WebJournal on International Taxation in Sweden no 4/2011
by Peter Sundgren
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Det är numera vida bekannt i vart fall bland de skattskyldiga som berörs därav att Sverige under senare tid har ingått ett trettiotal avtal med ett stort antal länder, det senaste och kanske viktigaste med Schweiz, om utlämnande av information till vägledning för beskattning. Den totala sekretess som dessa jurisdiktioner tidigare har iakttagit vad gäller information om de tillgångar som dessa länders banker m.fl. förvaltar och deras vägran att lämna ut information härom till utländska skattemyndigheter har således brutits.
OECD har under lång tid drivit en mycket seg kamp för att förmå världens ”secrecy jurisdictions” att frivilligt samverka i frågor avseende informationsutbyte. Det som under senare år drivit på utvecklingen är den världsvida finanskrisen samt Obama-administrationens målmedvetenhet i frågan. Det är inte rimligt, menar man, att världens alla banker, som ju i stor utsträckning orsakat finanskrisen och lett till att alla länders skattebetalare har fått ta notan härför, samtidigt utgör instrument för de gigantiska skattebedrägerier som pågår i alla skatteparadis jorden runt. Som nedan skall påpekas finns dock anledning att inte låta förväntningarna på de nya skatteavtalen bli alltför höga. Den främsta kritiken inriktar sig på att avtalen endast fungerar ”på begäran” (on request) dvs då en avtalsslutande stat har information som innebär skälig misstanke om att en person har oredovisade tillgångar och inkomster i (just) den andra avtalsslutande staten och därmed begär att myndigheterna i den andra staten skall lämna närmare upplysningar härom. Förslag har därför rests från olika håll, bl a inom EU, att införa regler om automatiskt informationsutbyte. Sverige har ett antal bilaterala överenskommelser om sådant automatiskt informationsutbyte.
Omfattningen av de tillgångar som förvaltas i de aktuella sekretessjurisdiktionerna är av fullständigt gigantiska proportioner. På engelska refererar man till det antal trillioner USD eller GBP som göms undan i de aktuella staterna. Med en trillion avses en million million dvs 1,000,000,000,000 (=tolv nollor). Och det handlar alltså om amerikanska dollar eller engelska pund!1 Även det kapital som man misstänker att i Sverige bosatta privatpersoner gömmer undan utomlands är också av närmast ofattbar storlek. Enligt Skatteverkets rapport 2008:1, ”Skattefelskarta för Sverige” har man räknat fram (bil 2) det ”oförklarade sparandet” utomlands till mellan 300 och 400 miljarder kronor. Om detta räknas om med prisutvecklingen till aktuellt penningvärde hamnar restposten strax över 500 miljarder kronor. Svenskt Näringsliv har dock uppskattat hushållssparandet utomlands till så mycket som ca 900 miljarder. Om det sistnämnda beloppet tas för gott och det svenska befolkningsantalet utgör 9 miljoner betyder detta att varje innevånare i vårt land skulle ha ett hemligt bankkonto utomlands med ett kapital på 100 000 kr !
Ytterligare omständigheter som givit stor uppmärksamhet åt frågan om utlänningars innehav av oredovisade tillgångar i världens alla sekretessjurisdiktioner är de avslöjanden som gjorts av personer som arbetat på banker i vissa av de aktuella staterna s.k.whistleblowers. För ett år sedan överlämnade således en anställd på LTG Bank i Liechtenstein, Heinrich Kieber, datauppgifter till skattemyndigheterna i Tyskland. Kieber fick härför en ersättning på av ca 40 miljoner kronor på vilket han betalade skatt i Tyskland på 20 procent. De tyska skattemyndigheterna skickade därefter (utan krav på ersättning) i sin tur över uppgifter till de svenska skattemyndigheterna betr. i Sverige bosatta kontoinnehavare. Nyligen överlämnade vidare en schweiziskt bankman (med ett samvete), Rudolf Elmer, som var chef för den schweiziska banken Julius Bärs kontor i Cayman Island uppgifter på 2000 kontohavare till Wikileaks under stor massmediebevakning. I USA har man särskilda bestämmelser om s.k. whistle blower awards enligt vilka skattemyndigheterna betalar uppgiftslämnare ersättning på upp till 30 procent av det belopp som skattemyndigheterna tar in på de uppgifter som avslöjas. Se http://www.irs.gov/compliance/article/0,,id=180171,00.html
En ytterligare omständighet som pekar på att banksekretessen börjar vittra sönder runt om i världen och att en förnyad attityd mot att undanhålla pengar i sekretessjurisdiktioner gör sig gällande är att Schweiz nyligen infört en lag, populärt kallad Lex Duvalier, som innebär att pengar som makthavare olagligt lagt beslag på och deponerat i Schweiz beslagtas och återlämnas till landet ifråga. Hosni Mubaraks och hans familjemedlemmars tillgångar i Schweiz blev således nyligen beslagtagna.
Frivilliga rättelser
De nya informationsutbytesavtalen har lett till att ett tilltagande, men i absoluta tal trots allt mycket litet, antal svenskar med undangömda tillgångar utomlands nu börjat bli ängsliga att uppdagas och därför frivilligt önskar göra rättelser av sina taxeringar. Om man gör det slipper man därvid skattetillägg på 40 procent av undanhållen skatt och det straff som kan följa på lagföring enligt skattebrottslagen. Skatteverkets riktlinjer avseende beloppsgränser för skattebrott (beloppen avser undandragen skatt) är 1 prisbasbelopp, vilket för 2010 är 42100 kronor. Beloppet gäller vid varje brottstillfälle, men det kan vara lägre vid upprepad brottslighet eller vid andra särskilda omständigheter. För sådant skattebrott döms till fängelse i högst två år. Om brottet bedöms som ringa döms för skatteförseelse till böter. För grovt skattebrott som anses föreligga då den undandragna skatten överstiger 10 prisbasbelopp, dvs. 4 210 000 kr, döms till fängelse i lägst sex månader och högst sex år.
I vissa länder har man man infört en fullständig skatteamnesti för dem som frivilligt uppger och till hemlandet återför belopp som man olagligt gömt undan utomlands. Man befrias således även från att betala den skatt som skulle ha utgått på de aktuella undanhållna inkomsterna. Detta är emellertid inte fallet här i Sverige även om förslag härom framförts i debatten. Den som frivilligt rättar skall således som ovan nämnts betala den svenska skatt som skulle ha utgått om riktiga uppgifter lämnats i vederbörlig ordning vid rätt tillfälle vilket kan omfatta i förekommande fall de senaste fem åren. Utöver skatten tillkommer kostnadsränta på aktuellt belopp från den dag då ett underskott uppkommit på vederbörandes skattekonto. Det bör vidare påpekas att de nya informationsutbytesavtalen inte medför någon skyldighet för den anmodade staten att driva in medel för de skattekrav som kan uppkomma i Sverige.
Frågan om vad som avses med en frivillig rättelse är emellertid inte alltid så lätt att avgöra. Av den sparsamma praxis som finns och i överensstämmelse med den restriktiva uppfattning som redovisas i förarbetena till lagstiftningen (prop 1971:10 s.269) bygger bestämmelserna på tanken att den uppgiftsskyldige bör ha möjlighet att anses framträda frivilligt så länge han eller hon har anledning att tro att den oriktiga uppgiften inte är upptäckt eller kommer att upptäckas. Om emellertid uppgiften upptäckts eller kommer att upptäckas är det för sent att frivilligt rapportera. Det är inte bara Skatteverkets åtgärder med avseende på en enskild uppgiftsskyldig – så som ett beslut om revision eller en förfrågan som har samband med den oriktiga uppgiften – som innebär att en frivillig rättelse inte längre kan göras. Även kännedom om att Skatteverket ska genomföra generella kontrollaktioner har betydelse. Om den skattskyldige får kännedom om att Skatteverket kommer att kontrollera t.ex. skattetillgodohavanden i utlandet eller vissa typer av transaktioner, är en därefter inkommen rättelse avseende sådana frågor inte att betrakta som frivillig (prop 1971:10, s.270 och RÅ82 1:83).
Enligt Skatteförfarandeutredningens (SOU 2009:21) uppfattning anses dock denna sistnämnda punkt böra ändras. Man föreslår således att även när Skatteverket har informerat om en generell kontrollaktion ska en uppgiftsskyldig kunna rätta en oriktig uppgift utan att drabbas av skattetillägg eller ansvar enligt skattebrottslagen.
En väsentlig fördel, utöver frikallelse från skattetillägg och åtalseftergift, för den som gör bot och bättring genom frivillig rättelse är naturligtvis vidare att de aktuella tillgångarna därefter kan tas i anspråk även i Sverige och användas för investeringar och konsumtion här i landet. Med den kontroll som görs via Riksbanken och banksystemet i övrigt vad gäller gränsöverskridande betalningar är det inte möjligt att till Sverige överföra annat än begränsade undangömda belopp närmare bestämt 150 000 kr per år. Något krav på att pengar i utlandet tas hem till Sverige ställs dock inte. En, som det kan antas, stor fördel med de nya avtalen är vidare den preventiva effekt de kan förväntas ha. De torde sålunda medföra att man i framtiden drar sig för att utnyttja secrecy jurisdictions i utlandet.
