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Sweden

Carl Pihlgren
Ernst & Young
Sweden

Sweden has plans to relieve the compliance burden and increase certainty for taxpayers with the release of draft tax procedure legislation and an initiative to increase cooperation between companies and the tax agency, explains Carl Pihlgren of Ernst & Young

The new Tax Procedure Act was presented to the Swedish Council of Legislation on January 13 2011. The purpose of the proposed legislation is to simplify and clarify the tax procedure to reduce the administrative burden for the taxpayer as well as for other parties.

The rules covering the tax procedure are included in mainly three different Acts supplemented, however, by other Acts where certain questions relating to the tax procedure are included. There are several disadvantages with the structure such as problems in defining boundaries; provisions connected to each other but presented in different Acts, and provisions with the same meaning having different importance. The proposal is therefore to bring the rules covering the tax procedure together in one single Act; the Tax Procedure Act. The result would be less provisions and no reference between different acts. The proposal implies these substantial changes:

• The Swedish Tax Boards are being abolished; the decisions should instead be taken by the Swedish Tax Agency.
• The tax surcharge rules are being adjusted; among other things, increased possibility for voluntary corrections.
• VAT should no longer be reported in the income tax return; instead it should always be reported in tax returns. The possibility for smaller companies to report VAT once a year should however remain.
• Increased possibility to prepare the income tax return with assistance from a representative.
• Remuneration for costs for legal counsel should be possible, even if the taxpayer does not win the case.
• More generous rules concerning the possibility to receive an extension with the payment of tax.
• New due dates with regard to the filing of the income tax return for legal persons. The income tax return should be filed at the latest the first day in the seventh month after the end of the fiscal year.

Next step in the legislative process is to transform the proposal into a Bill to be presented to Parliament during the autumn 2011. If adopted the new Act is proposed to enter into force from January 1 2012.

Amended rules with regard to the taxation of investment funds

As result of the implementation of the UCITS Directive 2009/65/EC certain amendments to the Swedish rules on investment funds have been presented.

In short, the first Bill (prop 2010/11:131) proposes changes with regard to tax neutral cross-border mergers of investment funds within the EU and a far-reaching liability to report on, among other things, the fund's assets and investors for the management company. The other Bill (prop 2010/11:135), contains proposed amendments of rules civil law with issues with regard to investments funds.

The third proposal concerns amended tax rules for investment funds in Sweden. The proposal states that a Swedish investment fund should no longer be subject to tax as regards the assets being part of the fund. Instead the investor in the investment fund (Swedish or foreign) should be taxed on a standardised basis. The taxable amount should be the value of the fund interest in the beginning of the year increased with the value of the fund interest being acquired during the year multiplied by 0.4%. The proposal adds that a deduction for disposed shares may not be granted. Furthermore, withholding tax should be abolished on dividends paid to investment funds resident within the EEA, or resident in states with which Sweden has an agreement on exchange of information on tax matters. The new rules are proposed to be effective as of January 1 2012. A Bill is expected later this year.

Dialogue and increased cooperation

The Swedish Tax Agency has in seminars and in a polemical article presented its new working method affecting the biggest companies in Sweden. The purpose of this method is to give companies the possibility to have an open dialogue with the tax agency and receive their viewpoint regarding a certain tax question or transaction before the income tax return is submitted or the transaction is carried out.

The dialogue between the tax agency and companies started in 2006 with the purpose to increase the cooperation between companies and the tax agency. According to the tax agency, the amount of dialogue between the two parts is increasing and lots of companies return with questions. The tax agency is also of the opinion that the complexity of the asked questions have increased.

The new working method implies that the tax agency should offer the companies, for example, the right competence within the tax agency, invitations to discussions and meetings, and clear answers, and meanwhile offer secrecy. The advantages from this is, the tax agency says, is that it becomes possible for companies to receive the tax agency's opinion in advance with regard to planned transactions. As a result, potential uncertainties can be solved early in the process and create a relationship and confidence between the tax agency and the taxpayer.

The tax agency stresses that a greater security in the company's tax position supplemented by an increased efficiency with regard to the handling of the taxes is what a company can gain from increasing cooperation with the tax agency. The result is said to be fewer audits. It is also mentioned that each company should have its own contact person with the tax agency to get in contact with them faster and safer. The tax agency also explains that the positive outcome for it is that the risk for errors in tax related matters as well as the costs for handling the taxes should decrease.

As a next step in this process, the tax agency will during autumn 2011 begin the cooperation with about five big groups and through meetings with them settle on the conditions for the forthcoming cooperation.

As a response to this a number of big Swedish companies written jointly to the Tax Agency to explain that they have good control over their tax risks and that they already today are transparent with regard to these. Based on this, they have at this initial stage said no to participation in the described co-operation.