A New Holding Company Regime in Sweden

Sweden has implemented new participation†exemption rules, making Sweden a competitive†country for the establishment of holding companies.†In general capital gains on shares held for†business purposes are exempt from capital gains†taxation. The regime is based on the concept that†dividends and capital gains on foreign participations†are exempt from tax under the same conditions†as capital gains and dividends related to†Swedish shares.

A Swedish Holding Company can provide major†advantages, making Sweden a competitive†Holding Company Jurisdiction, for example:A Swedish company is generally not subject†to capital gains taxation on sale of shares held†for business purposes in Swedish and foreign†companies.

A Swedish company is generally not subject†to tax on dividends derived from Swedish†and foreign subsidiaries.

A Swedish company may normally distribute†dividends to a foreign company (except to†companies in low tax countries) without any†Swedish withholding tax being levied.

The Swedish corporate tax is relatively low,†28 %. The effective corporate tax is often†even lower through the possibility of using†profit allocation reserves.

Interest paid by a Swedish company is fully†deductible. In addition, Sweden does not†withhold tax on interest payments.

No taxes or duties are levied at the incorporation

No taxes or duties are levied at the incorporation†of a Swedish holding company or on†capital increases or contributions.

Sweden has an extensive network of Tax†Treaties with other countries.

There are possibilities to tax-equalize the†profits and losses of different Group companies†in Sweden through the use of group†contributions.

The Swedish tax regime permits losses to be†carried forward indefinitely.

PARTICIPATION EXEMPTION RULES

Taxation of Capital Gains on Sale of Shares

A Swedish company is exempt from capital gains†taxation on sale of shares held for business†purposes. The term "held for business purposes"†implies the following:

unlisted shares are always considered to be†held for business purposes

listed shares are considered to be held for†business purposes if;

a company holds at least 10 % of the voting†rights in the other company, or

the shares are held for organizational purposes,†in the course of the business.

There is no minimum holding period to obtain†the tax exemption on disposal of unlisted shares,†but there is a one-year holding requirement for†listed shares.

Shares in Swedish companies as well as in†foreign companies may...