INTERNATIONAL CORPORATE SERVICE WITH CONFIDENCE


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Renemes Management AB

Box 4008

195 04 Rosersberg

Sweden


+46 70 533 47 99

info@renemes.com

About Sweden

– Area of Sweden is 450 000 km2, the third largest in Western Europe

– 53 % forests

– 11 % mountains

– 8 % farmland

– 10 % lakes and rivers

– Distance from north to south 1,574 km

– Distance from east to west 499 km

– Stockholm is the capital of Sweden

– The population of Sweden is 9,5 million

– The currency is Swedish Krona (SEK)

– The language is Swedish

– The form of Government is a Constitutional Monarchy and a parliamentary democracy

– The parliament contains the Riksdag with 349 members in one chamber

– The Religion in Sweden is very secularized. The Church of Sweden is Evangelical     Lutheran, co-exists with a number of other beliefs

– The average life expectancy is men 79 years and woman 83 years

– Most important exported products are: Machinery, electronics and telecommunication, paper, pharmaceuticals, iron and steel as well as foodproducts.

– most important imported products are: electronics and telecommunication, machinery, food products, crude oil, textiles, chemicals, pharmaceutical and petroleum products.

The Economy

Sweden is among the richest countries in the world and also one of the most technologically advanced nations. However it has not always been that way. Sweden was previously largely an agricultural country until it was developed to a nation of heavy industry in the in the 19th and 20th centuries. Now the country plays a significant part of the global business and industry far beyond its size. Companies such as IKEA; Ericsson, Volvo and H&M are well known names all over the world.

The transformation of Sweden has been help by several factors, including not to participate in any of the many wars of the 20th century as well as the country´s long history of successful

Entrepreneurs. Economists and politicians have for many years pointed to Sweden as a role model due to its successful combination of generous welfare benefits and high tech capitalism. Sweden is constantly ranked among top nations when competitiveness, innovation and standard of living is concerned.

The Swedish economy is built on rich reserves of iron ore and timber as well as plentiful hydroelectric power. The main industrial sectors are forestry, telecom and the automotive and pharmaceutical industries.Today, Sweden is among the 15 richest countries in the world in terms of GDP per capita. A status helped by a high level of education and skilled workforce as well as excellent internal and external communications and one of the highest level of internet access.

Sweden is a part of the European Union but maintains its own currency, the krona (SEK).

In 2003 Sweden voted in a referendum and chose not to join the Euro. The country bounced back from the recent global financial crisis and subsequent recession more quickly and strongly than many other industrialized countries and foreign observers have noted the country´s healthy public finances.

The Governement

All power proceeds from the people. This is the foundation of parliamentary democracy in Sweden. Everyone has the same rights, the same opportunity to have their say, and everyone is free to scrutinize how the politicians and public agencies exercise their power.

All public power in Sweden proceeds from the people, and the Riksdag is the foremost representative of the people.

General elections are held every four years. Some 7 million people in the country are entitled to vote and given the chance to influence which political party will represent them in the Riksdag (the Swedish Parliament), county councils and municipalities. People can also influence Swedish politics in other ways—taking part in referendums, joining a political party or commenting on reports presented by the Government.

The Swedish Constitution

The Swedish Constitution defines how Sweden is governed. It regulates the relationships between decision-making and executive power, and the basic rights and freedoms of citizens. Four fundamental laws make up the Constitution: the Instrument of Government, the Act of Succession, the Freedom of the Press Act and the Fundamental Law on Freedom of Expression. Among other things, the Instrument of Government guarantees citizens the right to obtain information freely, hold demonstrations, form political parties and practice their religion. The Act of Succession regulates the right of members of the House of Bernadotte to accede to the Swedish throne.

The Freedom of the Press Act sets out the principle of public access to official documents in order to guarantee an open society with access to information about the work of the Riksdag, the Government and public agencies. This openness entitles people to study official documents whenever they wish. Another principle in the Freedom of the Press Act is the freedom to communicate inform-ation. Under this principle, everyone in Sweden is entitled to give information to the media that they consider important and that they feel should be made public. The publisher of the material is not entitled to reveal the source if the individual in question wishes to remain anonymous.

