Clarification on cross-border conversion

In the preliminary ruling, an applicant sought clarification on the tax consequences of transferring a share portfolio from the applicant’s Maltese company to the applicant’s Swedish company. The Swedish company was the indirect parent company of the Maltese company, through another Maltese company. Following the transfer, the Maltese company which would transfer the share portfolio, would be converted into a Swedish company. The reason for the transfer of the share portfolio taking place prior to the conversion, was for the applicant to make use of the Maltese rules regarding tax refunds. A transfer of the share portfolio would trigger income tax at 35%. However, since the Maltese company was classified as a trading company, it would receive a tax refund which would effectively lower the Maltese tax to 5%. It was stated that the applicant’s Swedish company was subjected to controlled foreign company (“CFC”) taxation on dividends and capital gains from the share portfolio.

The Council clarified that no further CFC taxation would apply to the applicant’s Swedish company concerning the sale of the share portfolio or the tax refunds received from Malta, if the conversion would be completed before the fiscal year-end of the Swedish company, at which point in time the circumstances for potential CFC taxation are evaluated. Further, the tax refund would be considered dividend to the Maltese holding company, which would be exempt from tax according to Swedish rules, on which the tax basis for potential CFC taxation is calculated.

Finally, the Council stated that the Swedish anti-tax avoidance legislation does not apply to the considered restructuring measures. The restructuring measures would not result in any unjustified tax benefit under Swedish law, as the restructuring would have led to similar outcomes if the Maltese company had been reorganised while still holding its share portfolio.

The advance tax ruling has not been appealed by the Swedish Tax Agency