Income tax rate
Companies pay corporate income tax at a rate of 28 %. No local income taxes are levied on corporate profits.
Determination of taxable income
Corporate income tax is based on the company’s worldwide taxable business income computed according to the accrual method of accounting. Dividends on shares held for business purposes are normally tax free. A profit allocation reserve allows a 25 percent deduction of the taxable income for the financial year. Each year’s reserve must be added back as taxable income no later than six years after the year of the deduction. The reserve is based on net income before tax.
Losses may be carried forward indefinitely. Losses may however not be carried back. The use of old tax losses in acquired companies is limited.
There is no consolidated treatment whereby all companies in a group may be treated as a single taxable entity. However, the tax rules permit income earned by the companies in a corporate group to be distributed within the group through the use of group contributions, which are deductible for the distributing company and taxable income for the receiving company. In general, group contributions may be distributed between Swedish group companies if ownership of more than 90 percent of the capital and votes exists during the entire financial year.
The Swedish tax rules on transfer pricing is based on the arm’s length principle. Under these rules the income of an entity may be adjusted if its taxable income in Sweden is reduced as a result of contractual provisions that differ from those that would be agreed on by unrelated parties and if the following three additional conditions are met:
- The party to which the income is transferred is not subject to tax in Sweden;
- It is reasonably established that a community of economic interest exists between the parties; and
- It is clear from the circumstances that the contractual provisions were not agreed upon for reasons other than the community of economic interest.
There are no debt-to-equity rules or thin-capitalization rules in Sweden.
Sweden has no withholding tax on interest payments.
Share Transfer Duty
No capital contribution tax is levied on the issue of shares or on capital increases or contributions.
Swedish Double Tax Treaties
Sweden has concluded a wide range of Tax Treaties.
Brief remarks on Company Law in Sweden
Minimum share capital
A limited liability company may be formed as either a public limited company or as a private limited company. A public limited liability company must have a minimum share capital of SEK 500.000 and a private limed company must have a share capital of minimum SEK 100.000.
Board of directors
The board of directors shall consist of at least one regular member and one deputy. Should there be two regular members of the board, one deputy is still required. Public companies must have at least three ordinary members. In addition, public companies must have a managing director. At least half of the number of Directors shall be resident within the EEA. An exemption from this rule may be granted after application.
Public and private limited companies incorporated in Sweden must prepare annual accounts in accordance with Swedish generally accepted accounting principles. There is also an obligation to have an auditor. Please note that this information is of a general character and should not be relied on as legal advice. Please contact Setterwalls for further assistance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.