The Law on Freedom of Expression, which came into force in 1992, largely mirrors the Freedom of the Press Act, for example, in regards to the prohibition of censorship, freedom to communicate information and the right to anonymity.

Fundamental rights

To amend a fundamental law, the Riksdag must pass the amendment on two separate occasions, separated by a parliamentary election. The fundamental laws take precedence over all other statutes and no law may contravene the Constitution.

The Riksdag – representing the people

The Riksdag makes the decisions and the Government implements them. The Government also submits proposals for new laws or amendments to laws to the Riksdag.

The Riksdag has 349 members who are chosen by Sweden’s citizens every four years in general elections.

The 349-member Riksdag is Sweden’s primary representative forum. The entire Riksdag is chosen by direct elections based on suffrage for all Swedish citizens aged 18 or over who are, or previously have been, residents of Sweden. Since 1971, Sweden has had a unicameral (one-chamber) Riksdag.

General elections to the Riksdag are held on the third Sunday of September every four years. Eligibility to serve in the Riksdag requires Swedish citizenship and the attainment of voting age. All elections employ the principle of proportional representation, to ensure a distribution of seats among the political parties in proportion to the votes cast for them across the country as a whole.

Four percent required

There is one exception to the rule of full national proportionality: a party must receive at least 4 percent of all votes in the election to gain representation in the Riksdag, a rule intended to prevent very small parties from getting into the Riksdag.

There are currently eight parties represented in the Riksdag: the Moderate Party (Moderaterna, M), the Christian Democrats (Kristdemokraterna, KD), the Liberal Party (Folkpartiet Liberalerna, FP), the Center Party (Centerpartiet, C), the Green Party (Miljöpartiet de Gröna, MP), the Social Democratic Party (Socialdemokraterna, S), the Sweden Democrats (Sverigedemokraterna, SD) and the Left Party (Vänsterpartiet, V).

Appoints the Prime Minister

The Government governs the country but is accountable to the Riksdag. The Riksdag appoints a Prime Minister, who is tasked with forming a Government. The Prime Minister personally chooses the ministers to make up the Cabinet and also decides which ministers will be in charge of the various ministries. Together, the Prime Minister and the Cabinet ministers form the Government. Under the Constitution, the Government—not the head of state (the monarch)—is empowered to make governmental decisions.

Ministers usually represent the political party or parties in power. In many cases, they have a seat in the Riksdag, which they retain during their period in the Cabinet, although an alternate takes over the duties of a Riksdag member appointed to Cabinet. In other words, a Cabinet minister must abstain from the right to vote in the Riksdag. All ministers are, however, entitled to participate in parliamentary debates.

At the official opening of the Riksdag each September, the Prime Minister delivers a Statement of Government Policy. In it he presents Government policy goals for the next year and defines priority policy areas at national and international level.

The Government at work

The Government rules Sweden by implementing the decisions of the Riksdag and taking initiatives for new laws or amendments to laws, on which the Riksdag decides.

Helping the Government in this task are the Government Offices and around 300 government agencies. The Cabinet as a whole is responsible for all Government decisions. Although many routine matters are in practice decided by individual ministers and only formally approved
by the Government, the principle of collective responsibility is reflected in all Governmental work. As part of its official functions, the Government:

  • Presents bills to the Riksdag
  • Implements Riksdag decisions
  • Allocates the funds appropriated by the Riksdag for expenditure on items in the budget
  • Represents Sweden in the EU
  • Enters into agreements with other states
  • Takes decisions in certain administrative areas not covered by other authorities
  • Directs the activities and operations of the executive branch.

Local and regional administration

Sweden has three levels of domestic government: national, regional and local. In addition, the European level has becoming increasingly important since Sweden joined the EU in 1995.

The regional level

At the regional level, Sweden is divided into 21 counties. Political tasks at this level are undertaken by the county councils. The county councils are responsible for overseeing tasks that cannot be handled at the local level by municipalities but which rather require coordination across a larger region, most notably health care. The county councils are entitled to levy income taxes to cover their costs. At the regional level there are also county administrative boards, the government bodies for the counties.

