Swedish companies are not taxed on a consolidated basis. However, it is possible for qualifying groups (i.e. a holding greater than 90% of the capital, which must have been upheld during the whole fiscal year) to effectively offset operating losses of one Swedish company against operating profits of another Swedish company by way of group contributions, which are tax deductible for the contributor and taxable for the recipient. EEA companies are regarded as Swedish companies for these purposes if the recipient is taxable in Sweden.
A similar Swedish deduction is, under certain circumstances, also available for cross-border group relief at the Swedish parent’s level within the EEA for final foreign subsidiary losses.
The Swedish transfer pricing regime is generally an Organisation for Economic Co-operation and Development (OECD) type of regime. Sweden has formal transfer pricing documentation requirements in place.
County-by-country (CbC) reporting
A multinational group with a Swedish parent company, with annual group consolidating revenue exceeding SEK 7 billion shall, within 12 months after the closing of the financial year, submit certain financial data about their business for each tax jurisdiction in which the group operates, on an annual basis. All Swedish entities and foreign PEs within a multinational group shall, before the ending of the financial year, notify the Swedish Tax Agency which entity in the group is submitting to the CbC report.
There are no thin capitalisation rules for tax purposes in Sweden; however, interest stripping restrictions exist (see Interest expenses in the Deductions section).
Controlled foreign companies (CFCs)
Sweden’s CFC provisions aim at taxing a Swedish resident shareholder for shareholdings in low-taxed foreign entities. A Swedish resident shareholder with a holding in a CFC entity will annually be taxed for its ownership portion of the CFC's income, according to provisions applicable to a Swedish corporation. For a corporation, the portion will be taxed at the Swedish corporate tax rate. Only holdings, direct or indirect through other foreign entities, corresponding to at least 25% (capital or voting rights) in the foreign entity could lead to CFC taxation. A foreign company is considered low taxed if the income in the company, calculated in accordance with Swedish provisions, is taxed at a rate below 11.8%. However, if the foreign entity is resident in an 'approved country', CFC taxation should not arise. Approved countries appear in an official 'black/white' list. Active EEA entities are, under certain circumstances, not considered low taxed.
In the light of the EU ATAD, certain amendments to the Swedish CFC have been implemented. Notable changes are that companies could be deemed as affiliated due to a holding requirement of 25% (previously the threshold was 50%), implying that additional foreign entities could be covered by the Swedish CFC rules, depending on the ownership structure. Thereto, the ‘white’ list applies in fewer situations (e.g. in essence exempting Malta from the list). Further, royalties and other income from intellectual property (IP) rights are covered by the CFC rules.