Nordic Capital execs lose tax case

The private equity firm's executives are set to face substantial tax bills after the Swedish Tax Authority won its case to have carried interest deemed as employment income. It says it will now pursue other private equity houses over their tax affairs.

Previously, the Swedish Tax Authority said individuals working for Nordic Capital owed around SEK 412m in tax on their carried interest. However, reports suggest some individuals could owe as much as SEK 875m.

The case was contested, but now the Swedish Administrative Court has decided that Nordic Capital‘s carried interest is a form of income and subject to income tax. It will mean tax on carried interest would rise from 25% to 56%. Nordic Capital itself would also be liable to pay employee taxes.

Several jurisdictions have made moves to clamp down on carried interest as part of a broader drive to increase tax revenues, though none have gone as far as Sweden. Growing public anger regarding the tax efficiency measures used by big firms, including Amazon and Starbucks, are also putting pressure on governments to act on tax, making carried interest a target.

However, Linklaters tax partner Elizabeth Conway says most governments will not push hard on carried interest. "There is no immediate sign [...] of changes to the tax treatment of carried interest gaining any traction. Carry continues to be taxed favourably in the UK and the US, and the recent French proposals to tax carried interest as employment income have been largely reversed."

Nordic Capital plans to appeal the court's decision.

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• Nordics
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• tax