The local level

At the local level, Sweden is divided into 290 municipalities, each with an elected assembly or council. Municipalities are responsible for a broad range of facilities and services including housing, roads, water supply and waste-water processing, schools, public welfare, elderly care and childcare. The municipalities are entitled to levy income taxes on individuals. They also charge for various services. As a result, municipalities have significant latitude in deciding what services they should offer. They are however legally obliged to provide certain basic services.

The European level

On entering the EU in 1995, Sweden acquired a further level of government: the European level. As a member of the European Union, Sweden is subject to the EU acquis communautaire—the accumulated legislation, legal acts and court decisions that constitute the cumulative body of European Union Law. Sweden takes part in the decision-making process when new common rules are drafted and approved. The Swedish Government represents Sweden in the European Council of Ministers, which is the EU’s principal decision-making body. Various issues previously decided by the Riksdag are these days decided at the EU level.

A new political landscape

Sweden’s general election in September 2010 delivered historic results. The ruling center-right alliance beat the left-of-center coalition, but failed to gain an outright majority.
For many decades, the Social Democratic Party has played a major, often dominant role in Swedish politics. However, over the past 30 years, power has changed hands several times between the Social Democrats and the “non-socialist” political block.

In the general election of September 19, 2010, Fredrik Reinfeldt became the first conservative prime minister to be reelected — although his center-right alliance could not gain an absolute majority. The Prime Minister’s Moderate Party garnered 30.06 percent, far ahead of its previous result of around 20 percent. In a historic defeat, the Social Democrats won only 30.66 percent of the vote, far below previous levels of around 40 percent and their lowest percentage since World War I.

With its 2010 election, Sweden became the latest in a series of European nations where populist right-wing parties have entered parliament. Up until now, Swedish voters had not given the Sweden Democrats sufficient support to overcome the 4 percent constitutional threshold needed to enter parliament. The 2010 election is likely to mark the beginning of an era of sharper political division in Sweden.

Legal Framework

Setting up a business in Sweden is a straight – forward process. Procedures are simple and efficient, based on a transparent system that seeks to facilitate establishment of new enterprises.

 Swedish society and industry is highly international and technology oriented. As a nation the mindset is to adapt to constant change. These assets, along with a strong supply of educated and trained people, present a solid platform for successful business in Sweden.

Limited Liability Company or Branch

A foreign-based company wishing to establish an enterprise in Sweden will most likely choose one of two main business structures:

  • A subsidiary – a limited liability company ( Aktiebolag)
  • Branch (filial)

Most foreign investors who set up a business in Sweden opt for a limited liability company. Swedish legislation has long accepted limited liability companies with  a sole owner (wholly owned subsidiaries).

A limited liability company is a legal entity incorporated in Sweden. The minimum share capital is SEK 50,000. A branch is not incorporated in Sweden but is a divisional office – part of a foreign limited company – organized to conduct business in Sweden. Both must be registered at the Swedish Companies Office (Bolagsverket) and the Swedish Tax Agency (Skatteverket).

Limited liability companies and branches over a certain size are required to appoint an auditor and comply with Swedish book-keeping regulations. A limited liability company must submit annual account to Bolagsverket. A branch has to keep its accounts separate from those of the foreign-based company. Whether the annual accounts of both the foreign-based company and the branch are to be submitted depends on a number of factors.

For tax purposes, a limited liability company and branch are treated in similar fashion, but they can give rise to different tax implications depending on the structure of the company group.

Business Practice and Etiquette

The Swedish entrepreneurs and companies have proven that you do not have to exploit people or the environment to make a profit. Global surveys regularly put Swedish companies among the world leaders as far as Corporate Social Responsibility (CRS) is concerned – taking issuses such as climate change, equality, human rights and anti-corruption into account tin their business activities.

Sweden is known around the world for the way the country takes care of its citizens with generous welfare benefits. This same approach has become part of the Swedish way of doing business and is exported around the world by its multinational companies.

CSR is growing among corporations of all nationalities, but Swedish companies were among the first to show that competitiveness does not have to come at the expense of compassion, Home furnishing chain IKEA is considered one of the best companies in the world as far as the way of dealing with environmental and labour issues is concerned.

