The parliament has accepted that Sweden is subject to the arbitration convention in force between the member states of the European Union. Under the convention, transfer pricing disputes between EU member states should be settled by an arbitration board if the member states concerned cannot reach an agreement.
Negotiations with China
The lengthy tax agreement negotiations between China and Sweden concerning an extension of the matching credit regulations have finally been concluded.
Closely-held companies
Transactions between closely-held companies (ie companies with 4 or fewer shareholders holding more than 50% of the votes) and their owners are subject to certain rules in Sweden. The government abolished most of these rules (the so-called stop rules) at the end of 1999. Most of the stop rules were aimed at transactions involving a hidden dividend of the closely-held company's profit, for example when the company acquires assets which are to be used solely by the shareholder for private purposes. Under the former regime, the acquisition cost was taxed as earned income in the hands of the shareholder, and the company was denied a deduction for the acquisition cost. According to the new rules, the company may be entitled to deduct the acquisition cost whereas the shareholder will still be subject to income tax. The tax base will not be the acquisition cost for the asset, but the fair market value for the use of the asset (which could be significantly lower).
Advance pricing agreements
For a US company to make an advance pricing agreement (APA), it is a requirement that the state in which the US company is resident accepts the agreement. A bilateral agreement regarding transfer pricing is therefore necessary. The Swedish Ministry of Finance has confirmed that, as a competent authority, it is not prevented from participating in such bilateral APAs.
