Business Operations in Sweden (Portfolio 985)

Tax Management Portfolio, Business Operations in Sweden, contains information enabling foreign businesses to determine the best method of conducting their operations in Sweden from both the tax and general legal points of view and addresses the practical problems confronting foreign businesses operating in Sweden.

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It analyzes in detail the statutory and procedural framework of Swedish income taxation as it applies to individuals and corporations, both resident and nonresident. The analysis also covers many of the other legal details vital to the organization of a Swedish company. In addition to a detailed explanation of the Swedish system of income taxation, the Portfolio discusses the local taxes, the value added tax, other taxes and, as the context requires, the relationship of Swedish law to EC law based on Sweden's status as a Member State of the European Union.

Among the Worksheets are summaries of the effect of Sweden's income tax treaties on withholding taxes, tax forms, and the texts of the Sweden–United States income tax treaty. 


Business Operations in Sweden was authored by the following experts.
Peter Sjögren

Peter Sjögren, LL.M. 1989 Uppsala University, G.M.P 2009 Harvard Business School, Member of the Swedish Bar, member of the International Bar Association and partner at Advokatfirman PSAAB, Brahegatan 26, SE-11437 Stockholm, Sweden.  

Table of Contents

Detailed Analysis

I. Sweden – The Country, Its People and Economy

A. Geography and Population

B. Constitution

C. Economy

D. Membership of International Organizations

E. General Investment and Business Climate

F. Judicial System

II. Operating a Business in Sweden

A. Foreign Investment Regulations

B. Currency and Exchange Controls

C. Trade and Commerce Regulation

1. Imports and Exports

a. Licenses and Quotas

b. Customs Duties and Other Taxes

c. Documentation

2. General Regulation of Business

a. Monopolies

b. Mergers

c. Restrictive Trade Practices

d. Price Controls

e. Securities Regulation

3. Intellectual Property Rights

a. Introduction

b. Patents

c. Designs

d. Copyright

e. Trademarks

f. Domain Names

g. Trade Names

h. Sanctions

D. Immigration Regulations and Labor Laws

E. Financing the Business and Incentives

III. Forms of Doing Business in Sweden

A. Principal Business Entities

B. European Company

C. Corporation

1. Formation

a. Incorporators and Procedure

b. Corporate Name

c. Capital Stock

2. Operation

a. License

b. Amendment of Articles and Increase or Reduction of Corporate Capital

c. Acquisition of Own Stock

d. Corporate Officers and Directors

e. Shareholders’ Meetings

f. Directors’ Meetings

g. Books and Records

h. Financial Statements

i. Dividends and Other Distributions of Profits

3. Statutory Merger

4. Liquidation

D. Other Corporate Entities: Corporate Association

E. Partnerships

1. Formation

2. Administration

3. Dissolution

4. International Aspects

F. Branch of a Foreign Corporation

1. Registration

2. Liability

3. Books and Records

IV. Principal Taxes

A. Income Tax

B. Estate and Gift Tax

C. Net Wealth Tax

D. Sales Tax or Value Added Tax

E. Capital Investment Tax

F. Real Property Tax

G. Trade Tax

H. Tax Legislation

I. Tax Administration

J. Advance Rulings

V. Taxation of a Resident Corporation

A. Resident versus Nonresident Corporation

B. Corporate Income Tax

1. Taxation of Worldwide Income

2. Accounting

a. General

b. Accounting Periods

c. Accounting Methods

d. Consolidated Returns

e. Law on Annual Reports

3. Calculation of Gross Income

a. General

b. Capital Gains

c. Dividend Income

d. Participation Exemption for Qualifying Shares

e. Income from Foreign Sources

f. Stock Options

g. Corporate Group Contributions

h. Exclusions from Gross Income

4. Business Expenses

a. General

b. Organizational Expenses

c. Travel and Entertainment Expenses

d. Rents

e. Salaries, Wages and Directors’ Fees

f. Interest and Royalties

g. Shareholders' Contributions and Profit Participation Loans

h. Taxes

i. Obsolete Equipment

j. Charitable Contributions

k. Capital Losses

l. Casualty Losses

m. Bad Debts

n. Depreciation and Amortization

o. Inventory

p. Reserve Accounts

5. Tax Consequences of Mergers and Liquidations

6. Capital Expenditures

7. Loss Carryforward and Carryback

8. Tax Credits

a. Foreign Tax Credit

b. Other Tax Credits

9. Tax Rates and Calculation of Taxable Income

10. Assessment and Filing

C. Other Taxes

1. Dividend Tax

2. Capital Investment Tax

3. Value-Added Tax

4. Trade Tax

5. Real Property Tax

6. Local Taxes

7. Social Security Contributions and the New Start Jobs Subsidy

VI. Taxation of Foreign Corporations

A. What Is a Foreign Corporation?

B. Determination of Taxable Income

C. Method of Taxation

D. Interest and Royalties Paid among Related Companies of Different European Union Member States

VII. Taxation of a Branch

A. Determination of Taxable Income

B. Method of Taxation