Sweden leads by example in corporate responsibility. Extensive environmental protection, active measures to improve work environments, investments in cleantech – these are examples of how laws and regulations can encourage responsible corporate behaviour. But many Swedish companies chose to do more than they are legally required to.

Playing for change is a major Swedish initiative that seeks to promote social enterprise focusing on the right of children and young people to play. In 2009 it issued a call for creative and innovative social entrepreneurs around Sweden to come up with ways of making the world a better place. Out of thousands of respondents, they selected eight winners

Swedish business life is more relaxed and egalitarian than that of many nations with which the country trades. The boss is one of the team, decisions are reached by consensus, the vacations are long and the coffee breaks are sacred.

Egalitarianism is a key theme in Swedish society and is an important factor in the office. There is no executive dining room and the boss´s desk often stands next to those of his or her employees. Egalitarianism also shines through in the consensus approach to decision-making. While passion, argumentativeness and the slamming of fists on desks are part of everyday business in some cultures, they are alien to the Swedish management style. Instead of getting a finger poked in their chest, employees are asked their opinion on important decisions. This love of consensus is apparent from the vast number of meetings in the average working day. It may seem excessive to the outsider, but it allows everyone to have their say.

Women are often found in leadership positions, about one in five board members and one in three managers in Swedish listed companies is a women and while this is not true gender equality, it is double the European average. A world Economic Forum report has called Sweden and its Nordic neibours “ top performance and true leaders “ on gender equality.

Business dress in on the casual side- you don´t see many suits on the train during the morning commute – and everyone is strictly on first name terms, regardsless of their place in the company hierarchy.

Swedes are often envied by their colleagues or counterparts overseas for their work-life balance. Sweden has one of the world´s most generous systems of parental leave and many employees use flexitime to fit in a trip to the gym in the morning or to pick up the kids straight after school.

In between the long holidays, the early finishes, the long stretches of parental leave and the back-to-back coffee breaks, your average Swedish worker seems to be remarkably efficient and contributes to making the country rich, innovative and successful.

By any measure, Sweden is one of the world´s leading information and communication technology nations. Several reports name Sweden as the world´s foremost user of information technology, such as mobile telephones, computer and networks, while other studies show that Sweden has one of the world´s highest rates of internet usage and one of the fastest broadband networks. Technology companies from around the world often use Sweden as a test market for new products.

Sweden is the birthplace of wireless technologies such as GSM, WCDMA, LTE and Bluetoth. Networks manufactured by Ericsson, one of Sweden´s biggest companies handle almost half of the world´s mobile traffic.

Doing Business in Sweden

Sweden has been inhabited by humans since at least the 3rd millennium BC. The fifteenth and early sixteenth centuries saw Sweden as part of a larger Scandinavian union. Later in the seventeenth and eighteenth centuries Sweden became a Great Power of Europe ruling over much of what is today Finland, Norway and Denmark. After several conflicts with Russia and Poland, Sweden retreated fromits imperial stance and became neutral in the twentieth century. Only joining the EU in 1995 and remaining fiercly opposed to the Euro, Sweden maintains a strong economic model founded on high-tech capitalist growth with comprehensive welfare benefits. Across Europe, Sweden is often envied for its low unemployment and continual economic growth. As such, Sweden is an ideal place for new business endeavours and investment opportunities, but business in Sweden successfully requires an in-depth understanding of this unique culture and business etiquette.

Directness – Swedes are known for their open but direct stile of communication. Swedes tend to be literal and to the point in their communication , often voicing what might be perceived as strong and confrontational opinions. Directness is highly valued in business discussions, but direct criticism should be diplomatic and direct towards aspects of the problem and not towards anyone in particular.

Consensus and compromise Swedish culture places a high importance or notions of egalitarianism. Consensus and compromise permeate almost every aspect of Swedish society. Decision-making in business can therefore be a slow process since everyone has a right to contribute and decisions will tend to be made only once everyone is in agreement.

