Dividend from shares in a closely held company

According to the Swedish Income tax act (Sw. inkomstskattelagen), dividend shall be taxed when it is disposable in the hands of the beneficiary. In a recent ruling from the Swedish Supreme Administrative Court (“HFD”) it was determined that a dividend made in the form of a promissory note established in 2012, was disposable before any payments had been made (HFD 2023 not. 12).

In the ruling from 26 April 2023, a closely held company had decided to distribute dividend to the company's sole owner in 2012. A promissory note of an amount corresponding to the dividend was issued on the same day and the debt was to be paid within a month of the owner's request. The first payment occurred in 2017.

The Swedish Tax Agency's view was that the dividend had been disposable through the payments made in 2017 and that the dividend therefore was taxable in 2017. HFD, however, stated that the owner was able to dispose of the dividend at the time when he could request to be paid, i.e., one month after the promissory note was issued. HFD thus stated that the time of taxation was in 2012 and that no penalty fees was to be imposed.

The ruling implies that the time of taxation of dividends occur whenever a payment claim is at the hand of the creditor. Thus, the assumption could be made that no actual monetary payments must have been made for the time of taxation to occur.