Review of the Draft Swedish Global Minimum Tax Law

General

On February 7, 2023, the Special Investigator submitted the Interim Report on the proposal for the implementation of the EU Global Minimum Tax Directive to the government. This includes outline draft legislation which mainly corresponds to the EU Minimum Tax Directive but is adapted to Swedish conditions.

The interim report runs to over 470 pages and includes draft legislation as well as commentary on the approach that Sweden has taken. Our site members can download an English translation of the Interim Report at: Swedish Interim Report – English Translation. It is open for consultation until May 15, 2023.

The interim report does not cover all the articles of the EU Minimum Tax Directive.

This is due to the general lack of time and to the fact that the OECD international work was not completed when the Interim Report was issued. In particular, one important issue that was not covered were the safe harbours issued by the OECD on December 20, 2022.  This is particularly important as in practice these may mean very substantial relief for MNE groups.

Legislative Drafting

As with all jurisdictions, as a matter of legislative drafting it needs to be decided whether the provisions to give effect to the global minimum tax should be included in an existing law or whether they should be included in a new law. If they were to be included in an existing law, the Income Tax Act would be the most obvious choice.

The Special Investigator takes the view that there should be a separate law –  the Additional Tax Act. The reasons for this include:

• The EU Global Minimum Tax Directive is very comprehensive and will require a large number of new provisions, which can be brought together in a separate law, making the provisions – which are complex – easier to understand.
• The Income Tax Act applies to all those liable for income tax, whereas the additional tax will only apply to a small number of companies. The inclusion of the provisions in a separate Act avoids making the Income Tax Act much longer and more complicated than it is.
• The additional tax is different in nature from the income tax. The global minimum tax is a tax on income, but it is not an income tax in the ordinary sense.

The new Additional Tax Act also includes a number of procedural rules eg filing and penalties. There are procedural provisions in the EU Global Minimum Tax Directive, but to a large extent these have been left to the Member States to draw up. The aim is to have all relevant provisions relating to the global minimum tax in one law. The global minimum tax would therefore be excluded from the scope of the Tax Procedure Act.

In general the provisions in the Swedish global minimum tax law closely follow the rules set out in the EU Global Minimum Tax Directive. However, the structure of the draft law is different to both the EU Directive and the GloBE Model Rules.

The end of the Interim Report includes a useful comparison between the draft Swedish law, the OECD Model Rules and the EU Directive. It highlights where the Swedish Law differs from either of these (eg there is no equivalence to Article 2.4.2of the OECD Model Rules in the Swedish law for the carry-forward of excess UTPR top-up tax given the Swedish approach to the UTPR is for a separate tax charge rather than a denial of a deduction).