
Victor Elovsson
Senior Lawyer
Stockholm
Newsletter
by Victor Elovsson and Ebba Perman Borg
Published:
In December 2024, the Swedish Supreme Administrative Court issued key rulings which concluded that withholding tax on dividends paid to certain foreign public pension institutions breached the EU principle of free movement of capital (e.g., HFD 2024 ref. 63). The rulings centered on the fact that Swedish public pension funds (e.g., the AP funds) are completely exempt from taxation, whereas foreign equivalents were subject to withholding tax. In response, the Ministry of Finance has published a memorandum (Fi2025/01319) proposing legislative amendments to the Swedish Withholding Tax Act (Sw. kupongskattelagen) aimed at ensuring equal tax treatment of foreign states and their public institutions.
Under the proposed amendments, foreign states (including certain public-law institutions within those states) and foreign equivalents of Swedish regions, municipalities, or municipal associations should be exempt from withholding tax, under specific conditions. Crucially, such exemption should apply if the foreign state is within the EEA or has entered into an agreement with Sweden providing for information exchange in tax matters. The proposal is meant to align Sweden’s rules with EU law and eliminate any de facto discrimination that might deter foreign public entities from investing in Swedish companies.
The proposed changes are intended to enter into force on 1 July 2026, affecting dividends whose dividend date occurs after 30 June that year. Until then, existing rules formally remain in place, although the Court’s judgments give foreign public pension institutions compelling grounds to seek refunds or relief under EU law.
The proposed exemption represents a logical step toward ensuring Sweden’s compliance with EU law. For many foreign states and municipalities, this reform will reduce administrative hurdles and tax costs when investing in Swedish shares. Nevertheless, stakeholders should remain attentive to how the Swedish Tax Agency will evaluate “equivalence” and the requirement for sufficient legal similarity to Swedish public institutions. Although the memorandum provides guidelines, individual cases may still entail detailed factual inquiries to confirm eligibility.
Please feel free to contact Schjødt's tax department to discuss any specific queries regarding withholding tax.