SWEDEN Trends and Developments Contributed by: Christoffer Dahl, Niclas Söderlund, Michel Weimer and Björn Mårtensson, XR Legal
XR LEGAL ADVOKAT AB Västra Trädgårdsgatan 6A, 111 53 Stockholm Tel: +46738043399 Email: Christoffer.dahl@xrlegal.se Web: Xrlegal.se
Discussions Regarding Interest Deduction Limitations The Swedish interest deduction limitation legislation has been under fire since its first implementation. The criticism has mainly concerned the unpredictability of the targeted interest deduction limitation rules. The criticism initiated the launch of an investigation to propose relevant amendments. The investigation was published in 2024 and included, for example, propos - als to align with EU freedom of establishment rules, to update the targeted interest deduction rules to make the legislation more predictable, to increase the “safe harbour” amount from SEK5 million to SEK25 million, to extend the possibility to carry net interest expens - es forward indefinitely and to calculate net interest expenses on a group level rather than an entity level. However, the proposal was only implemented to avoid conflict with the EU. Implemented changes On 1 January 2026, the components concerning the targeted interest deduction limitation rules were implemented primarily to avoid further conflict with EU law. The key implementation was the new pro - vision for loans within the European Economic Area (EEA). Instead of the previous strict requirement that a loan must be “substantially motivated by commer - cial reasons”, a narrower exception was introduced. Deductions within the EEA can now only be denied if they involve a purely artificial arrangement. In prac - tice, this represents a reduced evidentiary burden for companies, as the Swedish Tax Agency (STA) now faces a higher threshold for denying deductions on cross-border loans within Europe.
For loans from countries outside the EEA (eg, the United States or Switzerland) and for purely domes - tic Swedish loans, no reliefs were implemented. The stricter rules remain in effect, where deductions can be denied if the primary purpose is to obtain a sig - nificant tax benefit. This bifurcation of the regulatory framework is now a permanent feature of Swedish tax law. Discarded proposals • General rules (EBITDA-based rule): The greatest disappointment for the business community was that the proposed reliefs for the general rules were not implemented on 1 January 2026, despite being included in earlier drafts. • The “ safe harbour “ amount remained at SEK5 mil- lion: The inquiry proposed a sharp increase in the “safe harbour” amount from SEK5 million to SEK25 million. This was not implemented. Consequently, companies/groups with interest expenses exceed - ing SEK5 million must still undergo the complex EBITDA-based deduction calculation. • No group consolidation (calculation units): A highly anticipated proposal was the introduction of “calculation units”, which would allow corporate groups to offset interest surpluses against interest deficits between different entities more easily. This proposal was shelved for budgetary reasons and is not part of the legislation applicable from 2026. • Time limit for remaining net interest: The govern - ment also chose to retain the six-year time limit for carrying forward unutilised interest deductions. The inquiry’s proposal to abolish this time limit – aimed at creating more predictability for investment-heavy sectors such as real estate and infrastructure – did not become reality.
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