Limitations on correcting building depreciation in arrears

Under Swedish tax rules, the acquisition cost of buildings must be deducted through annual depreciation based on a fixed-rate depreciation plan, commencing when the building is completed or acquired.

In the case at hand, a company owning a commercial property applied depreciation in accordance with such a plan but failed to claim deductions in its tax returns for the financial years 2015 and 2016. The question at hand was whether those unclaimed deductions could subsequently be made in a later year, either as additional deductions or by extending the depreciation period.

The Court held that the preparatory works to the Income Tax Act specifically states that depreciations are linked to the specific years to which they relate under the depreciation plan. A deduction not utilised in a given year may therefore not be deferred and claimed in a later year. The Court further noted that, although the possibility of allowing deferral through an extended depreciation period had been considered in earlier legislative work, it was ultimately not enacted.

Based on the statutory framework and preparatory works, the Court concluded that unclaimed depreciations are definitively lost and cannot be recovered, whether by increasing deductions in a later year or by prolonging the depreciation schedule.

The ruling confirms that depreciations not claimed in the relevant tax year are forfeited. However, in our view, the decision should not affect a taxpayer’s ability to correct depreciation within the ordinary six-year reassessment period. For such tax years, depreciations may be claimed by submitting a corrected income tax return for the relevant years to which they relate.