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8.1.1. Corporate Income Tax

The standard corporate tax rate is 22% which will be reduced to 21.4% (effective 1 January 2019) and to 20.6% (effective 1 January 2021).

Capital Gains

Capital gains are considered as ‘ordinary income’ and subject to tax at the standard corporate tax rate. The exemption is provided to the disposal of shares by Swedish resident companies held for business-related (organizational) reasons. Unquoted shares are always deemed to be business related (and qualify for the exemption) if they constitute fixed business assets Quoted shares are deemed to be business related if they:

  • Constitute fixed business assets of the non-resident company; and
  • The holding company shares represent at least 10% of the voting rights and such shares have been held for at least 1 year

However, the above capital gains tax exemption does not apply in case of sale of shares in a 'shell company' (i.e. a company or partnership firm where the market value of cash, shares and other marketable instruments (other than shares held for business reasons), and similar assets exceeds 50% of the consideration paid for the shares).

Dividends

Dividends are subject to tax in the hands of the recipient at the standard rates. In 2016, the tax authorities clarified that where dividends are repaid due to a suspension of the distribution or the decision to distribute is repealed based on civil law, the shareholder will not be subject to tax on the dividends. If, however, the shareholder repays the dividends without a civil law requirement to do so or waives its rights to the dividends, the dividends will be considered to have been at the disposal of the shareholder and subject to tax, and repayment will be considered as a capital contribution to the distributing company.

A tax exemption is provided to dividends received by Swedish resident companies from shares held for business-related (organizational) reasons. The conditions for exemptions, as discussed above for capital gains, apply to dividends as well.

In line with the anti-avoidance measures included in the EU Parent-Subsidiary Directive, the Swedish government adopted corresponding measures in its domestic legislation to limit the participation exemption. These anti-avoidance measures apply not only to dividends paid under the EU Parent-Subsidiary Directive but also to any dividends paid to a Swedish resident company. As per these measures, the tax exemption will not apply to dividends which can be deducted as interest or any similar nature in the distributing company.

Further, the participation exemption for dividends received does not apply when received from a resident of a tax haven not subject to corporate income tax.