On 1 February 2019, the Ministry of Finance has sent a memorandum on referral with a proposal to extend the so-called hybrid rules. The purpose of the rules is to prevent differences in countries legislation being used in cross-border arrangements to escape tax.
In the memorandum, it is proposed that the provisions of the Income Tax Act be extended to cover more hybrid mismatch situations and that the provisions also cover expenses other than interest expense (Sweden introduced new hybrid rules for interest expense from 2019). It is also proposed that the scope be extended to include arrangements that have been concluded for the purpose of incurring a tax advantage.
The provisions are a second step in the implementation of the OECD’s BEPS (Base Erosion and Profit Shifting) recommendations on hybrid mismatches (measure 2 and permanent establishments) and the rules on hybrid mismatches in the directive against tax evasion.
The proposal is proposed to enter into force on 1 January 2020.