De nya informationsutbytesavtalen utgör ett genombrott för att komma tillrätta med den omfattande skattebrottslighet som utnyttjandet av de aktuella skatteparadisens sekretessregler ger upphov till. Man bör dock inte ha alltför stora förväntningar på den effekt de kan komma att få. Som ovan anförts är de nämligen behäftade med väsentliga begränsningar för att få ut information och de berörda staterna kommer säkert inte att implementera dem i större utsträckning än vad som är absolut nödvändigt. En uppgift gör gällande att informationsutbytesavtalet mellan USA och Jersey bara tillämpats vid fyra tillfällen under en tvåårspriod. En återhållande faktor för att träda fram frivilligt är vidare att många skattskyldiga trots allt tycker att priset att betala den aktuella skatten och räntan därpå är alltför högt samt vidare att i vissa fall att det aktuella kapitalet är hänförligt till kriminell verksamhet och att avslöjandet därmed kan föranleda lagföring för annan olaglig verksamhet än skattebrott. Metoderna för att även i fortsättningen undgå upptäckt är också talrika. De banker och andra specialister som i åratal tjänat stora pengar på att mörklägga sina klienters tillgångar kommer således inte att kasta in handduken pga av de nya avtalen.
Information endast ”på begäran”.
Den kanske största begränsningen i informationsutbytesavtalens effektivitet är, vilket ovan redan påpekats, att information endast lämnas på begäran beträffande en namngiven person och där skälen för att anta att de begärda upplysningarna finns i den anmodade staten eller innehas eller kontrolleras av person inom denna stats jurisdiktion måste redovisas. Man kan således inte (på måfå) utan angivande av den aktuella personens identitet ägna sig åt s.k. ”fishing expeditions” för att få information enligt de aktuella avtalen. Det anförda betyder alltså att våra skattemyndigheter för att tillämpa de nya avtalen måste ha tillgång till en hel del konkreta uppgifter om den aktuella personens ekonomiska förhållanden innan uppgifter överhuvudtaget kan inhämtas. Insikten om att detta i hög grad begränsar de aktuella informationsutbytesavtalens effektivitet har gjort att man från olika håll framför allt inom EU lagt fram förslag om att införa gemensamma bestämmelser om automatiskt informationslämnande, se http://www.taxresearch.org.uk/Blog/2010/12/15/europe-heralds-new-era-of-tax-transparency/. Även inom den amerikanska senaten har röster höjts för införande av automatiskt uppgiftslämnande.
Informationsseminarium om frivilliga rättelser
Frågor omkring frivillig rättelse och tillämpningen av de nya skatteavtalen diskuterades för en tid sedan vid ett mycket välbesökt seminarium i Stockholm anordnat av Skatteverkets huvudkontor. (Det är inte mindre än det fjärde seminariet som av olika arrangörer har anordnats härom i Stockholm sedan december 2009.)
Medverkande från Skatteverkets huvudkontor sida var Vilhelm Andersson, rättschef, Thomas Andersson, rättslig expert avseende internationell beskattning, Eva Alm Bloom, rättslig expert avseende skattetillägg, Erik Viktorin, rättslig expert avseende offentlighet och sekretess, Claes Engren, rättslig samordnare samt Leif Rosenfeld, verksamhetsutvecklare. Dessutom deltog Staffan Andersson, skattechef hos Erik Penser Bankaktiebolag samt Erik Haglund, skatterådgivare hos Haglund & Partners i Göteborg. De två sistnämnda för att lämna upplysning om det ca 100-tal ärenden om frivilliga rättelser de handlagt för sina klienter.
Av dessa sistnämndas inledande kommentarer framgick för övrigt ånyo de svindlande belopp det hela handlar om. Det totala kapital som således fördelades på det ovan nämnda hundratalet skattskyldiga som lämnade frivilliga rättelser uppgick till ca 1.5 miljarder kronor. Dvs i genomsnitt 150 miljoner kr per person! Skattekostnaden för de avgivna rättelserna uppgavs ha varierat mellan 0 och 15 procent, som regel dock sällan över 10 procent. I genomsnitt kan den betalda skatten per skattskyldig om man utgår från sistnämnda procentsats därför beräknas ha uppgått till 15 miljoner kronor, (vilket om skatten förutsätts utgöra skatt på kapital och avser eftertaxeringar på fem år, motsvarar en undanhållen inkomst på 10 miljoner kronor per år). Detta kommenterades lakoniskt av Erik Haglund med att de berörda inkomsttagarna efter sina frivilliga rättelser fortfarande kunde ”skratta hela vägen till banken”. För en 'vanlig' inkomsttagare som kanske inte betalar så mycket skatt sammanlagt över en hel livscykel och vars undanhållande kan förtjäna ett fängelsestraff på upp till sex år ter sig ett sådant förhållningssätt måhända en aning vulgärt.
En väsentlig del av seminariet upptogs av frågor hur redovisningen av undanhållna inkomster skulle gå till och vad denna skulle omfatta. Detta kom att handla även om så speciella frågor som behandling av CFC-bolag, Lex Uggla, kapitalförvaltning/värdepapprershandel samt avräkning och återbetalning av utländsk och svensk kupongskatt. Trots kompliciteten i de frågor som här väcktes kan principiellt och sammanfattningsvis sägas att innehållet i en frivillig rättelse skall omfatta alla de inkomster och all den redovisning som vederbörande skulle ursprungligen ha lämnat i sin självdeklaration om en sådan hade inlämnats på vederbörligt sätt och vid rätt tidpunkt. Uppgiftsskyldigheten och skattemyndigheternas intresse för rättelsen ifråga omfattar således dels frågan om hur och när kapitalet har intjänats om det skett under den aktuella femårsperioden för att därmed kunna fastställa rätt inkomstskatt, dels hur mycket kapitalet avkastat i form av räntor, utdelningar, reavinster m.m. för fastställande av rätt kapitalskatt. För vissa år aktualiseras också svensk förmögenhetsskatt. Om kapitalet skapats genom ett arv eller en mottagen gåva kan svensk arvs- och gåvoskatt härpå också bli aktuellt.
Utländska truster och stiftelser
En fråga som vid seminariet tilldrog sig särskilt intresse var vidare beskattningen av truster och familjestiftelser i de aktuella skatteparadisen. Den skatterättsliga behandlingen av dessa rättsfigurer, som notoriskt används i stor omfattning i skatteundandragande syfte i dessa sammanhang, omgärdas av stor osäkerhet framför allt i den icke-anglosachsiska världen. Däremot utgör de i den engelsktalande kultursfären en naturlig del av dessa länders rättssystem. Någon har sagt att ”trusts are unknown in half the world and indispensable in the other half”. Och varje gång de dyker upp bekräftas att de belopp som förvaltas i dem är enorma.2 Detta har bl.a. att göra med att truster kräver anlitande av dyr juridisk och ekonomisk expertis och inte är intressanta att använda sig av annat än när fråga är om att inrätta sådana med betydande kapital.
Av diskussionen vid seminariet framgick att frivilliga rättelser vad avsåg truster hade aktualiserats vid flera tillfällen. Beskedet som gavs var att Skatteverket i samtliga fall hade ”sett igenom” trusten och beskattat den som upprättat den (settlor) för dess inkomster. Om således en i Sverige bosatt person (settlor) bildat en utländsk stiftelse eller trust och till denna överfört tillgångar av viket slag det vara må kommer regelmässigt stiftelsen/trustens kapital och avkastningen härå att tas till beskattning hos denne settlor. Därtill kommer att överföringen av tillgångarna i förekommande men förmodligen få fall också utlöser svensk arvs- eller gåvoskatt. Den ”genomsyn” som skett vid beskattningen av utländska stiftelser/truster som hade aktualiserats vid frivilliga rättelser berodde på att bildandet av dessa inte uppfyllde de krav som gäller för bildandet av en svensk stiftelse. Staffan Andersson nämnde i detta sammanhang att han för sin del endast haft erfarenhet av en enda trust som kunde anses ha upprättats på ett sätt som motsvarade en svensk stiftelse. Några invändningar mot skatteverkets genomsyn av de aktuella trustbildningarna hade av allt att döma inte rests i de aktuella fallen.
Detta något överraskande besked medförde att mina förväntningar på en diskussion om i vilken mån trustbildningar skulle behandlas i samband med frivilliga rättelser därför kom på skam. Som ovan påpekats kan nämligen utländska truster och stiftelser utgöra ett mycket användbart instrument för att avskilja kapitalet från beskattning hos trustens settlor eller beneficiärer (bosatta i Sverige) på ett sådant sätt att skattskyldighet inte uppkommer i Sverige. En stor fördel som ur skattesynpunkt numera har uppstått beträffande etablerandet av utländska truster etc. är att de inte längre föranleder något uttag av svensk arvs- eller gåvoskatt sedan dessa skatter avskaffades för ett antal år sedan. Som ovan just påpekats har bildandet av utländska truster tidigare föranlett svensk arvs- och gåvobeskattning vilket i praktiken medfört att sådana etableringar omöjliggjorts eller åtminstone inte kunnat rekommenderas ur skattesynpunkt3. Numera är alltså detta hinder borttaget.
