Sweden

There are no Swedish taxes on interest and service fees paid to non-resident corporations or individuals. Such payments to resident corporations and individuals are taxed as ordinary income.

WHT on dividends, royalties, and certain rentals vary according to domestic law and tax treaties, as shown below.

Pursuant to the amendment of the Parent Subsidiary Directive (EU general anti-avoidance rule [GAAR]), a minor change in the Swedish WHT Act (for outbound dividends) has been made, targeting structures put in place to obtain WHT exemption through the use of decoy arrangements. This anti-avoidance provision has long existed under current Swedish law, but an explicit clarification is made as of 1 January 2016 that the provision can also be applicable in cases covered by the Parent Subsidiary Directive.

Apart from the highlighted treaties, Sweden has concluded agreements on exchange of information in tax matters and partial tax treaties. Since 1 April 2017, when the tax information exchange agreement (TIEA) with the United Arab Emirates entered into force, Sweden has information exchange agreements with all the world’s tax jurisdictions. It could also be noted that amendments to the EU Directive on administrative cooperation in the field of taxation have been implemented in Swedish legislation with effect as of 1 January 2017.

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) was approved by the Swedish Parliament in May 2018. As five jurisdictions have deposit instruments of ratification, the MLI entered into force in July 2018 at an international level. Further, as Sweden has submitted the documents required for ratification, the MLI entered into force at a Swedish level in October 2018. However, the Swedish legislative process requires that the amendments are incorporated into Swedish law in respect of each bill. In general, Sweden has made reservations in regards of MLI's tax allocation articles, implying that existing tax allocation articles continue to apply. In regards of other articles in the MLI, minimum standards have been chosen.

In the light of EU case law (Case C-575/17, Sofina SA and Others), rules allowing deferment of payment of WHT upon application entered into effect as of 1 January 2020. In general, certain loss-making residents in jurisdictions where special treaties apply, or entities within the European Union, may apply for such deferment. The deferment is applied until four months after the end of the tax year that follows the tax year whose deferment scope is the basis for the deferment (e.g. WHT relating to a dividend paid during 2020 may be deferred until April 2022).

A new Withholding Tax Act has been proposed by the Ministry of Finance and was originally envisaged to enter into force as of January 2022. However, the proposal has been subject to discussions, and the legislative outcome is not yet wholly clear. As per the current proposal, the new legislation will be applied as of 1 January 2024.

Notes

1. According to domestic law, there is no WHT on dividends to a foreign company on shares held for business reasons (for the definition of shares held for business reasons, see Capital gains in the Income determination section), provided that the foreign company is similar to a Swedish limited liability company (and some other legal entities) and is subject to income tax at a level similar to that imposed on a Swedish company. Further, there is no tax liability for a legal entity of a member state of the European Union if the entity owns 10% or more of the share capital in the distributing company and fulfils the conditions of the Directive (90/435) regarding a parent company and subsidiaries.
2. The reduced rate shown before a stroke (/) refers to payments to corporations having requisite control. Where appropriate, the particular treaty should be consulted to see whether the reduced rate is applicable.
3. Swedish-source royalties and certain rental fees are treated as a special form of PE, taxable at the corporate tax rate, subject to treaty reduction or waiver. Royalties paid from Sweden to a company within the European Union should not be taxed in Sweden if one of the companies holds at least 25% (capital) of the other or, where there are two companies concerned, at least 25% are held by another company within the European Union. Indirect participation does not benefit from the legislation. Both the payer and the recipient must be legal entities under the EU directive.
4. Payments to resident corporations and individuals are taxed as ordinary income. Only resident banks and similar entities are required to withhold tax on payments of cash dividends to resident individuals.
5. Royalties and certain rentals paid by Swedish licensees are treated as business income taxable in Sweden and do not incur WHT (see Note 3).
6. Note also the domestic provision stating a 0% WHT on dividends distributed to qualifying entities based on EU Directive (90/435) and/or where the shares are held for business purposes (see Note 1).
7. Dividends: 10% of the gross amount if the company receiving the dividends owns at least 25% of the foreign company’s capital.
   
