Proposed rules on the taxation of carried interest

1. Expanded definition of active participation: The proposal suggests broadening the criteria under the Swedish 3:12 rules on what constitutes "significant involvement in a business", potentially affecting how income from private equity investments is classified and taxed.

2. Exclusion of external party rule: The proposal recommends that the "external party rule" under the 3:12 rules, which can influence tax obligations based on external ownership, should not apply to certain private equity fund structures.

3. Implementation of specific waiting periods: The memorandum proposes introducing particular deferral periods before certain tax treatments apply, aiming to prevent tax avoidance through short-term ownership changes.

4. Limitation on salary-based tax deductions in subsidiaries: The proposal includes a restriction on the use of salary expenses in subsidiaries to reduce the taxable income of parent companies, which could impact the overall tax planning strategies of private equity firms.

5. Stricter reporting requirements: The proposal emphasises the need for increased transparency, proposing stricter reporting obligations for entities involved in private equity to ensure compliance and facilitate tax oversight.

The proposals are intended to create a more predictable and equitable tax environment for private equity operations in Sweden.

Please find the full memorandum (in Swedish) here.