I det meddelande 2010-11-01 (se nedan) som upprättats av Skatteverket i anledning av seminariet anges under rubriken (på sid. 4): ”Har de utländska tillgångarna placerats i en trust, foundation eller liknande utländsk associationsform” att tillgångar och intäkter i en sådana rättsfigurer skall redovisas i samband med den frivilliga rättelsen. Den springande punkten i detta uttalande är emellertid frågan om vad som menas med att man ”har tillgångar” i trusten ifråga. Den avgörande frågan, vilket också påpekades vid seminariet, är huruvida tillgångarna ifråga som ovan just antytts från svensk utgångspunkt har ”avskiljts” från settlors förmögenhet eller inte. För att så skall anses ha skett krävs nämligen att tillgångarna slutligt och ovillkorligen överlämnats till trusten för förvaltning av trustee samt att settlor (eller honom närstående) aldrig kan tillgodogöra sig dem eller förfoga över dem. Om sålunda ett ovillkorligt överlämnande av egendomen har skett till trusten eller den utländska stiftelsen och vederbörande settlor avhänt sig varje möjlighet till bestämmande över kapitalet så är egendomen avskiljd så anses settlor inte längre vara ägare till egendomen och skall inte beskattas för de inkomster som trusten haft. Med hänsyn till att trustlagarna i många secrecy jurisdictions är ganska liberala när det gäller att tillåta settlor ett inflytande i trustens förvaltning från settlors sida är det nödvändigt att i varje enskilt fall och genom en noggrann undersökning av ”the trust deed” fastställa om kapitalet i trusten faktiskt avskiljts permanent från settlor i ekonomiskt hänseende. Om så inte skett kan man, som ovan nämnts, ”se igenom” trustbildningen vilken därmed kan anses utgöra en skatterättslig nullitet. Settlor skall då anses som (fortsatt) ägare till kapitalet och beskattas därefter för både förmögenheten (i förekommande fall) och för den avkastning som skett av kapitalet. Många gånger är, som framgick vid seminariet, sannolikt att det sistnämnda förhållandet ett faktum. Eller är det någon som tror att Ingvar Kamprad skulle låta slussa in vad som anges vara 100 miljarder till ”sin” stiftelse i Liechtenstein och samtidigt överge kontrollen däröver? Observera vidare att den ovan angivna genomsynsregimen för beskattning av truster också omfattar utlänningar som bor i Sverige och som är settlors eller beneficiärer till utländska truster och stiftelser (även om de bildats innan bosättning skett här i landet). Även denna kategori kan naturligtvis också bli föremål för utredning om eventuellt förekommande tillgångar i utlandet.
Vad gäller möjligheterna till insyn från skattemyndigheternas sida i utländska truster enligt de nya informationsutbytesavtalen gäller följande. De omfattar inte bara en skyldighet för den anmodade staten att lämna uppgifter om en specificerad persons ägarförhållanden utan även vad avser tillgångar i truster, stiftelser o. dyl. samt dess stiftare, förvaltare, förmånstagare och ”protectors” i den mån trusten härigenom har 'anknytning till Sverige. I praktiken kan det dock vara svårt för denna stat att över huvud taget fastställa vem som är förvaltare (trustee)och vem som är den som har insyn i trustens angelägenheter. Ofta kan denna funktion handhas av särskilda anonyma ”trust companies” som förvaltar tusentals truster vilket därigenom omöjliggör ett fastställande av stiftarnas och beneficiärernas identitet. En ytterligare sekretessbarriär är att lagstiftningen i den aktuella staten, Cayman Islands och Jersey utgör exempel härpå, stipulerar att truster inte behöver registreras varigenom de inte har någon juridisk identitet.4Ytterligare problem med att få fram information är att settlor, trusteen samt beneficiärerna ofta är hemmahörande i kanske tre olika jurisdiktioner och att tillgångarna finns i en fjärde eller fler stater. En del truster har to.m. så kallade”flight clauses” enligt vilka trusteen vid första tecken på förestående utredning har uppdragits att flytta tillgångarna i trusten till en annan jurisdiktion. Såsom framgår torde det alltså i många fall vara omöjligt att fastställa vem som är trustens settlors, beneficiärer eller trustees helt enkelt pga att skattemyndigheterna i det aktuella landet inte har tillgång till informationen. Av det anförda illustreras hur de nya informationsutbytesavtalen i praktiken inte torde utgöra några större problem för personer med goda resurser och rymliga samveten!
Trots detta borde i det angivna meddelande från Skatteverket vad gäller frivilliga rättelser avseende truster anges att information skall lämnas härom av alla i Sverige bosatta personer som någon gång bildat en utländsk trust eller liknande samt också av alla här bosatta beneficiärer till utländska truster.
Skatteverket har inrättat en central funktion för att handlägga alla ärenden om frivilliga rättelser. Om man har frågor är man välkommen att kontakta de särskilda kontaktpersonerna: Margareta Lindgren 010-574 34 15, Ida Potages 010-574 16 55 eller Mats Åbom 010-547 11 93.
Vid seminariet utdelades som ovan nämnts särskild ”Information om frivillig rättelse avseende tidigare oredovisade tillgångar och inkomster i utlandet t.ex. i skatteparadis” (Meddelande 2010-11-01). Den återfinns på nätet på följande länk: https://docs.google.com/viewer?a=v&pid=gmail&attid=0.1&thid=12c3bc0f14c5d756&mt=application/pdf&url=https://mail.google.com/mail/?ui%3D2%26ik%3D62f7fdf809%26view%3Datt%26th%3D12c3bc0f14c5d756%26attid%3D0.1%26disp%3Dattd%26zfe%3Dwindows-1252:sv%26zw&sig=AHIEtbQx_171gsyqd0IODD3A8ZBQeCa8kA&pli=1
Nytt (informationsutbytes)skatteavtal m.m. med Schweiz
När det gäller undangömda och obeskattade tillgångar i utlandet är Schweiz utan jämförelse och sedan lång tid det land som gjort sig mest beryktat av alla. Det är i själva verket det land som framstår som banksekretessens moderland. Men nu (sedan den 28 februari 2011) har även detta land (motvilligt som det kan förmodas) ”tvingats” krypa till korset och träffat ett informationsutbytesavtal med Sverige. Enligt uppgifter i medierna och av uttalanden från skattemyndigheterna är huvuddelen av ärendena om frivillig rättelse sådana som berör Schweiz. Någon har beräknat att antalet svenskar med tillgångar i Schweiz uppgår till ca. 75 000.
Avtalet är inte ett rent informationsutbytesavtal utan presenteras som ett tilläggsprotokoll till det tidigare avtal för undvikande av dubbelbeskattning som Sverige har med Schweiz sedan 1965. Innehållet i de nya artiklar som berör informationsutbytet är i princip detsamma som ovan redovisats. Information kan således inhämtas på begäran av Sverige beträffande särskilt namngivna personer bosatta i Sverige beträffande vilka det kan visas att rimlig misstanke föreligger om att de har tillgångar undangömda i Schweiz. Inga ”fishing expeditions” tillåts således. Rent generellt, och något som kan antas gälla alla sekretessjurisdiktioner som nu ”tvingats ut i ljuset”, kan det förmodas att schweizarna kommer att tillämpa informationsutbytesreglerna med betydligt mindre entusiasm än svenskarna. (Och antalet förfrågningar riktade till Sverige kan med säkerhet väntas bli noll!) Man kan nog förmoda att alla de aktuella stater med vilka vi nyligen träffat avtal kommer att vara restriktiva i sina tolkningar av avtalens bestämmelser och benägna att förhala processerna.
Utöver informationsutbyte innehåller avtalet för i Schweiz bosatta pensionärer oförmånliga nyheter. Efter vad som tidigare, men det är länge sedan nu, givit upphov till mycket starka, ja man kan säga bittra strider mellan Sverige och Schweiz vad gäller beskattningen av svenska pensioner som betalas till Schweiz har Sverige nu gått segrande ur striden. Nämnda pensioner, livräntor och liknande ersättningar oavsett om de betalas pga av tidigare anställning eller inte skall om de härrör från svenskt (försäkrings)företag beskattas primärt i Sverige. Om man efter utflyttningen till Schweiz har bibehållit sådan väsentlig anknytning till Sverige att man enligt intern skatterätt anses (kvar)bosatt i Sverige utgår skatt både statligt och kommunalt (i utflyttningskommunen). Annars är skatten 25% enligt den s k SINK-lagstiftningen som avser här icke bosatta personer. Liksom tidigare beskattas också utbetalningar enligt svensk socialförsäkringslagstiftning primärt i Sverige. Den svenska skatten får sedan räknas av mot schweizisk skatt. (I den senaste budgetpropositionen aviseras att SINK-skatten skall sänkas till 20 procent.)
Den andra stora nyheten i avtalet är vidare att Sverige nu delvis kan göra gällande sin tioårsregel som tillåter att svensk skatt uttas på aktievinster även om aktieägaren flyttar till utlandet och därefter säljer aktierna. Enligt det nu gällande avtalet skall vinsten bara beskattas i Schweiz om aktieägaren har hemvist där vilket alltså sätter vår interna tioårsregel ur spel. Enligt det nya avtalet har dock Sverige avtalat sig till primär beskattningsrätt i denna situation men regeln är begränsad på så sätt att ”karenstiden” i avtalet nedsatts till fem år och att beskattningen endast träffar personer som vid utflyttningen var svenska medborgare. Det bör observeras att femårsperioden räknas fr o m den tidpunkt då aktieägaren får hemvist i Schweiz enligt avtalet. (Se nedan beträffande ändring i hemvistartikeln.) Detta svenska beskattningsanspråk på aktievinster har också varit en långkörare i vår skatteavtalshistoria. Tioårsregeln infördes nämligen redan 1983 varvid riksdagen uttalade att våra avtalsförhandlare, vilka de flesta numera är antingen döda eller pensionerade, skulle med kraft driva kravet på källstatsbeskattning av aktievinster i förhandlingar med våra avtalsländer. Nu, 28 år senare och efter säkert många miljoner i skattebastapp, går man äntligen i mål vad gäller Schweiz.
