Ebba Perman Borg
Partner
Stockholm
Newsletter
Swedish withholding tax rules found contrary to EU law
by Ebba Perman Borg
Published:
The Swedish Supreme Administrative Court (Sw. Högsta förvaltningsdomstolen) has ruled that the levy of withholding tax on three Finnish public pension institutions violates the EU principle of free movement of capital (HFD 2024 ref. 63, dated 19 December 2024). The decision stems from the unequal treatment of dividend taxation for foreign pension institutions compared to the Swedish state through its national pension funds (AP-fonderna), which are exempt from such taxes.
Background
As previously reported by Schjødt, the Supreme Administrative Court sought a preliminary ruling from the Court of Justice of the European Union on the Swedish tax rules, and the Court of Justice of the European union delivered its judgement on 29 July 2024. The Court of Justice of the European union held that it is contrary to EU law to levy withholding tax on dividends from Swedish companies to certain foreign public pension institutions, while such dividends are not taxed when distributed to similar Swedish public pension funds.
The Supreme Administrative Court's decision
Aligning with the Court of Justice of the European Union's judgement, the Supreme Administrative Court concluded that Swedish withholding tax imposed on the Finnish public pension institutions infringed upon the principle of free movement of capital.
Implications
The decision underscores the importance of ensuring equal tax treatment for foreign and domestic entities within the EU to uphold the principle of free movement of capital. The ruling may pave the way for similar claims from other foreign pension institutions.
By addressing the discriminatory tax practices, the Supreme Administrative Court has reaffirmed the significance of EU principles in shaping national tax policies, particularly in cross-border transactions.
Please see our previous articles regarding the case here and here.
