Sweden

Corporate - Income determination

Last reviewed - 14 January 2020

Inventory valuation

Inventories (stock-in-trade) are valued at acquisition cost or market value, whichever is lower. As an alternative, inventories may be valued at 97% of the total acquisition cost, which is determined on a first in first out (FIFO) basis. The last in first out (LIFO) method is not permitted. Generally, inventories should be stated at the same amount for tax and accounting purposes.

Capital gains

There is a capital gains tax exemption for Swedish corporate entities on gains related to the disposal of shares held for business reasons.

Shares in Swedish corporations can qualify as shares held for business reasons. Unquoted/unlisted shares will always be considered as held for business reasons. Quoted/listed shares are considered held for business reasons if the company has a holding corresponding to at least 10% of the voting rights or the shares are held in the course of the business. An additional condition regarding quoted/listed shares is that the shares must be held for a period of at least one year. Under certain conditions, tax exemption also applies to shares in foreign companies.

Note that non-tax-exempt capital gains are included in business income and taxed at the corporate tax rate of 21.4% (see State [national] income tax in the Taxes on corporate income section).

Shares in partnerships (tax transparent entities) and indirect holdings via partnerships are also included in the participation exemption regime.

An exception from the capital gains tax exemption applies for the sale of shares in a 'shell company', which is a company or partnership 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. The sale of a shell company results in harsh taxation of the gross consideration. Provided certain formalities are fulfilled, however, it is possible to avoid such taxation.

A consequence of the participation exemption is that capital losses on shares or participations held for business reasons are not deductible.

Capital losses on portfolio holdings of shares, share options, convertible debentures, and similar financial instruments are allowed only as an offset to capital gains on the same group of financial instruments.

Certain special rules apply to computation of capital gains and losses on real estate.

Dividend income

A participation exemption applies for dividends received on shares held for business reasons (see above) and on qualifying holdings via partnerships. A tax deductible dividend paid by a foreign company (i.e. not only EU/European Economic Area [EEA] companies) under a hybrid arrangement is though subject to Swedish corporate tax for the recipient Swedish company.

Interest income

Interest received by a corporation is included in the corporate tax basis.

Royalty income

Royalty received by a corporation is included in the corporate tax basis.

Foreign income

Companies resident in Sweden are taxed on their worldwide income. Non-resident entities are taxed on income that is deemed to have its source within Sweden.

A Swedish corporation is taxed on foreign branch income. Double taxation is normally avoided by means of either a deduction of foreign tax or a foreign tax credit.

Dividends and capital gains from foreign subsidiaries are generally exempt from taxation according to the participation exemption provisions applicable to shares held for business reasons (see above).