Sweden: Foreign tax credit carryforward allowed on income not subject to foreign tax

Supreme Administrative Court decision

Supreme Administrative Court decision

The Supreme Administrative Court held that a foreign tax carryforward could be used to offset Swedish tax on foreign-source interest income in the current year, even though such income was not subject to any foreign tax in the current year.  


Under Swedish tax law, foreign tax credits may be carried forward for up to five years. The taxpayer sought to apply a foreign tax carryforward from 2012 to offset Swedish tax on foreign-source interest income earned in 2017, even though such income was not subject to any foreign tax. The tax authority denied the taxpayer’s right to credit the foreign tax carryforward based on the position that foreign tax carryforwards may only be credited if the taxpayer has foreign-source income subject to foreign tax in the year the credit is applied.

The court held that the tax authority’s position was not supported by the applicable law and regulations thereunder and that the taxpayer must be allowed to apply its foreign tax carryforward to offset Swedish tax on its current year foreign-source interest income.  

The tax authority subsequently announced that its position on the issue is changing in accordance with the court’s decision.

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



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