SWEDEN Law and Practice Contributed by: Christoffer Dahl, Niclas Söderlund, Michel Weimer and Björn Mårtensson, XR Legal
the Undertaxed Profits Rule does not apply to any tax year initiated before 31 December 2024. The implementation of Pillar Two is ongoing, and addi - tional administrative guidelines from the OECD were implemented in 2024 and 2025. 4.4 Specific Features or Deviations of Pillar Two The Swedish implementation of Pillar Two is remark - ably faithful to the OECD Model Rules. This is largely because the Swedish law is based on the EU Mini - mum Tax Directive, which mandated a uniform trans - position across EU member states. While the Direc - tive aligns closely with the OECD Model Rules, it introduces a key deviation to ensure compliance with EU primary law – specifically, the freedom of estab - lishment. Unlike the OECD framework, which targets cross-border groups, the Directive extends its scope to include large purely domestic groups. By treating domestic and cross-border structures identically, the Directive neutralises the risk of reverse discrimina - tion, ensuring the regime withstands scrutiny under EU legal principles. 4.5 Digital Services Tax Sweden has not implemented a specific tax on digi - tal products, but there is a proposal to introduce a “streaming tax”. The Swedish government is consid - ering a series of proposals to revitalise the nation’s film and TV production industry. The plans include a streaming levy programme whereby streamers must contribute annually to the development and produc - tion of films and TV series in Sweden. The financial contribution is proposed to be a fee of 1.5% of the turnover, with some exemptions, such as media pro - viders with an annual revenue of less than SEK20 mil - lion. 5. Anti-Avoidance and Anti-Evasion Measures 5.1 Definition and Identification of Tax Fraud, Evasion, Tax Avoidance and Abusive Schemes The Swedish Tax Avoidance Act is applicable to the majority of taxes in Sweden. Tax avoidance is gener -
ally defined as any arrangement whereby a taxpay - er carries out one or more transactions primarily to obtain or avoid a particular tax effect. The Tax Avoidance Act is applied by an administrative court upon the STA’s request. 5.2 Anti-Avoidance Mechanisms CFC Rules Under Swedish controlled foreign corporation (CFC) rules, a domestic company is taxed on its pro-rata share of a foreign entity’s profits if it controls at least 25% of the capital or voting rights at fiscal year-end. An entity is “low-taxed” if its effective tax rate, calcu - lated by Swedish standards, falls below 11.33%. This charge is waived for entities on the “approved list” of jurisdictions, provided that they are treaty-eligible where applicable. Interest Deduction Limitation Rules Sweden has implemented several interest deduction limitations. Targeted interest deduction limitation The targeted interest deduction limitation rules restrict the possibility to deduct interest expenses paid to an affiliated company unless the true recipient is tax resident within the EEA,in a jurisdiction covered by a double taxation agreement, or if the interest income is taxed at a rate of at least 10%. Deduction may, however, be denied if the debt structure has been created exclusively in order to achieve a substantial tax benefit. In order to obtain deductibility, interest derived from an internal transfer of shares or share- based instruments must be business-related. Under the targeted interest deduction limitation rules, corporate limited partners of a limited partnership in a GP structure may collectively be viewed as compa - nies affiliated with the debtor, which may lead to the denial of interest deductibility. Individuals may not be viewed as an affiliated party under the targeted inter - est deduction rules. Deduction limitation in an intragroup transaction If a debt to an affiliated company relates to the acqui - sition of a shareholding from another affiliated entity,
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