Sweden: Interest deduction limitation rules, taxpayer’s claim allowed (Supreme Administrative Court)

Sweden: Interest deduction limitation rules

The Supreme Administrative Court today issued a judgment in a case concerning the Swedish interest deduction limitation rules.


The court held that the interest expenses are deductible for the taxpayer company. The case is: Lexel AB v. Skatteverket (22 March 2021)


A Swedish company was denied a tax deduction for interest paid to a French group company with tax losses. The interest expense denial was made by reference to an exception to the 10% rule that provides that interest expenses relating to intra-group debt may not be deducted if the main reason for the debt relationship was to create a significant tax benefit for the group.

The Supreme Administrative Court referred the issue to the Court of Justice of the European Union (CJEU) which in January 2021 issued a judgment clarifying that the exception to the 10% rule under the interest deduction limitation rules (as applicable between 2013 and 2018) was contrary to the freedom of establishment in Article 49 of the Treaty on the Functioning of the European Union (TFEU). Read TaxNewsFlash

Following the CJEU’s judgment, the case was referred back to the Supreme Administrative Court for a final decision.

Decision of the Supreme Administrative Court

The decision of the Supreme Administrative Court reflects the following conclusions:

  • It was clarified that the taxpayer and the French lender are in the same group and that the level of taxation in France is such that the 10% rule applies.
  • It was established that the taxpayer and the French company would have been able to exchange group contributions if the French company had been Swedish and that the exception to the 10% rule would not have applied to interest payments.
  • Thus, the judgment of the CJEU makes it clear that it is contrary to Article 49 TFEU to refuse the taxpayer a deduction for the interest expenses in question under the exemption. 

Thus, the Supreme Administrative Court concluded that there was no reason to consider whether the exception to the 10% rule is applicable to interest expenses under Swedish domestic law. Accordingly, the taxpayer was to be allowed a deduction for interest expenses.

KPMG observation

In light of the CJEU’s judgment, tax professionals had expected today’s decision by the Supreme Administrative Court. Many companies now may have new arguments to put forward when claiming interest deductions.

Read a March 2021 report prepared by the KPMG member firm in Sweden

For more information, contact a KPMG tax professional in Sweden: 

Caroline Väljemark | +46 76 863 99 39 | caroline.valjemark@kpmg.se

Jonas Mauritzson | +46 72 368 85 56 | jonas.mauritzson@kpmg.se

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