On 4 September 2018, The Swedish government published a legislative proposal to amend the country’s controlled foreign company (CFC) rules to comply with the EU Anti-Tax Avoidance Directive (ATAD1).
Under the CFC rules, income of foreign entities subject to low taxation may in some instances be subject to taxation in the hands of Swedish shareholders.
The government’s proposal would generally align the Swedish rules with an EU directive (Council Directive (EU) 2016/1164 or the anti-tax avoidance directive (ATAD)) that addresses tax avoidance practices that directly affect the functioning of the internal market.
- Under the proposed CFC rules, a few countries would be removed from the “white list” of exempt jurisdictions (including Malta). Otherwise, there could be a number of countries where income of companies, if deemed subject to low taxation, would be subject to Swedish taxation at the shareholder level.
- There are proposed changes to the rules concerning “contingency reserves” of insurance companies. Tax-entry provisions are proposed. Certain other proposed changes would aim to satisfy the directive’s rules on eliminating double taxation of shareholders in CFC entities.
- The directive’s measures apply to corporate taxpayers, but the Swedish CFC rules (including the proposed changes) would apply both to legal entity shareholders and individual taxpayers.
The changes are proposed to be effective 1 January 2019.