En viktig ytterligare nyhet i det nya avtalet är vidare att den sk treårsregeln i artikel 25 § 2 försvinner. Den har inneburit att Sverige beträffande personer som flyttar till Schweiz och har en bibehållen ”väsentlig anknytning” till Sverige enligt intern svensk rätt inte kan få skydd under avtalets hemvistregler under tre år efter utflyttningen. Svenska bosättningsregler gäller således oavsett att den utflyttade enligt avtalets regler (artikel 4 §§ 1-2) kan anses ha hemvist i Schweiz. Denna, vad man skulle kunna kalla svenska ”bosättningskarantänen” försvinner alltså i det nya avtalet.
När den svenska riksdagen godkänt avtalet och även Schweiz vidtagit motsvarande åtgärder utväxlas meddelande mellan staterna härom, något som kan väntas ske senast i höst. Det nya avtalet träder därefter i kraft trettio dagar därefter vilket också kan väntas ske i höst. Avtalets bestämmelser börjar i så fall tillämpas fr o m 1 januari 2012.
Beträffande informationsutbytet föreligger en skrivning om ikraftträdandet som i en särskild situation kan ge upphov till en problematisk tolkning. Följande föreskrivs: ”Detta protokoll skall tillämpas...d) beträffande artikel 27 (Utbyte av upplysningar) i avtalet, på begäran som framställs dagen för ikraftträdandet av detta protokoll eller senare, och som avser upplysningar som hänför sig till kalenderår som börjar den 1 januari det år som följer närmast efter den dag då detta protokoll undertecknades eller senare”.
Sverige kan således om vi ponerar att avtalet börjar tillämpas fr.o.m. 1 januari 2012 bara begära upplysningar som hänför sig till detta datum eller senare. Om den aktuella personen dessförinnan har avslutat sina konton i en schweizisk bank och tagit ut sina pengar därifrån och det således beträffande upplysningar som hänför sig till kalenderåret som börjar den 1 januari 2012 inte finns någon upplysning att lämna kan således Schweiz avböja att lämna sådana. Och vederbörande kan således, med den tolkning av avtalet som här gjorts, undvika upptäckt. Problemet för den skattskyldige blir dock vad han skall göra med alla pengar han tagit ut från Schweiz. Att sätta in dem på en bank i någon annan stat blir svårt eftersom denna sannolikt också har ett informationsutbytesavtal med Sverige!
Avtalet skall enligt ett pressmeddelande följas upp med ytterligare åtgärder. Vad som härmed avses är oklart men man kan gissa att det handlar om att skapa förenklade administrativa rutiner vad gäller informationsutbytet.
Avslutande synpunkter
Det är naturligtvis viktigt att på alla sätt uppmuntra alla skattskyldiga med utländska oredovisade tillgångar och inkomster att frivilligt inkomma med rättelser av sina taxeringar. Som ”morot” för sådana rättelser erbjuds ju som ovan redovisats att frikallelse sker från att betala skattetillägg och åtalseftergift medges för skattebrott. Därutöver får vederbörande också avräkning för de skatter de betalat utomlands. För att ytterligare driva på denna utveckling bör Skatteverket som första åtgärd anamma de rekommendationer som OECD nyligen framlagt i en rapport: ”A Framework for Successful Offshore Voluntary Compliance Programmes (September 2010)” som just tar sikte på åtgärder som bör implementeras med anledning av de nya informationsutbytesavtalen. (Några upplysningar om denna OECD-rapport lämnades något överraskande inte vid seminariet).
Av de ovan angivna uppgifterna om omfattningen av utomlands förekommande utländska oredovisade tillgångar framgår att det som tagits fram genom frivilliga rättelser hittills utgör bara en bråkdel av vad som vad som fortfarande göms undan utomlands. Det räcker därför inte att slå sig till ro med att passivt bara förlita sig på att berörda inkomsttagare frivilligt skall inkomma med rättelser av sina deklarationer. Incitamenten för att fortsätta att ”mörka” sina utländska tillgångar och möjligheterna att lyckas härmed är betydande.
Utöver åtgärder för att förmå de skattskyldiga att frivilligt göra rätt för sig behövs därför även tvingande åtgärder för att komma tillrätta med det internationella skattefusket.OECD har på senare tid utgivit ytterligare en rapport under rubriken ”Tackling Aggressive Tax Planning through Improved Transparency and Disclosure”. I rapporten visas hur man i England genom införandet för några år sedan av ”early mandatory disclosure rules” uppdagade och genom motåtgärder förhindrade 49 olika skatteflyktsupplägg som sparade statskassan ca 12 miljarder GBP. Rapporten tar också särskilt sikte på beskattningen av ”high net wealth individuals” och behovet att beträffande denna kategori inkomsttagare få fram information som grund för korrekta taxeringar. Man erinrar om det ofantliga skattesvinn som förekommer ibland hundratals miljoner dollar i enstaka eller strukturerade transaktioner. En rekommendation som lämnas är att upprätta särskilda frågeformulär och deklarationsbilagor för speciella kategorier skattskyldiga. En sådan kategori skulle just kunna vara personer med utländska inkomster och tillgångar i utlandet. Skyldigheten att avge sådana uppgifter skulle vidare, som fallet är i USA, kunna kombineras med vitesklausuler. Deklarerandet av utländska inkomster är för övrigt alltid behäftat med speciella problem. En särskild deklarationsbilaga för sådana ändamål omfattande även arbetsinkomster, sexmånadersregeln, tillämpning av tioårsregeln, bostads- och aktievinster, skatteavtalstillämpning m.m skulle således kunna vara av stor hjälp för berörda skattskyldiga. Nya Zealand rapporterar goda effekter av olika typer av frågeformulär som kan göras administrativt flexibla och förenklar skatterevisioner samt bidrar till frivilligt uppgiftslämnande i syfte att undvika straffavgifter och skattetillägg. I sin doktorsavhandling ”Corporate Form and International Taxation of Box Corporations” framhåller Roland Dahlman de brister som finns i skatteavtalens informationsutbytesklausuler och understryker, låt vara i en något annan kontext, behovet av mer effektiva interna regler för att få fram adekvat information för att åstadkomma riktiga taxeringar.
Ett ytterligare förslag för att komma tillrätta med det internationella skattesvinnet: Sverige har som ovan påpekats ett antal, men ganska få, bilaterala avtal om automatiskt uppgiftslämnande av kontrolluppgifter i skatteärenden. Ytterligare sådana avtal bör ingås med andra länder. Redan en begäran om upptagande av förhandlingar om sådana avtal torde ha en preventiv effekt på skattskyldiga som funderar på att gömma tillgångar utomlands samt uppmuntra dem att göra frivilliga rättelser.
Även om det internationella informationsutbytet och åtgärder för att komma till rätta med världens alla secrecy jurisdictions har haft vissa framgångar på senare tid bör dock hållas i minnet att det finns mäktiga krafter som önskar motverka all transparans när det gäller skatter. På webbsiten http://www.taxjustice.blogspot.com rapporteras bl.a. om de något tragikomiska erfarenheter man nyligen haft i Brasilien avseende en mycket effektiv Transaction Tax: "The special interests in Brazil finally got rid of the Transaction Tax because -- are you ready -- it was so dependable and automated, they could not cheat and evade it like with VAT and income tax." Och uppgiften nyligen om att Österrikes tidigare finansminister Karl-Heinz Grasser åkt fast för att han inte deklarerat utländska inkomster på 20 000 euro och är under utredning om att ha parkerat 3 miljoner euro i Liechtenstein vittnar också om att frågan om komma tillrätta med det internationella skattefusket inte alltid torde stå så högt på den politiska agendan i praktiken. Och den tidigare chefsekonomen för Skandinaviska Enskilda Banken Klas Eklund kan inte anses ha bidragit till en önskvärd opinionsbildning när han i sin för ett antal år sedan utgivna bok ”Jakten på den försvinnande skatten” ansåg att sparare med depåer och bankkonton i Luxemburg som faktiskt tog upp dessa i sina deklarationer var ”naiva”!
Stockholm i maj 2011
peter@sundgren.net
tisdag 31 maj 2011
Appraisal of the Tax Law for Foreign Experts (the “Expert Tax Law”, ETL) (and further considerations regarding tax roll-overs). (Re-print)
WebJournal on International Taxation in Sweden no 4/2011
by Peter Sundgren (October 2007)
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In Sweden there are two tax payer categories that are granted special exemptions from State Tributes (skattefrälsen) – lingonberry pickers and foreign experts.
The tax breaks in a nut shell regarding this latter mentioned category under the ETL (chapter 11 paragraphs 22-23 of the Income Tax Law) are afforded only to foreign nationals employed by Swedish employers or foreign employers with permanent establishments in Sweden for a period of maximum three years who, after approval by the so called Scientist’s Tax Board (Forskarskattenämnden), are classified as experts/key personnel/company managers or scientists. The (normal) Swedish income tax in these cases and social security charges in these cases are based on only 75% of the gross income of the employee. Certain fringe benefits are tax free altogether. The total reduction of taxes and social security charges over a three year period, see below, amounts to about one and a quarter million SEK, the tax free benefits not included.
Some time ago the ETL was discussed at a tax seminar arranged by Deloitte, Stockholm the purpose being to draw conclusions from the application of the law since its entry into force on 1 January 2001. Keynote speakers were Elise Adelsköld, Johan Sander and Olle Kinnman from Deloitte, Pia Ahlfors of Astra Zeneca, Lennart Tottie from the Scientist’s Tax Board and Kerstin Nyqvist of the Federation of Swedish Enterprise (Svenskt Näringsliv).
