Sweden’s government has proposed making joint ventures and their subsidiaries directly liable for the domestic minimum top-up tax allocated to them, in a move aimed at closing a gap that could expose them to double taxation abroad.
Sweden’s Ministry of Finance has proposed amendments to the Additional Tax Act under Pillar Two that would make Swedish-resident joint ventures and their subsidiaries directly liable for the full amount of Swedish qualified domestic minimum top-up tax (QDMTT) allocated to them.
The proposal was published as Government Proposition 2026/27:9 on 27 October 2026.
The measure covers joint ventures and joint venture subsidiaries that belong to groups within the scope of the Minimum Taxation Directive (2022/2523), which implements the Pillar Two rules in the European Union. The Pillar Two rules apply where a group has annual consolidated revenue of at least EUR 750 million in at least two of the four preceding fiscal years.
Closing a legislative gap
Under current law, Swedish QDMTT linked to a joint venture is assigned to a constituent entity of the main group rather than to the joint venture itself. As a result, Sweden’s domestic top-up tax does not qualify for the QDMTT safe harbour in other jurisdictions in relation to those entities.
This could allow foreign tax authorities to apply the income inclusion rule (IIR) or the undertaxed profits rule (UTPR) to the same top-up tax amount, creating a risk of double taxation. The government said the amendments are intended to ensure that the full amount of top-up tax is collected in Sweden and that no foreign group entity becomes liable for a share of it.
New definitions and compliance duties
The proposal introduces definitions of “joint venture” and “subsidiary of a joint venture” into domestic legislation. It also widens the definition of legal person to cover both categories.
In-scope joint ventures and their subsidiaries would have to register with the Swedish Tax Agency within 15 months after the end of the tax year in which the obligation arises. Joint ventures would also have to file a top-up tax return within one month after the due date of the group top-up tax report. Where a joint venture belongs to two groups with different year-ends, the return would be due one month after both reports have passed their filing deadlines.
The five-year initial phase exemption for international expansion and the exemption for purely domestic groups would be extended to joint ventures and their subsidiaries. Where a joint venture is owned by two separate in-scope groups, top-up tax liability and any reductions would be split proportionally between them.
To protect commercially sensitive information among co-owners who may be competitors, joint ventures would only need access to the parts of the group top-up tax report required for their own return. Penalty relief would be available where reasonable steps were taken to comply during the transition period.
Timeline and retroactivity
The amendments are proposed to take effect on 1 March 2027 and apply to tax years beginning after 28 February 2027. Groups and joint ventures could jointly elect to apply the rules retroactively to fiscal years starting after 31 December 2023.
The government accepted the Council’s recommendations and made several linguistic and editorial changes to the bill. The proposition also reproduces in full the July 2023 OECD/G20 Inclusive Framework administrative guidance. It covers currency conversion, tax credits, the substance-based income exclusion, QDMTT safe harbour requirements and the transitional UTPR safe harbour.
If adopted, the changes would align Swedish rules with international Pillar Two practice and give multinational groups with Swedish joint ventures greater certainty over where top-up tax is payable.
Earlier, Sweden’s government submitted a proposal to the Council on Legislation to make Swedish joint ventures and their subsidiaries directly liable for Swedish national top-up tax under the Pillar Two rules.
