Sweden: local rules

The arm's length rule is in Inkomstskattelagen (IL) 14 kap. 19 §. It lets the tax office raise a Swedish company's result if terms with a related party differ from those between independent parties. It only applies if the other side is not taxed on the extra income in Sweden, if the parties have a community of economic interests (20 §), and if the terms do not have another cause. Documentation rules are in Skatteförfarandelagen (SFL) 39 kap. 15 to 16 f §§. The documentation rules also cover permanent establishments.

Companies with transactions with related foreign companies, or a foreign permanent establishment, must keep a two-part file: a group-wide part (master file) and a company-specific part (local file). A company is exempt if its whole group had fewer than 250 employees in the year before and either turnover up to SEK 450m or a balance sheet total up to SEK 400m. Transactions with a foreign related party under SEK 5m a year count as immaterial. The company-specific part must exist when the income tax return is due, and the group-wide part when the parent's return is due. Both go to Skatteverket on request. Swedish, Danish, Norwegian or English may be used.

The statute names no methods and sets no ranking. Skatteverket applies the OECD Guidelines. For permanent establishments it uses the functionally separate entity approach. The adjustment is one sided: IL 14 kap. 19 § only lowers a result that was reduced by non-arm's length terms.

There is no fixed fee for missing or poor TP documentation. A TP adjustment is made through the normal rules: a tax surcharge of 40% of the extra tax if an incorrect statement was given (SFL 49 kap. 4, 5 and 11 §§), or, when the error only creates a loss that is not used that year, 40% of one quarter of the wrong loss, in effect 10% (49 kap. 14 §). There is no surcharge if the statement was corrected on the taxpayer's own initiative or the tax at stake is insignificant (49 kap. 10 §), and the fee can be reduced if it is unreasonable (51 kap. 1 §). Skatteverket can also set tax by discretion if the base cannot be worked out (57 kap. 1 §). Late filing of the corporate return costs SEK 6,250. Late Pillar Two filings cost SEK 25,000.

The Top-up Tax Act (2023:875) applies the IIR and the Swedish qualified domestic top-up tax to tax years that begin after 31 December 2023, and the UTPR (supplementary rule) to tax years that begin after 31 December 2024. Swedish entities register once within 15 months, file the top-up tax report and any notification within 15 months (18 months the first year, but not before 30 June 2026 for years ended before 31 March 2025), and file the top-up tax return one month later. One entity can apply to carry the UTPR liability within 14 months. Tax is paid after Skatteverket's decision.

Advance pricing agreements are bilateral or multilateral only, under Lag (2009:1289). The fee is SEK 150,000 per country for a new one, and Sweden has no unilateral APAs. Intra-group interest is limited by IL 24 kap. 18 to 20 §§, and net interest by IL 24 kap. 24 § (30% of the tax EBITDA base, or SEK 5m). Skatteverket can reassess to the taxpayer's disadvantage up to six years after the calendar year the tax year ended if an incorrect statement was given (SFL 66 kap. 27 §). Local law moves a deadline that falls on a Saturday, Sunday, public holiday, Midsummer Eve, Christmas Eve or New Year's Eve to the next weekday (Lag 1930:173 2 §).