Nordic Capital tax case could be ruled before year-end

After the first day of hearings, which are closed to the press and public, key Nordic Capital figures involved remained generally positive regarding the developments. "So far we feel that Kammarrätten [the appeals court] is listening and considering our position," said Nordic Capital CFO Klas Tikkanen.

Sources close to the situation said a ruling might be made public before the end of the year, possibly even as early as Christmas. However, a local player told unquote" he deemed the case unlikely to be decided this year.

If NC Advisory loses in the second instance, it intends to appeal to the final court instance and so does Skatteverket, sources have told unquote". This means there could be months until a definitive ruling. Other factors, such as whether another appeal even remains a possibility, also add to the time-frame uncertainty.

NC Advisory's high-profile carried interest case against the Swedish tax authority is viewed as a precedent for other private equity firms in Sweden, due to it being the first in a long line of similar upcoming court proceedings. A ruling in the favour of Skatteverket is expected to have considerable repercussions on the private equity industry in Sweden and the wider Nordic region.

The case rests on whether the proceedings of Swedish private equity firms should continue being taxed at the current capital gains rate of 25%, or at the significantly higher income tax rate of 55%.

Both parties, the tax authority and NC Advisory, held their presentations yesterday and two witnesses, Morgan Olsson and Joakim Karlsson, were called. Today more specific technical questions will be raised and Nordic Capital will call one more witness. The proceedings will be over by the end of the day.

NC Advisory is represented by Sven-Åke Bergqvist and Olle Flykt from Stockholm-based law firm Mannheimer Swartling. Skatteverket, the Swedish tax authority, is assisted by seven legal representatives.

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• Sweden