SWEDEN Law and Practice Contributed by: Magnus Wennerhorn and Victor Bengtson, Linklaters
(i) prior to its ordinary maturity date, (ii) with unconventional means of payment or (iii) in an amount that has materially worsened the financial position of the debtor, can be subject to claw-back unless such payment is deemed to be ordinary. • Security provided after debt incurrence: security granted or perfected after the debt has been incurred may be subject to a three- month hardening period. For LBOs, where it is common that certain security is pro- vided 90 days after closing, it will mean that such security will become effective after six months from closing. Longer claw-back periods may apply for trans- actions involving related parties (such as own- ers, directors and group companies). Lenders should take a cautious approach in refi- nancing or restructuring scenarios, particularly if the borrower is in a distressed financial position. Sweden does not impose stamp duty or similar transaction taxes on loans or security. However, there may be fees associated with certain reg- istrations. • Real property mortgages: mortgages require registration with the Swedish Land Registry ( Lantmäteriet ) and this attracts a stamp duty of 2% of the secured amount at the time of issuance. • Business mortgages (floating charges): registration of business mortgages with the Swedish Companies Registration Office ( Bolagsverket ) incurs a stamp duty of 1% on 8. Tax Issues 8.1 Stamp Taxes
the face value of the mortgages at the time of issuance. 8.2 Withholding Tax/Qualifying Lender Concepts Sweden does not impose withholding tax on interest payments made on loans. However, cer- tain limitations apply if the interest payments are treated as other forms of income (eg, reclassified under tax treaties or local anti-avoidance rules). Unlike some jurisdictions, Sweden does not use a formal “qualifying lender” concept for with- holding tax exemptions. 8.3 Thin-Capitalisation Rules Sweden does not apply traditional thin-capi- talisation rules (eg, fixed debt-to-equity ratios). Instead, it uses interest deduction limitation rules to prevent aggressive tax structuring. • General limits: interest is deductible only if the loan relationship meets ordinary arm’s length principles. • Earnings-related limit: deductions are capped at 30% of tax-adjusted EBITDA. This rule applies uniformly to domestic and interna- tional transactions. • Anti-avoidance rules: interest paid to affiliated entities in low-tax jurisdictions may be disal- lowed unless the borrower can demonstrate adequate commercial justification. Lenders and borrowers should carefully structure deals to ensure compliance with these restric- tions, as non-deductible interest can increase the effective cost of debt.
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