in which they are active. Normally, it will be the parent company of the multinational group that will submit the CbC report to the tax authority of the country where it is active.
A CbC report must include the following information on indicators of economic activity for each country in which the taxpayer’s group operates in:
-Revenue.
-Profit or loss before income tax.
-Paid and accumulated income tax.
-Share capital.
-Accumulated profits.
-Number of employees.
-Tangible assets except cash.
Where the parent is resident abroad and that country does not require a CbC report, a Swedish subsidiary may be required to submit the report on behalf of the parent. Penalties will apply for failure to submit a CbC report to the tax agency.
With respect to master and local file requirements, an exception will apply to small and medium-sized enterprises, which are companies that have less than 250 employees and whose annual turnover does not exceed SEK450 million or assets do not exceed SEK400 million.
