Sweden: Interim report on implementation of EU global minimum tax directive

The special investigator on 7 February 2023 submitted to the government an interim report on the proposal for implementation of the EU global minimum tax directive.

The investigator proposes that a new law on additional tax be introduced that mainly corresponds to the EU directive but is adapted to Swedish conditions. The proposed law, which would consist of 10 chapters and approximately 280 sections, is intended to be comprehensive and therefore includes both substantive and procedural rules. However, the proposal is not totally complete (e.g., rules on safe harbors are not included) because the Organisation for Economic Cooperation and Development (OECD) only recently published certain parts of the model rules.

The law on additional tax would apply to groups, international as well as Swedish, with revenues of at least €750 million. According to the interim report, this means that 124 groups with parent companies in Sweden and a total of approximately 12,000 Swedish group units (of which approximately 8,000 Swedish group units belong to groups with foreign parent companies) would be covered by the rules.

The proposed law would become effective 1 January 2024 and would apply to tax years beginning after 31 December 2023 (with the exception of the supplementary rule, which would apply after 31 December 2024).

Some initial observations:

• The investigator proposes that a national additional tax be introduced in Sweden (corresponding to a so-called Qualified Domestic Minimum Top-up Tax). A national additional tax means that Swedish group units would not be subject to additional taxation by foreign tax authorities. The difference between the main rule (which in the new law is called international additional taxation and corresponds to the Income Inclusion Rule) and the national additional tax is that the national additional tax would be levied in the jurisdiction where the low-taxed entity is domiciled (as opposed to in the state of residence of the parent entity). Note that the rule on the national additional tax would take precedence over the main rule.
• The investigator also suggests introducing a supplementary rule (corresponding to the Undertaxed Profit Rule) as a supplementary additional tax instead of an adjustment through a denied deduction. Note that the supplementary rule would only be intended to apply in exceptional cases when the main rule cannot be applied in full. For example, this may be the case when the parent company belongs to a third country and is not covered by a main rule. The bill also contains special rules for the distribution of the supplementary additional tax between Swedish group units.
• The investigator proposes that an additional tax report (similar to the GloBE Information Return) and an additional tax return be introduced. Note that both the EU directive and the OECD model rules lack provisions on a national declaration procedure. However, the investigator considers that there is a need for an additional tax return that supplements the additional tax report. The proposal also contains an obligation for group entities to notify the Swedish Tax Agency that another entity will submit the additional tax report (similar to the notification of another's obligation for country-by-country reporting).
• The proposal also includes three possible sanctions (special fees).
   

Read a February 2023 report (Swedish) prepared by the KPMG member firm in Sweden