The purpose of the ETL is to improve Sweden’s tax competitiveness in relation to our neighbour states, to provide incentives for enterprises, to maintain leading functions of Swedish groups of companies in Sweden, to offer better wage opportunities adapted to the world market and to promote the establishment in Sweden of scientific research and development programs. The means herefor is “to reduce wage costs of Swedish companies in order to enable them to provide net of tax wages to foreign expertise adapted to the world market” 1. The reason herefor is “that the determination of wages for this category of personnel is based on after, or net-of-tax considerations which can be very expensive for employers where such wages give rise to increased taxation which must be compensated by still higher wages etc.…”2
There was a general consensus between the panelists that the ETL during its first years had been a flop. The law had thus not lived up to its expectations to reduce taxes and social security charges in order to facilitate the employment of foreign expertise. This, (which I announced), dovetailed also the conclusions drawn in a recent 50 page report by the Swedish Institute for Growth Policy Studies (Institutet för Tillväxtpolitiska Studier, www.itps.org). The result of this report indicated that the ETL does not seem to have influenced the choice of foreign expertise to move to Sweden. Nor has the recruitment by Swedish enterprises been dependant on the existence of the ETL. Instead foreign experts were attracted to come to Sweden more for the purpose of making a career. Almost fifty percent of the companies involved in the ITPS investigation concluded that the Swedish rules for attracting foreign experts were less favorable than those of other countries. They asserted, however, that, in the near future, there would be a considerable demand for recruiting foreigners and that, therefore, the legislation should be maintained despite its shortcomings during its initial period of existence.
Lennart Tottie who is the secretary of the Researchers’ Tax Committee (Forskarskattenämnden) provided some interesting statistical data, e.g. that the average wage amount for those who had been granted expert tax status was app. 800 000 SEK and that the number of applications that had been approved was around 600 per year. The total annual cost to the treasury could thus be established at about 150 million SEK.
Kerstin Nyqvist from The Federation of Swedish Enterprise, who had recently been appointed a regular member of the Scientist's Tax Committee, was probably the harshest critic of the present structure of the ETL which she considered almost impossible to apply in practice. On the website of the Federation of Swedish Enterprise (www.svensktnaringsliv.se) she has concluded that the regime is erratic and unpredictable especially with regard to the determination of the term “key personnel”. She recommended that our system be exchanged for the type of legislation adopted by Denmark where foreigners who take up employment there for a period of three years are granted an especially favorable tax rate of 25 percent on gross income if they earn a minimum annual salary of 785 000 DKR. (The interviewees in the ITPS’ study had also noted the advantages of the Danish system concluding, however, that it rewarded the very highly paid experts but were unfavorable to low paid scientists.)
At the concluding discussion of the seminar I expressed my disappointment that it had completely ignored the widespread application of the practice granted by the Supreme Administrative Court ruling RÅ 1991 not. 53 according to which Swedish (tax) residents (irrespective of nationality) employed by foreign employers who do not have permanent establishments in Sweden and who consequently are not subject to the normal pay-as-you-earn tax payment regime as Swedish companies, can benefit from being taxed only on their disposable current (net) income upon which the ensuing income tax amount is subjected to tax only in the following year (of tax assessment.) This tax regime, nick-named “tax roll-overs”, gives rise to tax and social security advantages, which, depending on the wage amount and the progression of the tax rate, are quite considerable. I underlined that a discussion or a seminar devoted to the study of the tax consequences of how to furnish high-earning foreign expertise with favorable tax conditions in order to recruit them to Sweden without taking into consideration the tax roll-over regime was incomplete and of little meaning. If the tactics of this method were used to its full extent the complaints that had been raised at the seminar about the characterization of the Swedish tax system as an obstacle to the recruitment of foreign experts was less convincing.3
At the seminar two further problems of a technical character came up to discussion but were never fully resolved. One of these addressed the problem of deferred wage payments to foreign experts (efterskottsbetalningar), the other the definition in the ETL of the term “employer”. Both of these problems had in fact given rise to serious contemplation by the tax authorities in their published opinions (styrsignaler) under the headings “Efterskottsbetalningar till “expatriater” (Deferred payments to “expatriates”) which, however had been superseded by “Deferred payments to foreign key personnel” (Efterskottsbetalningar till utländska nyckelpersoner m.fl.) (2006-05-18 dnr. 131 320553-06/11) and “Are payments from other than Swedish employers comprised by decisions of the Researchers’ Tax Committee?” (Omfattas utbetalningar från annan än den svenska arbetsgivaren av beslut från Forskarskattenämnden?), (2005-06-17, dnr. 130 352766-05/111).
The purpose of the following discussion is to further analyze these problem areas and will reveal that they contain considerable tax planning opportunities as well as, in both cases, EU tax considerations. With regard to the uncertainty of the definition of the term employer, tax roll-overs will also come into renewed focus.
Deferred wage payments.
In this context a deferred wage payment is understood as a payment made to an ETL-expert where the payment is made after the elapse of the three year period during which tax benefits are granted under this regime. In its first opinion the tax authorities concluded that such payments should not be given tax benefits of the ETL. However, after a subsequent ruling by the Supreme Administrative Court, which overturned the tax authority opinion, they naturally issued a new opinion to this effect.
At the seminar I broached the question whether or not this would apply also to a situation where the expert/employee had left Sweden and thereafter received his deferred payment. In such a case he/she would no longer be resident in Sweden and thus not subject to unlimited tax liability under The Income Tax Law (ITL) but instead under the special income tax law for Foreign residents (Lagen om statlig inkomstskatt för utomlands bosatta, SINK). Under this tax regime employment income is taxed on a gross basis and taxed at a flat rate of tax of 25 percent. As mentioned above this question was not fully resolved at the seminar but the tax authorities have subsequently determined that deferred wage payments of this kind shall indeed also be covered by ETL benefits. Tax on such payments shall thus be subject to 25 percent on 75 percent of the payment, consequently an effective tax of 18.75 percent.
Moreover, EU residents under certain circumstances are entitled to choose whether they desire to be taxed under the ITL or the SINK. It can, however, be assumed that only under very special circumstances will it be more favourable to choose ITL taxation. Or, in other words, it is highly unlikely to achieve a tax under the ITL that beats the SINK-taxation! It can be expected that the ruling on the above discussed deferred payments will give rise to all sorts of tax planning techniques such as loan transactions etc. whereby payments to foreign experts will be deferred to a point in time where they can benefit from the 18.75 percent rate.
The definition of the term “employer”.
In her presentation at the seminar Elise Adelsköld discussed the above mentioned opinion by the tax authorities according to which ETL treatment is afforded only to wage payments made by Swedish employers and by foreign employers that have a permanent establishment in Sweden. Only if it can be clearly demonstrated, the tax authorities have concluded, that the wage payment has been made on behalf of a Swedish employer will ETL benefits be granted. Consequently the Swedish employer shall bear the effective cost and be entitled to a deduction here for and shall also pay the social security charges.
Ms Adelsköld pointed out, however, and with some emphasise too, that this was “only” the (non-binding) opinion of the tax authorities and that there was in her opinion an uncertainty as to whether foreign employer payments should be excluded from ETL treatment. However, she did not provide any precise explanation as to why the tax authority opinion could be rejected. Johan Sander pointed out that the restrictions of the ETL only allowing benefits to wage payments made by Swedish employers or foreign employers with permanent establishments in Sweden constituted an unfortunate application of the law. As an example he referred to a situation of a foreign group company who had established head office functions in another Scandinavian country and who had experts sent out to work in Sweden where the employer did not have a permanent establishment and who could thus not enjoy expert tax status.
It is difficult to understand on what grounds the opinion of the tax authorities is incorrect. The wording of the provision itself seems quite clear and the preparatory works to the ETL point out that in order for to qualify for ETL benefits it is necessary that the employer be established in Sweden in such a manner that it is liable here to corporate taxation. The key condition for determining tax liability in Sweden of a foreign enterprise is precisely that a permanent establishment exist here. The term “belongs here” (höra hemma här) is also the normal Swedish term for expressing unlimited tax liability in Sweden for corporate bodies. Important too is of course the employment contract between the parties obliging the employer to pay wages to the employee for services rendered. A “payor” of such wages as such does not automatically qualify him as an employer for ETL tax purposes. As pointed out by the tax authorities the “payor” of the wages performs only a service on behalf of the true employer, (a service which also gives rise to an (arm’s length) payment from this employer to the payor).
It remains a mystery, however, why the legislator has disqualified foreign employers from the ETL benefits. The main purpose of this regime, one would think, is to provide as favourable conditions as possible for the employment of foreign experts as such in Sweden. So what difference does it make who is the employer? Why restrict the application of the law only to situations where Swedish employers are involved? By enabling foreigners employed by foreign enterprises without permanent establishments in Sweden to take advantage of the ETL one would gain the further advantage that the corporate tax base is not reduced by the wage costs and social security charges!
A problem regarding the restriction of the ETL to apply only to Swedish employers – and here Elise Adelsköld could have a point - is that it could be considered a discrimination of foreign experts employed in Sweden by foreign and especially EU based companies. Or, in other words, why should not an EU resident employee with an EU employer be entitled to the benefits under the ETL? Mr Sander pointed out that the “the employer problem” would be challenged in court.
