SWEDEN Law and Practice Contributed by: Christoffer Dahl, Niclas Söderlund, Michel Weimer and Björn Mårtensson, XR Legal
• Unlisted shares that are not in closely held compa - nies or holdings/during the current year or previous four years have held more than 10% of the shares (votes or capital) in a market-traded company. Divi - dends (or capital gains) from such unlisted shares are subject to a 25% tax. Corporations Interest and dividends not covered by the participa - tion exemption are taxed at 20.6%, unless held within an endowment insurance policy. Dividends and/or capital gains may be tax exempt for a corporate shareholder if the shares are covered by the participation exemption. Shares held for business purposes are generally covered by the participation exemption if they are capital assets (ie, not current assets) and one of the following requirements is met: • the shares are unlisted; • the shares are listed and the recipient of the divi - dends owns at least 10% of the voting power of the payer for more than one year; or • the shares are listed and the holding of the share is conditioned by the business conducted by the owning company, or by a company that, with regard to ownership structure or organisational circumstances, can be considered closely related to the owning company. Withholding Tax Dividends and interest Sweden only levies withholding tax on dividends. The general withholding tax rate is 30%, which may be reduced or eliminated by domestic legislation or an applicable tax treaty. No withholding tax is levied on market-rate interest or repayment of principal. Inter - est exceeding fair market terms may be deemed a dividend and subject to withholding tax. The main domestic exemptions for withholding tax are: • if the dividend would be covered by the participa - tion exemption if the receiving shareholder were Swedish; or • if the recipient is covered by the Parent-Subsidiary Directive.
A recent development of the Withholding Tax Act will extend the exemption of withholding tax to include dividends to foreign states (within the EEA or a juris - diction with which Sweden has entered a tax treaty or other agreement to exchange information on tax matters), and their equivalent to Swedish regions, municipalities and associations of municipalities, and other government authorities such as public pension institutions. Sovereign wealth funds owned by the state and state-controlled investment funds should also be covered. Royalties Sweden does not levy withholding tax on royalties paid by a Swedish resident company to a non-res - ident. However, royalties paid to a non-resident are considered as deriving from a Swedish business and are taxed as income from a permanent place of busi - ness in Sweden. 3.4 Capital Gains General Under Swedish rules, divestment/disposal of, for example, shares determines the taxable event regard - less of when the seller is paid. This means that the taxable event generally occurs when a binding agree - ment has been signed by the parties, unless there are provisions creating a high level of uncertainty over the completion of the agreement. Consequently, a selling party may be subject to and liable to pay tax without receiving payment from the buyer. Individuals Capital gains are categorised (in some cases reduced based on a favourable tax rule) and added to the capital tax calculation. Capital losses are categorised (often reduced) and offset against the annual capital gains. Any difference exceeding zero is subject to a 30% capital gains tax. Losses up to SEK100,000 enti - tle the individual to a tax deduction. Losses exceed - ing SEK100,000 are only deductible up to 70% of the loss. It should be noted that the specific tax rules for closely held companies also apply to capital gains.
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