Post by PihlgrenBolmstrand on Mar 13, 2009 8:47:37 GMT 4
Sweden: Sweden proposes changes to participation exemption rules related to partnerships
On November 24 2008 the Swedish tax agency submitted a proposal to the Swedish government relating to partnerships and the application of the Swedish participation exemption rules. The proposal suggests among other things that the disposal of an interest in a partnership by a Swedish corporate taxpayer could benefit from the application of the Swedish participation exemption. Also, the proposal suggests that a partnership can benefit from the participation exemption rules even if it is not a taxable entity itself.
The Swedish participation exemption fully tax exempts capital gains and dividends on business related shares. Shares are deemed to be held for business purposes if they are not held as current assets, are unlisted and if the subsidiary (in the case of a non-Swedish subsidiary) is equivalent to a Swedish limited liability company. As regards to shares in a listed company the holding must represent at least 10% of the voting rights and the shares must have been held for more than one year to benefit from the exemption.
The Swedish tax agency proposes that:
* An interest in a partnership should be considered business related if it is held by a company. Consequently, any capital gain when disposing of the interest should be tax exempt and any capital loss should be non-deductible. The rules should be applicable to an interest in a Swedish partnership as well as an interest in a foreign partnership within the EEA.
* A partnership should benefit from the participation exemption with respect to shares in a subsidiary, if the capital gain would have been tax exempt had the partner in the partnership itself disposed of the shares. Further, any capital loss should be non-deductible.
* Partnerships should be able to receive tax exempt dividends if the dividends would have been tax exempt if they had been received directly by the partner itself.
The Swedish tax agency also suggests that the adjusted acquisition cost (Sw: JAU), relating to a company or a physical person having an interest in a partnership, should be determined at the assessment year 2011. This means that a company or a physical person (with an interest in a partnership) having a negative adjusted acquisition cost should be taxed at an amount equal to the negative adjusted acquisition cost. However, if at least SEK 50 000 ($6,058) is being taxed per year, it should be possible to divide the amount over a 10 year period. Another change that the Swedish tax agency proposes is that partnerships should be included in the provisions concerning the taxation of shell companies. As a result, the applicable rules regarding the taxation of shell companies, should apply also when a company disposes of an interest in a Swedish partnership as well as a foreign partnership. In addition, the Swedish tax agency proposes some other adjustments regarding for, inter alia, how profits should be allocated between the partners in the partnership and when an adjustment of such allocation can be made.
The Swedish tax agency suggests that the proposal be introduced on January 1 2010. The Swedish government has not yet taken any view on the Swedish tax agency's proposal. The proposal has been submitted to relevant parties for comments. The comments should be received by the Swedish ministry of finance by March 10 2009.
Carl Pihlgren (carl.pihlgren@ey.com), and Sara Bolmstrand (sara.bolmstrand@se.ey.com)
On November 24 2008 the Swedish tax agency submitted a proposal to the Swedish government relating to partnerships and the application of the Swedish participation exemption rules. The proposal suggests among other things that the disposal of an interest in a partnership by a Swedish corporate taxpayer could benefit from the application of the Swedish participation exemption. Also, the proposal suggests that a partnership can benefit from the participation exemption rules even if it is not a taxable entity itself.
The Swedish participation exemption fully tax exempts capital gains and dividends on business related shares. Shares are deemed to be held for business purposes if they are not held as current assets, are unlisted and if the subsidiary (in the case of a non-Swedish subsidiary) is equivalent to a Swedish limited liability company. As regards to shares in a listed company the holding must represent at least 10% of the voting rights and the shares must have been held for more than one year to benefit from the exemption.
The Swedish tax agency proposes that:
* An interest in a partnership should be considered business related if it is held by a company. Consequently, any capital gain when disposing of the interest should be tax exempt and any capital loss should be non-deductible. The rules should be applicable to an interest in a Swedish partnership as well as an interest in a foreign partnership within the EEA.
* A partnership should benefit from the participation exemption with respect to shares in a subsidiary, if the capital gain would have been tax exempt had the partner in the partnership itself disposed of the shares. Further, any capital loss should be non-deductible.
* Partnerships should be able to receive tax exempt dividends if the dividends would have been tax exempt if they had been received directly by the partner itself.
The Swedish tax agency also suggests that the adjusted acquisition cost (Sw: JAU), relating to a company or a physical person having an interest in a partnership, should be determined at the assessment year 2011. This means that a company or a physical person (with an interest in a partnership) having a negative adjusted acquisition cost should be taxed at an amount equal to the negative adjusted acquisition cost. However, if at least SEK 50 000 ($6,058) is being taxed per year, it should be possible to divide the amount over a 10 year period. Another change that the Swedish tax agency proposes is that partnerships should be included in the provisions concerning the taxation of shell companies. As a result, the applicable rules regarding the taxation of shell companies, should apply also when a company disposes of an interest in a Swedish partnership as well as a foreign partnership. In addition, the Swedish tax agency proposes some other adjustments regarding for, inter alia, how profits should be allocated between the partners in the partnership and when an adjustment of such allocation can be made.
The Swedish tax agency suggests that the proposal be introduced on January 1 2010. The Swedish government has not yet taken any view on the Swedish tax agency's proposal. The proposal has been submitted to relevant parties for comments. The comments should be received by the Swedish ministry of finance by March 10 2009.
Carl Pihlgren (carl.pihlgren@ey.com), and Sara Bolmstrand (sara.bolmstrand@se.ey.com)