On June 19 2025, the Swedish Administrative Court of Appeal of Sundsvall (an intermediate court for tax and other administrative matters) issued a judgment granting a Canadian mutual fund corporation a withholding tax (WHT) refund on the basis that it was deemed comparable to a Swedish special fund (case Nos. 1777–1786-24). The ruling went against the Swedish Tax Agency’s (STA’s) position in the case, and was not appealed to the Supreme Administrative Court.
Case background
Sweden imposes WHT on outbound dividends and certain distributions to non-residents under the Swedish Withholding Tax Act (WTA). Tax liability is determined based on the recipient’s status. According to Section 4, paragraph 9 of the WTA, non-Swedish collective funds that are comparable to certain Swedish non-UCITS funds – referred to as ‘special funds’ – are exempt from WHT; e.g., if resident in the European Economic Area or in a treaty jurisdiction, provided certain criteria are met.
To qualify as comparable to a Swedish special fund, the foreign fund needs to be deemed similar to a Swedish special fund to a sufficient degree. Generally, Swedish special funds are only allowed to invest in certain types of liquid, financial assets, including cash-settled derivatives, unless an exemption is granted by the Financial Supervisory Authority. There are strong indications that exemptions to physically invest in commodities cannot be granted, but this is still not entirely clear.
In the case at hand, the Canadian fund (or, more specifically, its sub-funds) was allowed to invest in precious metals provided permission from the Canadian supervisory authority was sought and granted. Out of approximately 40 sub-funds, three had received such permissions, and one had made such investments. The Canadian fund advocated that this limited investment was not a disqualifying factor and did not affect its comparability to a Swedish special fund.
The STA disagreed, maintaining that investments in precious metals and other physical commodities are prohibited investments for Swedish special funds and that funds capable of making such investments cannot be considered comparable, regardless of whether such investments have been made. The STA referred to a previous case heard by the court (case Nos. 235–239‑14).
The Administrative Court of Appeal’s judgment
Firstly, the Administrative Court of Appeal had to address whether it was the Canadian fund vehicle or its sub-funds that should be considered entitled to the dividends under the WTA. The court agreed with the lower instance that it was the fund as such that should be considered entitled.
The court then addressed the question of whether the fund should qualify as a foreign special fund exempt from WHT. It held that comparability does not require characteristics that are identical to a Swedish fund. The Canadian fund was undisputedly comparable in all respects except for the types of assets it was allowed to invest in.
The STA’s argument based on a previous case was rejected by the court, which made reference to the fact that several other deviations from what applied in respect of a Swedish special fund had indeed been accepted in that case.
The court concluded that the Canadian fund’s (and sub-funds’) limited ability to invest in precious metals was so minor in comparison that it should still be deemed similar to a Swedish special fund.
KPMG’s commentary
Although not a Supreme Administrative Court precedent, the case emphasises that it should not be possible for the STA to demand a precise match between a foreign fund and a Swedish special fund for the former to be deemed comparable. The judgment adopts a less restrictive interpretation of the exemption than the STA’s preceding decision, allowing – at least to some degree – investments in commodities such as precious metals.
The court reached the same conclusion in a similar case the same day (case Nos. 1787–1792-249) and the judgments may indicate a shift towards a more flexible interpretation of the law. Potentially, other asset classes such as limited real estate holdings should be allowed, too, but it is difficult to know where the line should be drawn.
However, should a similar case reach the Supreme Administrative Court, the outcome could be different.
Regardless, it is essential for non-Swedish, non-UCITS (undertakings for collective investment in transferable securities) funds to examine their specific characteristics carefully to try to assess if they qualify for the domestic special funds exemption. Advance rulings may be sought, although it is relatively rare in the case of WHT. If WHT has been paid, it is possible to apply for a refund up to five calendar years after the year the distribution (record date) occurred.
A revision of the legislation is long overdue to mitigate the lack of predictability in the WHT treatment, especially of non-Swedish, non-UCITS funds.