Reserve The national character of Swedes is often described as shy, quiet and reserved. As a result, Swedes are often mistaken for being cold and unfriendly but once you get to know them they are extremely warm and hospitable. The fact that they prefer to keep a large degree of separation between their personal and public life often makes them seem uninterested and distant when, in fact, they simply value modest and reserved behaviour

Love of nature Surrounded by expansive forests, archipelagos and over 100,000 lake, it comes as no surprise that the small population of Sweden has a high respect for natural spaces. This love of nature is reflected in Swedish society such as in their environmental awareness and unique architecture. It is also evident at work where Swedes ensure that they take time off to escape from the high-paced business life to a more serene and peaceful existence in the country.

*             Working practice in Sweden

  • The typical working week is Monday to Friday from 8am to 4pm. Swedes generally work 35 to 40 hours a week and take a minimum of five weeks paid holiday each year.
  • Appropriate business dress is conservative, with men wearing suits and ties and women suits or dresses.
  • Appointments should be scheduled in advance and confirmed a few days beforehand. Avoid scheduling anything in July or December as they are popular holiday months. Allthough there is a tendency that Sweden is adapting to international standards.
  • Punctuality is taken very seriously in Sweden, so it is important to arrive at the time specified. Advanced warning with an explanation is expected if your are running late or no longer able to make it.

*             Structure and hierarchy in Swedish Companies

  • Corporation and consensus result in a relatively flat company hierarchy. Managers therefore tend to take a coaching role more than that of “ the boss “ and treat all of their employees fairly and equally.
  • Decision-making in Swedish companies can occur at any level. While Swedish employees are encouraged to seek other options, they do not always have  obtain permission or approval from their superior.

*             Working relationships in Sweden

  • The flat structure and low levels of hierarchy in Sweden companies create a relatively informal business culture. People greet each other with handshake and use first names in almost every situation.
  • Swedes take at least one or two coffee breaks during the day known as “fika”. This is an ideal opportunity to talk to your Swedish counterparts on a more  informal basis to get to know them.

*             Swedish business etiquette

  • DO respect a Swede´s personal space. In Sweden people tend to leave a relatively large distance between each other when speaking. This is also reflective of the separation they will keep between personal and public life.
  • DO avoid comparing Sweden to Finland, Norway or Denmark as Swedes are quite sensitive to this and are proud of their own unique culture and identity.
  • DO avoid criticising someone in public. Criticism should be given privately and diplomatically in way that gets your point across but avoids offending them.
  • DO take the time to meet with your Swedish counterpart more than once. Swedes spent a lot of time on details and ensuring everything is right before making a deal so it is important to cooperate and assist where possible.
  • DON`T be surprised when your Swedish counterpart take a few moments to respond. Silence and not interrupting are important considerations to bear in mind when communicating with the Swedish.
  • DON`T over-exaggerate or over display your emotions. In Sweden, people pride themselves on their ability to control and present themselves in a sophisticated and respectful manner at all times.
  • DON`T wear or do anything which would display or flaunt your status or wealth. Swedish culture is very egalitarian and therefore does not consider status to be very important

Taxation

Sweden personal income tax

Individuals pay both national income tax and municipal tax. In 2010 individual income tax rates in Sweden change between 54% and 61%. 57,7 % being the average tax rate.

The above tax rate includes a national income tax of 25%, an average municipal tax rate of 31,56% as well  as an average contribution to the SwedishChurch 0,99%. Tax can vary to smaller extent depending on in which municipal you leave.

An individual income is divided into 3 categories: business income, employment income and capital income.

Individuals who are liable to Swedish tax have to pay tax on their worldwide income and capital gains. Taxable income includes all remuneration received from employers, whether in cash or in kind, such as free food, free accommodation, company cars etc. Pensions unemployment benefits etc. are also included in the taxable income. It is permissible to deduct certain costs from the income, e.g. travelling costs between work and home.

A foreign national will be liable to tax if he is regarded as resident in Sweden, if he has an essential connection to Sweden or if the individual is present in Sweden for a period of more than 183 days during the tax year.

Capital income is taxed separately from income from employment at a rate of 30% and is not subject to municipal income tax. Capital income is comprised of interest, gains from sale of capital assets, gains from sale of real estate, dividends etc. Interest expenses and capital losses can be set off against capital income. 30% (or 21% when the total net capital loss exceeds SEK 100,000) of a net capital loss can be set off against tax on income from employment.

