Swedish carried interest taxation could be dropped

The policy briefing note, issued by the Swedish Ministry of Finance only last month, proposed a hybrid taxation model for carried interest payments. The first SEK 5m would be taxed as standard income at 57% (excluding payroll tax), while any excess of that would be taxed at 30%.

Local press has now reported that the Ministry of Finance fears the proposition lacks parliamentary support, and that the minister of finance is ready to back down. Of the eight parties in the Swedish parliament, only two - the liberals and the moderates - have expressed support for the proposed rules, while the others do not think the proposal goes far enough.

However, while the government stance is that the proposition will raise more tax, the opposition has fiercely criticised the new model as a tax break compared to the tax authority's wish to tax all carried interest as standard income at 57%.

Moreover, concerns have been raised that the proposition, which relied heavily on advice from the Swedish Private Equity and Venture Capital Association (SVCA), is the result of a lobbying campaign by the private equity industry.

The head of the ministry of finance, Hans Lindberg, told Swedish newswire TT that it will reappraise the proposal. He explained that the purpose of the new rules was to raise substantially more tax, and if this is not the case, it might need amendments or be shelved until further notice.

Lindberg, echoing previous concerns by the SVCA, explained that putting the proposal on ice would risk leading to legal uncertainty. If the law is shelved until the next parliament, then it may take 4-5 years before a final verdict on the taxation of carried interest is reached.

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• Topics
• Nordics
• tax
• Sweden