Proposed tax changes following new rules on corporate mobility

by Ebba Perman Borg, Victor Elovsson and Maria Ström


Man walking down a staircase.

On 15 March 2023, the Swedish Ministry of Finance published a proposal (Fi2023/01049) regarding certain amendments to the Swedish Income Tax Act and the rules on disposal of business assets. The proposal is prompted by the new rules regarding cross‑border demergers and cross‑border conversions which entered into force earlier on 31 January 2023 (please see our newsletter on 28 November 2022 regarding the Swedish rules on cross‑border demergers and cross‑border conversions for corporate mobility in the EU).

A basic premise is that the tax legislation should not complicate or interfere with companies' ability to restructure their operations, or the business rationale behind such restructuring. Therefore, certain tax rules exist to facilitate various forms of restructurings, e.g., regarding mergers, spin‑offs, and business transfers. The purpose of these rules is to ensure that transfers made in connection with such restructurings do not unnecessarily result in taxation of unrealised values. However, when a company carries out a reorganisation across national borders, its tax liability in Sweden may be affected. In such cases, safeguards must be in place so that Sweden withholds its right to tax the income and values created before the reorganisation. To facilitate certain establishments within the EAA, however, special rules are in place which may allow for deferral of such exit taxation.

Therefore, the proposed amendments clarify, among other things, that the rules on exemption from immediate taxation upon the disposal of business assets may also apply when a company disposes of such business assets in connection with the new procedure of cross‑border demerger. Also proposed is an extension of the rules on exemption from immediate reversal of deductions for deposition to the tax allocation reserve fund and compensation fund, which means that a Swedish limited liability company that concludes a cross-border conversion may be covered by the rules.

The proposal also includes an extension of the rules regarding deferred exit taxation for businesses, so that situations in which the tax residency in Sweden ends because the taxpayer transfers its registered office to another state within the EEA, also are covered by the rules.

Further, the proposal includes amendments to the rules which concern life insurance companies in situations where such a company's tax liability would change due to the transfer of its registered seat to another EEA state, in which case the rules on adjustment of the yield tax rate should apply.

The amendments are proposed to enter into force on 1 January 2024.

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