SWEDEN Trends and Developments Contributed by: Corinne Ekman, Mikael Nagy and Joacim Kanstedt, Gernandt & Danielsson Advokatbyrå KB
FDI Act marks a notable shift in Sweden’s his - torically open approach to foreign investments, introducing a new layer of scrutiny designed to protect national interests in the wave of geopo - litical uncertainty. The FDI Act is broader than its equivalent in many other European countries and establishes a screening mechanism for investors acquiring (directly or indirectly) vot - ing rights above certain thresholds (starting at 10%) or influence over Swedish-based compa - nies preforming activities eligible for protection, particularly those involving businesses engaged in activities deemed critical to national security, public order or essential societal functions. The FDI Act targets all investors (Swedish, EU and non-EU) and does not have any turnover thresh - olds (however, certain thresholds are applied by the Inspectorate of Strategic Products (IPS) in order for a business to qualify as essential) and can also apply to intra-group reorganisa - tions. However, only investors that are (directly or indirectly) non-EU will be subject to enhanced review and a decision to prohibit or impose con - ditions. As a result of the FDI Act, investors are required to navigate a more complex regulatory environment and structure investments more carefully. During 2024, the ISP received 1,264 notifications out of which 1,107 were approved without an enhanced review being initiated. Out of the 26 notifications which were subject to enhanced review, 12 were approved, five were approved with conditions and one was prohibited. The large number of notified transactions is partly a result of investors taking a cautious approach as it has proven difficult to determine whether a transaction is in fact notifiable under the FDI Act or not, given its broad scope and a lack of clear guidance from the regulators. With time, investors and advisers have gained valuable insights into the screening processes, leading to
improved predictability. This transparency is vital for making informed investment decisions and structuring transactions, including risk allocation and agreeing on what conditions, imposed by IPS, will be acceptable. Nonetheless, challenges such as potentially lengthy investment timelines persist, particularly for cross-border transactions that involve several jurisdictional with diversified regulations with different timelines. Counter movement to increased regulatory landscape With the Swedish (and European) business land - scape becoming increasingly more regulated, there are emerging indicators of resistance to regulatory burdens and even signs of traction across various sectors as a result of various stakeholders pushing for a deregulation. This sentiment is fuelled from two fronts – firstly, by the EU’s prioritisation of boosting industry com - petitiveness, and secondly, by national initiatives aimed at reducing the regulatory load on Swed - ish businesses. Consequently, policymakers are grappling with the challenge of balancing the need for effective regulation with the necessity of fostering an environment conducive to inno - vation and investment. It remains to be seen how the movement for deregulation will impact the venture capital environment in Sweden, but if successful, these efforts could lead to a more agile regulatory framework that empowers busi - nesses while still ensuring accountability and ethical conduct, ultimately shaping the future landscape of investments in Sweden. Taxation on carried interest There is no current legislation or regulation of carried interest under Swedish tax law. Instead, taxation follows general tax rules and principles. Historically, carried interest received by Swedish individuals has been reported as capital income, subject to an effective tax rate of 25% or 30%.
539 CHAMBERS.COM
Powered by FlippingBook