Personal allowances adjusted in relation top the total amount of income are available. Expenses incurred for the purpose of acquiring or maintaining income are deductible against the same source of income. Other deductions from employment income include workrelated travel expenses and increase in living expenses resulting from work-related travel or maintenance of more than 1 dwelling, premiums paid for private insurance and alimony.         A tax reduction of 50 % of costs relating to housekeeping is available since housekeeping is considered a cost for repair, maintenance and rebuilding of a private dwelling. The tax reduction is limited to SEK 50,000 per year.

An individual living or regularly residing in Sweden is considered resident for tax purposes. An individual that has been living in Sweden previously is considered resident even after depature from Sweden if he/she retains essential ties with Sweden, such as permanent home or family.

Real property tax – Individuals are liable for a municipal fee at a maximum of SEK 6,387  (for 2010) on real property owned in Sweden.

Sweden Corporate Tax    

Sweden corporate tax rate is 26.3 %.

A corporation is resident in Sweden if it is registered with the Swedish Companies Registration Office.

Residents are taxed on a world wide income.

Corporation tax is imposed on a company´s profit, which consist of all types of income. All expenses incurred in obtaining on safeguarding income subject to tax are deductible in computing taxable income. However, permanent non-deductible items exist.

Dividends received by a Swedish resident company from another Swedish company are exempt provided the shareholding is business-related. Dividends not tax exempt are included in a business income and tax at 26.3%.

Capital gains derived from the sale of shares in a resident company are tax exempt provided the shareholding is business related. Shares in companies resident in the EU (including shares held as inventory) are also considered business related, provided the holding represent at least 10% of the capital and other criteria are fulfilled. Non-tax-exempt capital gains are included in business income and taxed at 26.3%.

Losses may be carried forward indefinitely. Complex rules on the limitation of use of losses exist upon a direct or indirect change of ownership.

Foreign tax credit – Foreign tax paid may be credited against the Swedish tax on the same profits, but the credit is limited to the amount of Swedish tax payable on the foreign-source income.

Participation exemption – The participation exemption applies to dividends derived by a Swedish resident company from another resident company and to capital gains from the sale of shares in a resident company provided the shares qualify as business related (shares held as inventory do not qualify). Unquoted shares constituting fixed business assets are always deemed business related. Quoted shares that constitute fixed business assets are deemed business related if the holding amounts to at least 10% of the company’s voting rights or is considered necessary for conducting the business of the shareholding company. In addition, quoted shares must be held for at least 1 year. The participation exemption, in certain cases, may be extended to dividends received and capital gains on the sale of shares in nonresident companies. As from 1 January 2010, an exemption also exists for partnerships or holdings in partnerships. Special rules apply to investment companies.

A final withholding tax of 30% applies to dividends paid by a Swedish company to a foreign company. The rate may be reduced on an exemption provided under a tax treaty, the domestic participation exemption or the EC parent-subsidiary-directive.

There is no withholding tax on interest payments. .

Royalties – There is no withholding tax on royalty payments. A royalty payment to a foreign recipient, however, may be deemed to constitute a PE for the foreign recipient and be taxed at the corporate rate.

Branch remittance tax – No

Other taxes on corporations:
Capital duty – No
Payroll tax – No (see under “Social security”).

Real property tax – Annual real property tax is levied at rates ranging between 0.2% and 2.2% on the tax assessed value (as determined by the tax authorities) on all types of real estate (however, see below). The tax is deductible in computing corporate tax liability. A real property fee (instead of property tax) must be paid to the municipality on dwellings and duplex dwellings. The annual fee for dwellings is the lower of SEK 6,387 (for 2010) or 0.75% of the property’s assessed value. For duplex dwellings, the fee is the lower of SEK 1,277 (for 2010) or 0.4% of the real property’s assessed value.

Social security contributions – The general aggregate contribution by an employer on behalf of an employee is 31.42% (for 2010). Employees born 1937 or earlier are not subject to the special salary tax on business income. The rate for individuals between ages 18 to 25 is 21.31%.

