Swedish Corporate Tax Rate, International Tax Advantages

Over the last decade, many countries have lowered their corporate tax; Sweden has followed the trend and now offers Swedish corporate tax rate with international tax advantages. The Swedish corporate tax rate was lowered for the first time since 1994 in 2009, from 28.0% to 26.3% of the profits. The Swedish tax rate is relatively competitive, but far more competitive then it was a few years ago.

Sweden had until year 1989 a corporate tax of 52%. For the year 1990-1991 tax reform the corporate tax rate was lowered first to 40% and then 30%. At the same time the tax base was broadened by the termination of a series of deduction and reservations. Between year 1994 and 2008 tax rate was unchanged at 28%. In year 2009 the tax rate was reduced to 26.3%, which is also the tax rate for 2012.

Since year 2004 the corporate tax rate has was in an averaged lower in the rest of Europe than in Sweden. The trend of reduced corporate taxes is also visible in the OECD. Right up until the mid-1990’s the OECD average was above the Swedish tax levels. Gradually, however, several OECD countries cut corporate tax, and today the OECD average is just below the Swedish tax level.

Since year 2000, corporate taxes fell by 10% points in Europe and by over 7% points among all OECD countries. During the same period, the tax was cut by a total of 1.7% points in Sweden.

It should be emphasized that the actual tax rate on Swedish companies is not all that must be taken into account, equally important for a country’s attractiveness is how the rules of tax deduction are designed and the tax planning possibilities.

Corporate Tax Advantages

On the taxable profits remaining in a limited company, when all deductions and reservations have been made, the company pays a tax rate of 26.3% in Sweden. The effective tax rate is usually much lower, depending on the possibilities for different kinds of reservations, profit transfer and general corporate tax planning that will add extra corporate tax advantages.

Counties such as Cyprus, Ireland, Croatia, Estonia, Latvia, Lithuania, Malta and Switzerland have low corporate taxes in Europe. It has also been announced that the Swedish state may review the corporate tax, which could mean reduced corporation tax in the near future in exchange for removal of the tax allocation reserve that can be used today.

EU countries demands free movement of capital and labor; which means that capital can be transferred tax free between companies within the EU. But not always to companies in other countries outside of the EU borders. Each EU country still has the right to determine the national corporate legislation, tax and the tax rules applied. This means that corporate tax in some cases are nonexistent or that the tax is deducted on dividends, such as in Estonia, or the tax is first paid but recovers later on dividends, such as for companies in Malta.

Sweden has adopted the EU community’s thinking and can today provide companies with international tax advantages. Swedish Holding Companies can buy and sell stocks and other securities without having to pay any capital gains tax on the profits generated. A holding company may also receive dividends from other companies that are fully exempt from tax.

And in addition, a Swedish Holding Company can sell a subsidiary in its entirety, and do not have to pay tax on any of the profits; profits are totally exempt from tax. Company formation in Sweden is uncomplicated and all administration can be handled by a local administration company, inlastucturen for business is very well developed and there are several large commercial banks with international affiliations.

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