   Royalties: of the gross amount paid for the use of, or the right to use:
   • News: 3%.
   • Copyright of literary, dramatic, musical, or other artistic work: 5%.
   • Any patent, trademark, design or model, plan, or secret formula or process; industrial or scientific equipment or information concerning industrial, commercial, or scientific experience; payments for the rendering of technical assistance: 10%.
   • All other cases: 15%.
8. Royalties are normally taxable only in the recipient’s home country. However, where the royalty is paid by a Swedish legal entity that is more than 50% owned by one Austrian recipient, entity or individual, the tax in Sweden is a maximum of 10%.
9. Literary, artistic, or scientific royalties: 0%; other royalties: 5%.
10. Royalties for use of industrial, commercial, or scientific equipment: 5%; with respect to patents, secret formulas or processes, or for information concerning industrial, commercial, or scientific experience: 3%; other royalties: 10%.
11. Royalties for use of copyright and literary, dramatic, musical, and artistic royalties: 0%. Other royalties: 10% (treaty should be consulted).
12. The treaty has effect on income derived on or after 1 January 2006.
13. The double taxation treaty does not include Hong Kong.
14. The same treaty is applicable to the Czech Republic and the Slovak Republic.
15. According to the Nordic multilateral tax treaty.
16. Dividends are exempt from tax if the recipient of the dividends is a company directly owning at least 10% of the capital of the company paying out the dividends. Certain rentals are subject to tax if there is a PE in a country other than the home country and the claim is connected with the business carried on from the PE. Concerning Iceland, dividends are normally exempt from tax for companies, but the tax rate is 15% if the dividends have been deducted from the income of the distributing company.
17. Royalties for the use of industrial, commercial, or scientific equipment: 5%; other royalties: 10%.
18. Royalties with respect to patents, secret formulas or processes, or for information concerning industrial, commercial, or scientific experience: 5%; other royalties: 12.5%.
19. Royalties for the use of industrial, commercial, or scientific equipment or for information concerning industrial, commercial, or scientific experience: 10%; other royalties: 15% (treaty should be consulted).
20. Literary, artistic, or scientific royalties including films: 15%; other royalties: 10% (treaty should be consulted).
21. Royalties with respect to patents, secret formulas or processes, or for information concerning industrial or scientific experience: 5%; other royalties: 15%.
22. Commercial royalties, including films: 20%; copyright, literary, dramatic, musical, or artistic royalties: 0%.
23. Commercial royalties, including films: 15%; literary, dramatic, musical, or artistic royalties: 5%.
24. Literary, artistic, scientific, or film royalties: 10%; other royalties: 7%.
25. Royalties with respect to patents, designs or models, secret formulas or processes, or for information concerning industrial or scientific experience or for the use of industrial, commercial, or scientific equipment involving a transfer of know-how: 5%; other royalties: 15%.
26. Former Yugoslavia refers to the countries of Bosnia and Herzegovina, Croatia, Macedonia, Montenegro, Serbia, Slovenia, and the autonomous province of Kosovo. The treaty is applicable to all republics and autonomous provinces of the former Yugoslavia with the exception of Macedonia, with which Sweden has concluded a bilateral treaty.
27. Royalties arising from the use or the right to use trademarks: 25%; other royalties: 15%. A proposal was launched by the Swedish government in November 2019 proposing a decreased WHT rate of 10%/15% (based on protocol dated 29 March 2019). The 15% tax rate is to be applied on royalties arising from the use of or the right to use trademarks, and the 10% rate is applied on other royalties. The proposal is currently awaiting approval by the Swedish Parliament.
28. The first tax treaty between Sweden and Armenia entered into force on 1 June 2017.
29. The first tax treaty between Sweden and Azerbaijan entered into force on 31 December 2016.
30. Dividends are exempt from tax if the beneficial owner is a company that controls at least 10% of the voting power of the paying company. For other cases, dividends are taxable at a maximum rate of 5%. A maximum rate of 15% applies to dividends paid out of income (including gains) from immovable property by an investment vehicle that distributes most of the income annually and whose income from the immovable property is tax exempt.
31. Royalties for the use of, or the right to use, industrial, commercial, or scientific equipment: 5%; other royalties: 10%.
32. Royalties for the use of, or the right to use, industrial, commercial, or scientific equipment: 5%; other royalties: 7%.
33. Royalties for patents relating to industrial know-how of manufacturing methods and royalties attributable to agriculture, pharmaceuticals, computers, computer software and construction, secret formula or processes, or for information concerning industrial, commercial, or scientific nature: 0%. Other royalties: 10%.
34. Royalties paid for the use of, or the right to use, patent, trademark, design or model, plan, or secret formula or process, or information concerning experience of industrial, commercial, or scientific nature: 5%. Other royalties: 10%.
35. A proposal was launched by the Swedish government in November 2019 proposing a decreased WHT rate of 10%/15% (based on protocol dated 29 March 2019). In general, the 10% tax rate is to be applied if the beneficial owner is a company that directly holds at least 10% of the voting power of the company paying the dividends throughout a 365-day period. The proposal is currently awaiting approval by the Swedish Parliament.
36. Sweden has decided to terminate its tax treaties with Portugal and Greece. The tax treaties and the benefits described therein were in effect until 31 December 2021. After that, dividends paid to a resident in Portugal and Greece are subject to Swedish WHT under domestic law and the exemptions included therein.