On 22 April 2015, the Swedish government issued a memorandum proposing changes to the country's participation exemption rules and the anti-avoidance rules under the Tax Avoidance Act.
The participation exemption rule change would include a limitation in line with the EU Parent-Subsidiary Directive amendment adopted in July 2014 to counter double non-taxation from hybrid arrangement, whereby an exemption for dividends received would not apply if the dividends are deductible for the distributing company. However, the Swedish proposal would apply the limitation to any dividends received by a Swedish company, not only dividends received according to the Parent-Subsidiary Directive.
In regard to Sweden's Tax Avoidance Act, it is proposed that the Act be expanded to cover the Swedish Coupon Tax Act, which covers outgoing dividend payments and withholding tax exemptions. Currently the Tax Avoidance Act only covers the Income Tax Act, i.e. incoming dividend payments exemption. This change follows the adoption of new anti-abuse rule amendment to the EU Parent-Subsidiary Directive in January 2015.
Subject to approval, the proposed changes are expected to enter into force on 1 January 2016.
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