SWEDEN Trends and Developments Contributed by: Björn Wendleby, Rico Benavides, Per Josephson and Stellan Koch, Harvest Advokatbyrå AB
Alternative investment funds other than special funds, however, lack a similar possibility of being created on a mere contractual basis and instead are created through, for example, Swedish lim - ited liability companies ( aktiebolag ). Under its mandate, the committee review will look more closely at the possibility of creating contractual- based alternative investment funds, other than special funds, as it is believed such a framework would make it easier to establish new funds, increasing the attractiveness of establishing European long-term investment funds (ELTIFs) in Sweden. The taxation aspect is also to be considered in this regard. Review of certain provisions related to exchange-traded funds Today, Swedish legislation provides the pos - sibility of exempting UCITS funds traded on a regulated market from redemption require - ments, insofar as it is ensured that the market value does not significantly deviate from the net asset value. Subsequently, the provision does not apply to units traded on a multilateral trading facility (MTF) platform. Whereas the UCITS Direc - tive does not explicitly provide for the nature of the exchange, the committee review has been tasked with evaluating whether the exemption should also be available for MTF-traded funds. In addition, the committee review is tasked with determining whether a certain unit class should be able to be traded on a trading venue when other unit classes are not. New fund structures for institutional investors Investors in a common fund in Sweden are cur - rently not taxed for transactions within the fund, but must calculate its tax liability based on the
return on the units. From a cross-border perspec - tive, certain jurisdictions provide full exemption from taxation at the source of income (eg, divi - dends in portfolio companies) for certain insti - tutional investors, such as pension schemes. A contractual fund structure where the investor is seen to invest directly in the underlying holdings may therefore allow such institutional investors to avoid taxation. For the Swedish fund market to continue to attract foreign institutional capital, the com - mittee review will be looking at whether Swed - ish legislation should allow for a fund structure that is contractually based, tax-transparent and available to institutional investors, to provide for exposure towards the underlying assets rather than the unit itself, effectively providing for lower tax where applicable. Redemption frequency for UCITS funds With the COVID-19 pandemic in the rear-view mirror, the SFSA has suggested that UCITS funds should be permitted to have a redemp - tion frequency set as low as bi-weekly, allowing for a liquidity profile better aligned with a fund’s character. The suggestion is to align with the minimum requirement under the UCITS Direc - tive rather than the current gold-plated legisla - tion, where a minimum weekly redemption fre - quency applies. In addition, certain exemptions – subject to SFSA approval – will be investigated by the committee review, allowing for an up-to- monthly redemption period.
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