Joint application of the ETL and tax roll-overs.
A development of the application of the ETL along the lines promoted by Johan Sander, i.e. encompassing also employment by foreign enterprises without permanent establishments in Sweden would no doubt represent a wet dream of every international tax practitioner. The reason here for is that one could then apply both the ETL and tax roll-overs at the same time! The basis for operating the roll-overs is precisely that a foreign employer without a permanent establishment – under specific provisions supplied by the tax authorities - is not obliged to deliver pay-as-you-earn (preliminary) wage taxes. Only if he has a permanent establishment in Sweden does this obligation click into operation. Thus, by offering a foreign ETL expert employment in Sweden a tax roll-over contract, only 75 percent of both the net income in the year when it was derived and the tax thereon which is payable and subject to tax in the following year would be taxable under the ETL treatment. The tax roll-over would thus add a “turbo-effect” to the ETL regime! The outcome of the court decision in this respect is therefore awaited with great interest.
The ETL will apply in many cases especially for persons who work for large international group companies and who are sent out to Sweden for a period of time to work for the Swedish subsidiary. In these cases it is quite easy to arrange his or her employment situation so that he/she maintains his employment in the foreign company instead of the Swedish company in order to take advantage of both the ETL and the roll-over. If the foreign expert is not employed by a group company it may be possible to recruit him/her through a foreign hiring-out-of-personnel company in order to achieve the same result.
Expert tax and tax roll-overs in numbers.
The following calculation will give an approximate idea of the wage and social security amounts to be paid by the employer with the application of the ETL and tax roll-overs, (and a possible combination thereof), based on the average annual (gross) income of 800 000 SEK (as determined by the Researchers’ Tax Committee.)
Granted ETL status the social security charge (at 33%) will be based on 600 000 SEK (= 75% of 800 000). The combined wage amount and the social security charge is 998 000 SEK annually. Over three years 2 994 000 SEK.
In the above case the tax to be paid by the expert employee (also based on 600 000 SEK) would be app. 257 000 SEK and his net income would thus be 543 000 SEK (=800 000 – 257 000 SEK).
If the ETL is not applicable because the employer is foreign based and does not have a permanent establishment in Sweden and if the above annual level of net income is agreed with the employee to be a fair income for the work performed in Sweden, the application of the tax roll-over method over a three year period would cost the foreign employer approximately 3 500 000 SEK.
If the ETL and the tax roll-over method could be jointly applied (i.e. allowing ETL treatment also to a foreign employer without a permanent establishment in Sweden) the total wage and social security charge for the employer over three years would fall to app. 2 780 000 SEK.
(In order to give a Swedish (expert) employee, on whom neither ETL nor tax roll-over treatment is applicable, an equal after tax income, the employer’s wage and social security cost over three years would rise to about 4 250 000 SEK.)
Concluding remarks.
The advance ruling in RÅ 1991 not 53, in my opinion is based on a misunderstanding of the underlying construction of the roll-over employment contract. (Incidentally the Court did not bother to inspect the complete employment contract.) The determination of the salary of the employee – which seems also to be the conclusion of the Advance Rulings Board in this tax case - is based on factors that are all known at the conclusion of the contract i.e. the level of the net income, the tax amount and progression of the tax rates in both Sweden and the hypothetical tax that would have applied in the homeland of the foreigner if he had remained and worked there. The employment contract does thus not contain any unknown elements or risks that would prevent the correct assessment of the gross income already in the year during which it is derived. If the employee should die or quit his job after the conclusion of his stay in Sweden he would still be entitled to an imbursement from his employer for the tax amount on his (previous) net income. His income is thus rightly derived and its gross amount is factually known (faktiskt förvärvad och till sitt belopp känt) as soon as the net amount is paid out. And this is the key definition of our cash principle that triggers tax liability with regard to employment income. The tax roll-over is an anachronism giving rise to a temporary deduction of income tax. The subsequent payment of tax also gives rise to repetitive and further tax roll-overs ad infinitum after the conclusion of the tax payer’s sojourn in Sweden. The analysis by the tax authorities of the Supreme Court case is a submissive conclusion that the outcome thereof “seems to rest on the wording/structure of the employment contract”.
Tax roll-overs, in my opinion, represent a degenerate form of tax planning that corrupts the tax system. It is unfair and provides unforeseen and unwarranted tax advantages allowing a certain group of tax payers to enjoy a standard of living at a fraction of the tax cost that applies to other tax payers. The legislator, after a lot of hand-wringing, has adopted specific tax breaks for foreign experts under the ETL ostensibly with the purpose that only this system shall apply. The tax roll-over system also distorts tax competition to the detriment of Swedish employers that cannot benefit there from. A further complication is that it is very difficult to detect in the normal tax assessment procedure.
It is the task of the tax authorities – this at least was something that applied at the time (quite long ago) when I worked there – to promote “a uniform and fair taxation in our country”. In no way do tax roll-overs conform here to. The tax authorities should therefore as soon as possible initiate proceedings to abolish tax roll-overs by legislation or otherwise.4 This in fact is very easy to accomplish! They have only to decree that foreign employers too– in accordance with the Law on Tax Payments (skattebetalningslagen), paragraph 5, subparagraphs 1-5 – shall make (normal) preliminary (pay-as-you earn) tax payments on behalf of their employees in Sweden!
The seminar gave no indication as to the expected future development of the ETL. A representative of the finance department who was present at the seminar expressed his concern that, due to the prevailing shortcomings and problems regarding this legislation, certain large Swedish group companies such as Ericsson had even given up applying for ETL status of their foreign experts. As mentioned above Kerstin Nyqvist of the Federation of Swedish Enterprise suggested that Sweden, in order to strengthen its competitiveness in attracting foreign personnel, should introduce legislation similar to that existing in Denmark and which had also been officially proposed to the new alliance (‘tory’) government. As expressed in the report by the ITP such a model would be a great idea for high-earning experts and key personnel but be a disadvantage for young scientists with low salaries. Considering the prevailing emotional debate going on in Sweden regarding the tax favours that in the recent past have already been showered to persons with high incomes and to capital owners it would probably be politically sensitive to give further tax breaks to the type of tax payers discussed in this article.
peter@sundgren.net
by Peter Sundgren (October 2007)
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In Sweden there are two tax payer categories that are granted special exemptions from State Tributes (skattefrälsen) – lingonberry pickers and foreign experts.
The tax breaks in a nut shell regarding this latter mentioned category under the ETL (chapter 11 paragraphs 22-23 of the Income Tax Law) are afforded only to foreign nationals employed by Swedish employers or foreign employers with permanent establishments in Sweden for a period of maximum three years who, after approval by the so called Scientist’s Tax Board (Forskarskattenämnden), are classified as experts/key personnel/company managers or scientists. The (normal) Swedish income tax in these cases and social security charges in these cases are based on only 75% of the gross income of the employee. Certain fringe benefits are tax free altogether. The total reduction of taxes and social security charges over a three year period, see below, amounts to about one and a quarter million SEK, the tax free benefits not included.
Some time ago the ETL was discussed at a tax seminar arranged by Deloitte, Stockholm the purpose being to draw conclusions from the application of the law since its entry into force on 1 January 2001. Keynote speakers were Elise Adelsköld, Johan Sander and Olle Kinnman from Deloitte, Pia Ahlfors of Astra Zeneca, Lennart Tottie from the Scientist’s Tax Board and Kerstin Nyqvist of the Federation of Swedish Enterprise (Svenskt Näringsliv).
The purpose of the ETL is to improve Sweden’s tax competitiveness in relation to our neighbour states, to provide incentives for enterprises, to maintain leading functions of Swedish groups of companies in Sweden, to offer better wage opportunities adapted to the world market and to promote the establishment in Sweden of scientific research and development programs. The means herefor is “to reduce wage costs of Swedish companies in order to enable them to provide net of tax wages to foreign expertise adapted to the world market” 1. The reason herefor is “that the determination of wages for this category of personnel is based on after, or net-of-tax considerations which can be very expensive for employers where such wages give rise to increased taxation which must be compensated by still higher wages etc.…”2
There was a general consensus between the panelists that the ETL during its first years had been a flop. The law had thus not lived up to its expectations to reduce taxes and social security charges in order to facilitate the employment of foreign expertise. This, (which I announced), dovetailed also the conclusions drawn in a recent 50 page report by the Swedish Institute for Growth Policy Studies (Institutet för Tillväxtpolitiska Studier, www.itps.org). The result of this report indicated that the ETL does not seem to have influenced the choice of foreign expertise to move to Sweden. Nor has the recruitment by Swedish enterprises been dependant on the existence of the ETL. Instead foreign experts were attracted to come to Sweden more for the purpose of making a career. Almost fifty percent of the companies involved in the ITPS investigation concluded that the Swedish rules for attracting foreign experts were less favorable than those of other countries. They asserted, however, that, in the near future, there would be a considerable demand for recruiting foreigners and that, therefore, the legislation should be maintained despite its shortcomings during its initial period of existence.
Lennart Tottie who is the secretary of the Researchers’ Tax Committee (Forskarskattenämnden) provided some interesting statistical data, e.g. that the average wage amount for those who had been granted expert tax status was app. 800 000 SEK and that the number of applications that had been approved was around 600 per year. The total annual cost to the treasury could thus be established at about 150 million SEK.
