No major changes have been introduced within the corporate tax system. As a general up-date, Sweden still has a classic system of double taxation of corporate profits, firstly at the company level and secondly, when distributed, at the shareholder level with no credit for underlying taxes. The corporation tax is levied at 28% (effectively some 26% after appropriation to the accruals reserve). Under qualifying circumstances, intra group profit shifting and dividend tax exemption is available. Losses may be carried forward indefinitely.

As from this year Sweden has generally harmonized its accounting legislation with the EC-rules for general applicability for financial years commencing in 1997 (in respect of certain issues and lines of businesses, financial institutions etc. the new rules apply already from financial years commencing 1996). The new rules involve substantial changes in the accounting legislation, but also include certain tax changes and furthermore changes in the Companies Act etc., mainly in respect of a new definition of the concept of a group. Further company law changes may be expected in accordance with Committee proposals.

The restrictions for losses carried forward after ownership changes have been extended to also cover Swedish permanent establishments of foreign entities.

Changes in trademark and business name legislation apply due to the introduction of Community Trademarks.

A Governmental committee has presented a proposal, for possible enforcement as from 1997, extending the unlimited Swedish tax liability in domestic law to also foreign legal entities with place of effective management in Sweden, and several further amendments of tax rules in relation to such entities, in general enabling Swedish domestic tax law to impose taxes well in line with entitlements in the tax treaties. The proposal may be regarded as a sequel to the exit-tax rules for Swedish companies migrating their tax-residence, which were enforced 1995.

Another Committee proposal deals with the effects of the mandatory increase in levels of capital of Swedish limited liability companies (private and public AB's). In respect of private companies not fulfilling the minimum SEK 100,000 level even by a bonus-issue at the deadline at end of 1997, the proposed rules enable an operating company to dissolve into a sole proprietorship or a partnership of its shareholder ('s) without immediate tax effects.

This is a summary highlighting recent developments within the area of Swedish tax and related legal matters. The changes apply - if nothing else is stated - as from January 1, 1996. Detailed advice should be sought on your own specific situation and the applicability of rules reported on Price Waterhouse is available to follow-up any queries you may have regarding the new rules, or any other matter.

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.

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