Sweden as an attractive Holding Company Jurisdiction
Contributed by Scandicorp
25 November, 2016
Most people tend to perceive Sweden as a high tax country. This may be true for individuals but is far from the truth when it comes to corporate taxes, especially for holding companies. The corporate tax rate is a moderate 22%. However dividends and capital gains received by Swedish companies are usually exempt. This in combination with other factors such as the lack of thin capitalization rules and no withholding taxes on interest paid abroad makes Sweden a very attractive EU jurisdiction for holding company purposes.
Dividends from "business related shares" (usually shares that are not listed on any market place or that represent 10% or more of the voting power) are tax-exempt. Generally shares in EU resident companies and companies outside of the EU would be considered "business related" provided the subsidiary foreign entity is similar to a Swedish Limited company. Special care has to be given to subsidiaries in tax haven jurisdictions due to Swedish CFC-rules.
Capital gains exemption:
Capital gains from "business related shares" will generally be exempt for a Swedish holding company. However special care needs to be taken with respect to shares in what is referred to as "shell companies" (companies with substantial liquid assets).
No withholding taxes on interest paid abroad:
Even if the lender is domiciled in a tax haven or is a shareholder there will be no Swedish withholding taxes on interest paid abroad. A tax haven investor would prefer a loan to the holding company rather than equity.
Lack of thin capitalization rules:
Investors may opt to use a very low share capital and fund the Swedish holding company with a loan instead. Some care should however be taken here, as there may be a risk that the Swedish tax authorities may challenge such a structure if tax planning is extremely agressive.
Interest expenses are generally deductible:
Interest expenses on external loans are fully deductible, whereas interest paid to affiliated companies can be affected affected by Swedish interests tripping rules and arms length priciples.
Good tax treaty network and EU Parent-Subsidiary Directive:
Withholding tax on dividends paid abroad is 30% unless reduced or eliminated by a tax treaty or the EU Parent-Subsidiary Directive. Likewise dividends received by the Swedish holding company may also be subject to no or low withholding taxes in the foreign country paying the dividends.
No stamp duty or capital tax
Unlike many other countries, a Swedish company can be established without any stamp duty or taxes on share capital.
- The company may opt to use either the Euro or Sweden's own currency SEK as accounting currency
- By international comparison Sweden advisor's fees tend to be low in Sweden
- English is widely spoken
- As Sweden is perceived as a high tax country, a Swedish holding company is likely to fall under the radar of tax authorities outside of Sweden
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