On 3 September 2020, the Swedish Government has announced to deny deductions for interest expenses regarding debts to EU blacklist countries.
The EU’s work against tax planning and harmful tax competition has been going on for a long time. Among other things, there is a special code of conduct for corporate taxation that examines the harmful effects of new tax measures in the Member States of the Union. Within the framework of the group’s work, a list of non-cooperating jurisdictions in the tax area has also been produced. In order to persuade jurisdictions that are on that list to meet and comply with relevant international standards, countermeasures in the tax area have also been developed.
The countermeasures the government is now proposing to apply in Sweden are a ban on deductions for interest expenses paid to non-cooperating jurisdictions included in the EU list and that the application of the so-called CFC rules is ensured in certain cases in respect of these jurisdictions. The new prohibition on deductions will mean that a company may not deduct internal or external interest expenses relating to a debt to a company that belongs to such a listed jurisdiction. The prohibition applies regardless of whether the debt is to a company in the community of interest or to an external party.
