On March 30, the special appointed Committee presented its proposal for amended Swedish tax legislation for real property transactions. Current beneficial tax rules applicable to the sale of real property into and via companies has been a topic of discussion for a long time. The Committee instruction was to change these rules and to minimize tax planning opportunities at sale of real property. The proposal includes a major tax increase for the real property market should it be introduced.
In brief, the Committee is proposing:
Please note it is a proposal by a committee only, and as such it is not certain to become law. Although only a proposal, we have seen effects on the market and a buyer would already most likely ask for a significant increase in discount for deferred tax at an acquisition of a Swedish property company.
The Swedish Ministry of Finance has communicated that the proposal will not be a part of the autumn budget. Based on this the proposal date for entry into force is questionable. The Ministry of Finance has, however, circulated the proposal for formal consultation. Parties other than appointed consultation bodies may provide their views on the proposal and the deadline for comments is August 14, 2017.
The Committee’s proposal is rather controversial in many aspects. For example it proposes that all deferred tax should be brought to taxation at the sale of a property company without introducing any grand fathering provisions or transitional rules. This part will most likely meet heavy criticism since it would be a form of retroactive taxation that could be very burdensome for many real property investors. Also, minority shareholders could indirectly be targeted even if they have not been involved or have had any control over the transaction that triggers the tax liability which likely also will be criticized.
After the consultation period, the Ministry of Finance will present its proposal, which could be different from the Committee’s. It will likely be coordinated with the new rules on interest deductions, that must be implemented as a consequence of the Anti Tax Avoidance Directive, and which are also very important for the real estate sector.
You are very welcome to contact us if you have any questions on what this could mean for your business.
Barbro Jansson Stridlund
+46 8 723 95 68