C. Subsidiary versus Branch

VIII. Taxation of Partnerships

IX. Taxation of Other Business Entities

A. Economic Associations

B. Private Business (Sole Proprietorship)

C. Trusts

D. Non-profit Organizations

E. Insurance Companies

X. Taxation of Individuals - Residents

A. Income Tax: Scope

B. Residents

C. Determination of Gross Income/Earned Income

1. Employment Income

2. Business Income

3. Capital Income

D. Allowable Deductions and Credits

E. Rates and Calculation of Taxable Income

F. Assessment and Filing

G. Rulings and Holdings

XI. Taxation of Nonresidents

A. Income Tax: General

B. Business Income

C. Investment Income

1. Royalties

2. Dividends

3. Interest

4. Rentals

D. Capital Gains

E. Compensation Income and Directors’ Fees and Salaries

F. Special Income Tax for Artists, Sportsmen, etc.

G. Special Regime for Key Persons on Temporary Assignment

XII. Estate and Gift Tax

XIII. Net Wealth Tax

XIV. Intercompany Pricing

A. Scope of Provisions for Adjustment of Intercompany Pricing

B. Transfer Pricing Documentation Requirements

C. Determination of Arm's-Length Price

D. Competent Authority

XV. Special Provisions Relating to Multinational Operations

A. General

B. Sweden as Holding Company Jurisdiction

1. Background

2. New Swedish Holding Company Regime

a. Business Related Shares - General Conditions

b. Shares in EU Companies

c. Shares in Other Foreign Companies

d. Legal Entities Qualifying for the Participation Exemption

e. Treatment of Capital Losses

f. Exclusion from the Participation Regime - Companies Trading in Securities

3. Alternatives to Participation Regime

4. Withholding Tax Exemption for Outbound Dividend Distribution

a. Distribution to EU Companies

b. Distribution to Shareholders in Tax Treaty Countries

c. Distribution to Shareholders in Other Foreign Countries

5. Capital Gains on Shares

6. Cross-border Interest and Royalty Payments

a. Debt Financing

b. Royalties

7. Intra-group Restructuring Measures

8. Comparison with Other Holding Company Regimes

C. Controlled Foreign Corporations

XVI. Avoidance of Double Taxation

A. Foreign Tax Credit

B. Tax Treaties

1. In General

a. Planning to Minimize Taxation of Business Income under Tax Treaties

b. Taxation of Investment Income

2. 1994 Sweden-United States Tax Treaty

a. Permanent Establishment

b. Industrial or Commercial Profits

c. Saving Clause

d. Protocol Signed September 30, 2005

C. Exchange of Information

D. Other Treaties - Sweden-United States Totalization Agreement

Working Papers

Working Papers

Table of Worksheets

Worksheet 1 List of Comprehensive Double Taxation Agreements and Related Protocols Signed by Sweden as of January 15, 2007

Worksheet 2 Table of Withholding Tax Rates in Sweden as of January 1, 2007

Worksheet 3 Public Information Request/Response (SKV 4820 BW)

Worksheet 4 List of Treaties Between Sweden and the United States

Worksheet 5 1994 Sweden-United States Income Tax Treaty

Worksheet 5A 2005 Protocol Amending 1994 Sweden-United States Income Tax Treaty

Worksheet 6 1983 Sweden–United States Estate, Inheritance and Gift Tax Treaty

Worksheet 7 Standardized Call/Put Options for up to One Year (Form K11)

Worksheet 7A Application to File Electronic Returns (SKV 4801 W)

Worksheet 8 Special Income Tax Return (Form 1)

Worksheet 9 Corporate Income Tax Return (Form 2) (including Accounting Schedule SKV 2002a W)

Worksheet 10 Income from Business Activities (Form N2)

Worksheet 10A Attachment (Accounting Schedules) to Income from Business Activities Form

Worksheet 10B Form for Distribution on Swedish Shares, Subject to Swedish Withholding Tax (Form 18b - SKV 2332 W)

Worksheet 10C Claim for Repayment of Swedish Tax on Dividends (SKV 3740 W)

Worksheet 11 Partnership Interest for Individuals - Disclosure of Net Income, Part of Net Assets, Basis, Compensation, etc. (Form N3A)

Worksheet 12 Partnership Interest for Corporations - Disclosure of Net Income, Part of Net Assets, Basis, Compensation, etc. (Form N3B)

Worksheet 13 Income Tax Form Relating to Partnerships (Form 4)

Worksheet 14 Capital Gains or Losses (Form K1)

Worksheet 15 Capital Gains or Losses - Disclosure Relating to Basis and Average Basis (Form K4)

Worksheet 16 Capital Gains or Losses - Disclosure Relating to Disposal of Business Real Property (Form K7) and Disclosure Relating to Transitional Rules (Form K7 A)

Worksheet 16A Form for Sale or Disposition of Shares, Debentures etc. (K4 - SKV 2104 W)

Worksheet 16B Form on the Sale or Disposition of Shares Qualifying for a Tax-free Reorganization (K4C -SKV 2118 W)

Worksheet 16C Capital Gains on Family Housing (K5 - SKV 2105)

Worksheet 16D Income Statement from Employers etc. (KU - SKV 2301 W)

Worksheet 16E Application - Special Income Tax on Non-residents (SKV 4350a W)

Worksheet 17 Foreign Currencies - Disposal of Claim and Payment of Debt (Form K9)

Worksheet 17A Refund of Value Added Tax to Foreign Companies (KSV 5801 W)

Worksheet 18 1985 Sweden-United States Social Security Agreement