Sweden: Proposed tax changes, real property transactions

Proposed tax changes, real property transactions

A proposal to amend Swedish tax law for real estate transactions was presented by a special committee on 30 March 2017. If legislation is introduced and enacted, the proposal would provide a major tax increase for the real property market.

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Among the measures being proposed are the following.

  • A sale of shares in a “Swedish property company” (as defined under the proposal) when the transferor loses control over the property company, would trigger capital gains taxation for the property company on the difference between the property’s tax base value and the fair market value. The gain would be taxed at the standard corporate tax rate at 22%.
  • Current investments would not be “grandfathered” (i.e., if the proposal were to become law, it would affect current property structures). 
  • An “extra” income tax would be triggered on the sale of a real property company equal to the stamp duty (i.e., a taxable fictitious income of 7.09% of the property’s fair market value). Also, the taxable entity would be the property company.
  • A stamp duty for certain legal entities (such as limited liability companies) would be reduced to 2% from 4.25%. Intra-group transfers of real property would be exempt.
  • A stamp duty on property reallotment and partition (currently exempt) would be introduced.

The new rules would apply as from 1 July 2018. The date of a binding agreement for a sale would be decisive as to whether the new rules apply or not.

 

Read an April 2017 report prepared by the KPMG member firm in Sweden

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