A proposed law to enact a global minimum tax in Sweden

The special investigator commissioned to analyse the Swedish implementation of a global minimum tax, submitted its interim report to the Swedish Government on February 7. The committee proposes new legislation to enter into force on 1 January 2024 and to apply for the first time to tax years beginning after 31 December 2023.

In the interim report “SOU 2023:6”, the special investigator presents its proposal on the Swedish implementation of the Council Directive (EU) 2022/2523 of 14 December 2022, on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union (“the Minimum Tax Directive”).

The Minimum Tax Directive is a product of the model rules developed by the OECD Pillar Two and the new law on a top-up tax presented in the interim report does essentially corresponds to the Minimum Tax Directive but is adapted to Swedish conditions.

What is top-up tax?

The top-up tax is intended to ensure that the income of multinational enterprises is taxed at a minimum rate of 15%. Only members of multinational enterprise groups and large-scale domestic groups that meet an annual threshold of at least EUR 750 million of consolidated revenue may be subject to the top-up tax.

Groups subject to the Minimum Tax Directive will thus be required to determine an effective tax rate for each jurisdiction where it carries out activities. In cases where the effective tax rate in a jurisdiction is below the minimum tax rate, a top-up tax amount is to be calculated.

Who will be liable to pay?

Under the general rule, the liability to pay the top-up tax should fall on the ultimate parent company of a group. Thus, a domestic parent company may become liable for tax on foreign group entities. However, the interim report proposes that Sweden exercises the option to introduce a so-called qualified domestic top-up tax system, which will ensure that no other country should be able to collect any top-up tax attributable to the Swedish group entities. In short, this means that the obligation to pay any additional tax attributable to the Swedish group entities would fall to the Swedish group entity that is the highest in the ownership chain. Consequently, the ultimate parent company must not necessarily be a Swedish entity for Sweden to be able to collect top-up tax attributable to Swedish entities.

What additional work is to be expected?

 Each individual group entity has an obligation to report certain prescribed additional tax information in a special top-up tax report. A group entity may, by notification to the Tax Agency, designate another entity in the group to submit the report. However, the obligation remains with the group entity itself and the obligation will be accompanied with sanctions.

The special investigator predicts that the implementation of the minimum tax will lead to significant administrative costs for the affected companies. Primarily in terms of investment in systems and know-how at the initial stage, but also in terms of ongoing administrative costs.

Due to the short time frame, the interim report has not dealt exhaustively with all elements in the Minimum Tax Directive. Svalner attentively follows upcoming updates with great interest.

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