Stamp duty – Stamp duty is levied on the transfer of real estate and on mortgage loans. The standard rate for real estate is 3% if the transferee is a legal entity. For mortgage loans, the rate is between 0.4% and 2%.

Transfer tax – No, although some transfers are subject to stamp duty.

Anti-avoidance rules:

Transfer pricing – The arm’s length principle applies and profits may be reallocated. Documentation requirements apply.

Thin capitalisation – There are no formal thin capitalisation rules for tax purposes, but certain rules in the Swedish Company Act may result in compulsory liquidation. As from 1 January 2009, Swedish companies may not deduct interest expense on loans obtained to finance intragroup acquisitions of shares. A deduction is allowed, however, if either the recipient of the interest is taxed at a rate of at least 10% or the company can demonstrate that the transaction is motivated primarily by business reasons.

Controlled foreign companies – A Swedish resident company (or individual) or a non resident with a PE in Sweden that holds an interest in certain foreign legal entities is subject to immediate taxation on its proportionate share of the foreign legal entity’s profits if the foreign entity is not taxed or if it is subject to taxation at a rate lower than 14.5% (i.e. 55% of the Swedish tax rate of 26.3%). The CFC regime stipulates a participating interest threshold and a “white list” applies. A shareholder (taxpayer) in a foreign legal person within the EEA that is treated as a CFC is exempt from CFC taxation on income derived from the CFC if the taxpayer can demonstrate that the foreign legal person is actually established in its home state and carries on genuine economic activities.

Other – A transaction may be disregarded if it produces a substantial tax benefit, the tax benefit could be viewed as the predominant reason for the transaction and an assessment based on the transaction would be contrary to the purpose of the legislation.

Disclosure requirements – No

Sweden Tax year – Corporations use a financial year, normally consisting of a 12-month period ending on 31 December, 30 April, 30 June or 31 August, unless the tax authorities permit another date.

Consolidated tax returns – Consolidated tax returns are not allowed, but contributions between Swedish group companies are allowed as a way to equalise profits and losses.

Tax Filing requirements – Annual tax returns are due by 2 May (3 May for 2010) of the year following the income year (extensions are available). The corporation also must file a preliminary tax return on or before 30 November of the year before the income year and make monthly estimated tax payments during the income year based on the preliminary tax return. A final assessment is made in the year following the income year (normally issued in December) and either a refund is issued or a final balance must be paid.

Penalties – A fee of SEK 5,000 is imposed for late filing, with additional fees if the failure to file continues. A surcharge of 40% of the tax due on hidden income is levied if the taxpayer has omitted or provided false information on the return. If filing is incomplete or there is no filing, the tax authorities may estimate the tax payable. Interest penalties are levied on outstanding taxes.

Rulings – Advance rulings may be issued by the Council for Advance Tax Rulings to resident or nonresident companies on corporate income tax, VAT, the real estate tax and the general anti-avoidance provision.

Sweden vat (Value added tax) rate

The general rate of VAT for goods and services in Sweden is 25% of the assessed value. Certain goods and services are exempt from tax or taxed at a lower rate (12% or 6%).

In general, output VAT is levied on all domestic sales but not on export or EU sales. Returns for input and output VAT need to be settled each month with the Swedish tax authorities.

With the new regulations that apply from 1 January 2008 you may also report the VAT on a three-month basis. New regulations for reporting VAT in the construction sector came into effect on 1 July 2007. A reverse charge mechanism is used for construction services. Purchasers who sell certain construction services on more than a temporary basis must report and pay VAT for such services. The seller of these construction services does not charge VAT on the invoice. The legislation conforms to the EU Directives.

Taxable transactions – VAT is levied on the supply of VATable goods or services in Sweden, the intra-Community (EU) acquisition of VATable goods, the acquisition of services from a foreign company and any importation of VATable goods into Sweden.

VAT Registration – A company that is VAT liable in Sweden must register for VAT purposes.

Filing and payment of tax – VAT returns are filed and tax is paid monthly or quarterly. However, for companies with a turnover of less than SEK 1 million, VAT may be reported in the income tax return.

Sweden – A great place to do business