Kerstin Nyqvist from The Federation of Swedish Enterprise, who had recently been appointed a regular member of the Scientist's Tax Committee, was probably the harshest critic of the present structure of the ETL which she considered almost impossible to apply in practice. On the website of the Federation of Swedish Enterprise (www.svensktnaringsliv.se) she has concluded that the regime is erratic and unpredictable especially with regard to the determination of the term “key personnel”. She recommended that our system be exchanged for the type of legislation adopted by Denmark where foreigners who take up employment there for a period of three years are granted an especially favorable tax rate of 25 percent on gross income if they earn a minimum annual salary of 785 000 DKR. (The interviewees in the ITPS’ study had also noted the advantages of the Danish system concluding, however, that it rewarded the very highly paid experts but were unfavorable to low paid scientists.)
At the concluding discussion of the seminar I expressed my disappointment that it had completely ignored the widespread application of the practice granted by the Supreme Administrative Court ruling RÅ 1991 not. 53 according to which Swedish (tax) residents (irrespective of nationality) employed by foreign employers who do not have permanent establishments in Sweden and who consequently are not subject to the normal pay-as-you-earn tax payment regime as Swedish companies, can benefit from being taxed only on their disposable current (net) income upon which the ensuing income tax amount is subjected to tax only in the following year (of tax assessment.) This tax regime, nick-named “tax roll-overs”, gives rise to tax and social security advantages, which, depending on the wage amount and the progression of the tax rate, are quite considerable. I underlined that a discussion or a seminar devoted to the study of the tax consequences of how to furnish high-earning foreign expertise with favorable tax conditions in order to recruit them to Sweden without taking into consideration the tax roll-over regime was incomplete and of little meaning. If the tactics of this method were used to its full extent the complaints that had been raised at the seminar about the characterization of the Swedish tax system as an obstacle to the recruitment of foreign experts was less convincing.3
At the seminar two further problems of a technical character came up to discussion but were never fully resolved. One of these addressed the problem of deferred wage payments to foreign experts (efterskottsbetalningar), the other the definition in the ETL of the term “employer”. Both of these problems had in fact given rise to serious contemplation by the tax authorities in their published opinions (styrsignaler) under the headings “Efterskottsbetalningar till “expatriater” (Deferred payments to “expatriates”) which, however had been superseded by “Deferred payments to foreign key personnel” (Efterskottsbetalningar till utländska nyckelpersoner m.fl.) (2006-05-18 dnr. 131 320553-06/11) and “Are payments from other than Swedish employers comprised by decisions of the Researchers’ Tax Committee?” (Omfattas utbetalningar från annan än den svenska arbetsgivaren av beslut från Forskarskattenämnden?), (2005-06-17, dnr. 130 352766-05/111).
The purpose of the following discussion is to further analyze these problem areas and will reveal that they contain considerable tax planning opportunities as well as, in both cases, EU tax considerations. With regard to the uncertainty of the definition of the term employer, tax roll-overs will also come into renewed focus.
Deferred wage payments.
In this context a deferred wage payment is understood as a payment made to an ETL-expert where the payment is made after the elapse of the three year period during which tax benefits are granted under this regime. In its first opinion the tax authorities concluded that such payments should not be given tax benefits of the ETL. However, after a subsequent ruling by the Supreme Administrative Court, which overturned the tax authority opinion, they naturally issued a new opinion to this effect.
At the seminar I broached the question whether or not this would apply also to a situation where the expert/employee had left Sweden and thereafter received his deferred payment. In such a case he/she would no longer be resident in Sweden and thus not subject to unlimited tax liability under The Income Tax Law (ITL) but instead under the special income tax law for Foreign residents (Lagen om statlig inkomstskatt för utomlands bosatta, SINK). Under this tax regime employment income is taxed on a gross basis and taxed at a flat rate of tax of 25 percent. As mentioned above this question was not fully resolved at the seminar but the tax authorities have subsequently determined that deferred wage payments of this kind shall indeed also be covered by ETL benefits. Tax on such payments shall thus be subject to 25 percent on 75 percent of the payment, consequently an effective tax of 18.75 percent.
Moreover, EU residents under certain circumstances are entitled to choose whether they desire to be taxed under the ITL or the SINK. It can, however, be assumed that only under very special circumstances will it be more favourable to choose ITL taxation. Or, in other words, it is highly unlikely to achieve a tax under the ITL that beats the SINK-taxation! It can be expected that the ruling on the above discussed deferred payments will give rise to all sorts of tax planning techniques such as loan transactions etc. whereby payments to foreign experts will be deferred to a point in time where they can benefit from the 18.75 percent rate.
The definition of the term “employer”.
In her presentation at the seminar Elise Adelsköld discussed the above mentioned opinion by the tax authorities according to which ETL treatment is afforded only to wage payments made by Swedish employers and by foreign employers that have a permanent establishment in Sweden. Only if it can be clearly demonstrated, the tax authorities have concluded, that the wage payment has been made on behalf of a Swedish employer will ETL benefits be granted. Consequently the Swedish employer shall bear the effective cost and be entitled to a deduction here for and shall also pay the social security charges.
Ms Adelsköld pointed out, however, and with some emphasise too, that this was “only” the (non-binding) opinion of the tax authorities and that there was in her opinion an uncertainty as to whether foreign employer payments should be excluded from ETL treatment. However, she did not provide any precise explanation as to why the tax authority opinion could be rejected. Johan Sander pointed out that the restrictions of the ETL only allowing benefits to wage payments made by Swedish employers or foreign employers with permanent establishments in Sweden constituted an unfortunate application of the law. As an example he referred to a situation of a foreign group company who had established head office functions in another Scandinavian country and who had experts sent out to work in Sweden where the employer did not have a permanent establishment and who could thus not enjoy expert tax status.
It is difficult to understand on what grounds the opinion of the tax authorities is incorrect. The wording of the provision itself seems quite clear and the preparatory works to the ETL point out that in order for to qualify for ETL benefits it is necessary that the employer be established in Sweden in such a manner that it is liable here to corporate taxation. The key condition for determining tax liability in Sweden of a foreign enterprise is precisely that a permanent establishment exist here. The term “belongs here” (höra hemma här) is also the normal Swedish term for expressing unlimited tax liability in Sweden for corporate bodies. Important too is of course the employment contract between the parties obliging the employer to pay wages to the employee for services rendered. A “payor” of such wages as such does not automatically qualify him as an employer for ETL tax purposes. As pointed out by the tax authorities the “payor” of the wages performs only a service on behalf of the true employer, (a service which also gives rise to an (arm’s length) payment from this employer to the payor).
It remains a mystery, however, why the legislator has disqualified foreign employers from the ETL benefits. The main purpose of this regime, one would think, is to provide as favourable conditions as possible for the employment of foreign experts as such in Sweden. So what difference does it make who is the employer? Why restrict the application of the law only to situations where Swedish employers are involved? By enabling foreigners employed by foreign enterprises without permanent establishments in Sweden to take advantage of the ETL one would gain the further advantage that the corporate tax base is not reduced by the wage costs and social security charges!
A problem regarding the restriction of the ETL to apply only to Swedish employers – and here Elise Adelsköld could have a point - is that it could be considered a discrimination of foreign experts employed in Sweden by foreign and especially EU based companies. Or, in other words, why should not an EU resident employee with an EU employer be entitled to the benefits under the ETL? Mr Sander pointed out that the “the employer problem” would be challenged in court.
Joint application of the ETL and tax roll-overs.
A development of the application of the ETL along the lines promoted by Johan Sander, i.e. encompassing also employment by foreign enterprises without permanent establishments in Sweden would no doubt represent a wet dream of every international tax practitioner. The reason here for is that one could then apply both the ETL and tax roll-overs at the same time! The basis for operating the roll-overs is precisely that a foreign employer without a permanent establishment – under specific provisions supplied by the tax authorities - is not obliged to deliver pay-as-you-earn (preliminary) wage taxes. Only if he has a permanent establishment in Sweden does this obligation click into operation. Thus, by offering a foreign ETL expert employment in Sweden a tax roll-over contract, only 75 percent of both the net income in the year when it was derived and the tax thereon which is payable and subject to tax in the following year would be taxable under the ETL treatment. The tax roll-over would thus add a “turbo-effect” to the ETL regime! The outcome of the court decision in this respect is therefore awaited with great interest.
The ETL will apply in many cases especially for persons who work for large international group companies and who are sent out to Sweden for a period of time to work for the Swedish subsidiary. In these cases it is quite easy to arrange his or her employment situation so that he/she maintains his employment in the foreign company instead of the Swedish company in order to take advantage of both the ETL and the roll-over. If the foreign expert is not employed by a group company it may be possible to recruit him/her through a foreign hiring-out-of-personnel company in order to achieve the same result.
Expert tax and tax roll-overs in numbers.
The following calculation will give an approximate idea of the wage and social security amounts to be paid by the employer with the application of the ETL and tax roll-overs, (and a possible combination thereof), based on the average annual (gross) income of 800 000 SEK (as determined by the Researchers’ Tax Committee.)
Granted ETL status the social security charge (at 33%) will be based on 600 000 SEK (= 75% of 800 000). The combined wage amount and the social security charge is 998 000 SEK annually. Over three years 2 994 000 SEK.
In the above case the tax to be paid by the expert employee (also based on 600 000 SEK) would be app. 257 000 SEK and his net income would thus be 543 000 SEK (=800 000 – 257 000 SEK).
If the ETL is not applicable because the employer is foreign based and does not have a permanent establishment in Sweden and if the above annual level of net income is agreed with the employee to be a fair income for the work performed in Sweden, the application of the tax roll-over method over a three year period would cost the foreign employer approximately 3 500 000 SEK.
