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Swedish Parliament Approves Amendments to CFC Rules to Comply with EU Anti-Tax Avoidance Directive

On 14 November 2018, the Swedish parliament reportedly approved the legislative proposal to amend the country's controlled foreign company (CFC) rules to comply with the EU Anti-Tax Avoidance Directive (ATAD1). In general, Sweden's CFC rules are already compliant with the ATAD and the primary rules are maintained, including the 25% CFC ownership threshold and the low-tax threshold of 55% of the Swedish rate. However, certain changes were needed, which include:

  • The amendment of the whitelist of jurisdictions/income types that are deemed not to be low-taxed and therefore exempt from the CFC rules, which includes:
    • The removal of Malta in respect of all types of income;
    • The exclusion of income from royalties and other intellectual property rights from the whitelist exemption for Ireland and Luxembourg;
    • The exclusion of income from financing and insurance and from royalties and other intellectual property rights not subject to the standard corporate tax rate for Croatia, France, Russia and Spain; and
    • The exclusion of income subject to notional interest deductions or similar treatment for Belgium and Italy;
  • A reduction in the ownership/control percentage from 50% to 25% to determine whether persons are associated for the purpose of determining a community interest in a CFC; and
  • New security reserve provisions for foreign non-life insurance companies with business in Sweden.

The amended CFC rules enter into force on 1 January 2019 and apply to tax years beginning after 31 December 2018.

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