Our point of view

Legal Update: Proposed Changes to the Rules Governing Closely Held Companies

8 November 2016

On November 3rd, 2016, an official report was published containing several proposed changes to the rules governing closely held companies. This proposal will now be referred to stakeholders for consultation before a final version is handed to Parliament for voting. Hence, there may be some changes before the rules are enacted. The new rules are proposed to enter into force on January 1st, 2018.

In summary, the proposal may be considered less business-friendly, but some changes are welcomed. The first reaction to the proposal from the business community was somewhat negative, and it remains to be seen if it will survive in its current form.

The key proposals are as follows:

  • The equity requirement of 4% (Sw. kapitalandelskravet) is abolished making the rules more taxpayer friendly,

  • The formula for computing the amount to be taxed as capital income is made less beneficial,

  • The tax rate on amounts up to a threshold (Sw. gränsbeloppet) increased from 20 % to 25 %,

  • The tax rate on amounts in excess of maximum amount taxed as salary (Sw. takbeloppet) lowered from 30% to 25% (i.e. a slight improvement, but only if taxpayer reports salary income of approximately EUR 0,6 million),

  • The minimum amount subject to capital gains taxation is substantially lowered.

It would be prudent for taxpayers to do a dry run and try to apply the rules to their particular circumstances, preferably before the end of 2016, so that any issues or opportunities can be surfaced and potentially addressed as soon as possible.

Please feel free to contact Christian Carneborn with questions regarding the current or proposed rules.

Please find additional comments on the proposal (in Swedish) here.