If the ETL and the tax roll-over method could be jointly applied (i.e. allowing ETL treatment also to a foreign employer without a permanent establishment in Sweden) the total wage and social security charge for the employer over three years would fall to app. 2 780 000 SEK.
(In order to give a Swedish (expert) employee, on whom neither ETL nor tax roll-over treatment is applicable, an equal after tax income, the employer’s wage and social security cost over three years would rise to about 4 250 000 SEK.)
Concluding remarks.
The advance ruling in RÅ 1991 not 53, in my opinion is based on a misunderstanding of the underlying construction of the roll-over employment contract. (Incidentally the Court did not bother to inspect the complete employment contract.) The determination of the salary of the employee – which seems also to be the conclusion of the Advance Rulings Board in this tax case - is based on factors that are all known at the conclusion of the contract i.e. the level of the net income, the tax amount and progression of the tax rates in both Sweden and the hypothetical tax that would have applied in the homeland of the foreigner if he had remained and worked there. The employment contract does thus not contain any unknown elements or risks that would prevent the correct assessment of the gross income already in the year during which it is derived. If the employee should die or quit his job after the conclusion of his stay in Sweden he would still be entitled to an imbursement from his employer for the tax amount on his (previous) net income. His income is thus rightly derived and its gross amount is factually known (faktiskt förvärvad och till sitt belopp känt) as soon as the net amount is paid out. And this is the key definition of our cash principle that triggers tax liability with regard to employment income. The tax roll-over is an anachronism giving rise to a temporary deduction of income tax. The subsequent payment of tax also gives rise to repetitive and further tax roll-overs ad infinitum after the conclusion of the tax payer’s sojourn in Sweden. The analysis by the tax authorities of the Supreme Court case is a submissive conclusion that the outcome thereof “seems to rest on the wording/structure of the employment contract”.
Tax roll-overs, in my opinion, represent a degenerate form of tax planning that corrupts the tax system. It is unfair and provides unforeseen and unwarranted tax advantages allowing a certain group of tax payers to enjoy a standard of living at a fraction of the tax cost that applies to other tax payers. The legislator, after a lot of hand-wringing, has adopted specific tax breaks for foreign experts under the ETL ostensibly with the purpose that only this system shall apply. The tax roll-over system also distorts tax competition to the detriment of Swedish employers that cannot benefit there from. A further complication is that it is very difficult to detect in the normal tax assessment procedure.
It is the task of the tax authorities – this at least was something that applied at the time (quite long ago) when I worked there – to promote “a uniform and fair taxation in our country”. In no way do tax roll-overs conform here to. The tax authorities should therefore as soon as possible initiate proceedings to abolish tax roll-overs by legislation or otherwise.4 This in fact is very easy to accomplish! They have only to decree that foreign employers too– in accordance with the Law on Tax Payments (skattebetalningslagen), paragraph 5, subparagraphs 1-5 – shall make (normal) preliminary (pay-as-you earn) tax payments on behalf of their employees in Sweden!
The seminar gave no indication as to the expected future development of the ETL. A representative of the finance department who was present at the seminar expressed his concern that, due to the prevailing shortcomings and problems regarding this legislation, certain large Swedish group companies such as Ericsson had even given up applying for ETL status of their foreign experts. As mentioned above Kerstin Nyqvist of the Federation of Swedish Enterprise suggested that Sweden, in order to strengthen its competitiveness in attracting foreign personnel, should introduce legislation similar to that existing in Denmark and which had also been officially proposed to the new alliance (‘tory’) government. As expressed in the report by the ITP such a model would be a great idea for high-earning experts and key personnel but be a disadvantage for young scientists with low salaries. Considering the prevailing emotional debate going on in Sweden regarding the tax favours that in the recent past have already been showered to persons with high incomes and to capital owners it would probably be politically sensitive to give further tax breaks to the type of tax payers discussed in this article.
peter@sundgren.net
Tax roll-overs and foreign expert tax benefits
WebJournal on International Taxation in Sweden no 4/2011
Tax roll-overs and (foreign) expert tax benefits
by Peter Sundgren
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In a ruling last year that has attracted very little attention the Swedish Supreme Administrative Court (the Court), unwittingly perhaps, has paved the way for very interesting international tax planning opportunities for certain foreigners employed in Sweden. The issue as such that came up before the Court appears quite trivial and it is at first sight quite difficult to understand why the tax payer and his tax adviser (Ernst & Young) have taken the trouble of litigating what spontaneously appeared to be such a trifling matter all the way to the court of the highest instance.
The case focused on our so called expert tax regime concerning a foreign citizen who was employed as as managing director of a Swedish subsidiary of a German (parent) company. He was considered such an ”expert” that qualified him for the benefits available under our foreign expert tax regime. The most important tax break in such cases is that only 75 percent of wages paid out to such experts is subject to Swedish income tax. This amount also constitutes the base for social security charges.
Due to what was considered ”administrative reasons” it had been agreed that the German parent company should make the payments of the salaries to its Swedish subsidiary's managing director. For undisclosed reasons this would make it easier for him to cover certain costs arising in Germany during his stay in Sweden.
The problem with this arrangement, however, was that the expert tax provisions explicitly apply only to experts with Swedish employers which of course normaly makes the payments of salaries to its employees. The situation was further complicated by the fact that under chapter 1 paragraph 6 of the Swedish Tax Payments Act (skattebetalningslagen) the term employer is determined to be the person that makes the payment of the salaries in question.
It was established that the German (parent) company would charge its Swdish subsidiary for its salary disbursments and that consequently the final cost herefor would be borne by this latter company.
The tax authorities, all along, maintained that expert tax priviledges should be denied due to the explicit requirement that such priviledges only apply where the employer was Swedish and that the the employer was the person who actually made the salary payments. As already mentioned the Court, however, ruled in favour of the tax payer. Subsequently the tax authorities in a letter ruling (ställningstagande) no 130 352766-05/111 have confirmed that ”in cases where it is clearly established that salary payments have been made intermediately by a foreign payor on instructions by and on account of a Swedish employer the recipient of the salary may still be eligible for expert tax benefits”.
Comments:
As mentioned above it difficult to figure out why it was so crucial that the salary payments should be made by the German company. In our present digitalized world with deregulated finance markets one would imagine that it would be quite easy for the employee in Sweden himself to take care of simple cash payments and bank transactions also crossborder, especially within the EU. And for the Swedish (real) employer it would also be most uncomplicated, one would imagine, to include its managing director too in the normal wage payment routines of the company. Using the foreign parent company for such purposes appears complicated and costly. Such an arrangement would incur additional costs for the Swedish company for services provided by the forign company. Considering too that such payments are not at arm's length the payments must take transfer pricing problems into account. The Swedish company may also incur foreign exchange costs when reimbursing the foreign parent company. And this company may also have to charge interest for payments made in arrears. So therefore, again, why (on earth) litigate such a trivial problem as this all the way to the Supreme Court?
The answer hereto is no doubt the following: By adopting a salary payment regime as described it is possible to combine the benefits of the expert tax regime with the widespread system allowing foreign citizens with foreign employers on so called tax roll-over contracts subjecting the employee to tax only on his net-of-tax salary received from his employer. Only when the tax, based on this net amount, is assessed as a final tax in the subsequent year, does this tax amount become taxable together with the (net) salary received by the employee for this same year. The tax attributable to the net income received by the employee in the current year is thus ”rolled over” to the subsequent year. Or in other words, the tax payer enjoys a (temporary) deduction for a tax assessed on a his net income! Considering too that the final tax is paid quite late in the year of assessment of tax these tax roll-over arrangements also give rise to a considerable interest saving. (Sweden is so far as is known the only country allowing tax roll-over arrangements of this kind.).
But how (on earth) – which every wage earner would ask himself – has the preliminary pay-as-you-earn-tax which every employer must withhold and pay already in the current year been eliminated.
As such this amount must surely be added to the taxable (net) income received in that year by the employee!
The answer hereto is, however, quite simple: Foreign employers, in this case the German parent company, of Swedish resident employees subject to world wide taxation, are exempted from making current preliminary tax payments! This has been explicitly and independently decreed by the Swedish Tax Authorities. Despite it beeing in conflict with the Tax Pyments Act which does not provide any such exemption for foreign employers. According to certain sources foreign employers will sometimes actually make voluntary preliminary tax payments but will not include the amount as taxable income when subsequenly reporting the salary payments.
The bottom line is thus that a foreigner who works in Sweden on a tax roll-over contract and who also qualifies as an expert by the Scientist Tax Board (Forskarskattenämnden) will pay tax on only 75 percent of his cash salary. He thus enjoys double benefits, partly under established tax practise as regards tax roll-overs and partly under the expert tax provisions. And his employer (in Sweden)will pay social security charges on that same amount.
A couple of years ago when reporting from a seminar held by Deloitte, Stockholm, it was lamented that expert tax benefits were not available for foreign companies' experts in Sweden. I suggested that such a regime combined with tax roll-overs represented a wet dream for all tax practitioners. That dream has now come true! This report is re-printed below.
The Swedish government has announced that the expert tax regime shall be widened to allow benefits automatically to all foreigners with monthly earning of two base amounts (basbelopp) and above, currently 85 600 SEK. This round of legislation should then give an opportunity to reconsider the above reported combination of the expert tax and tax roll-overs.
Stockholm June 2011
peter@sundgren.net
Tax roll-overs and (foreign) expert tax benefits
by Peter Sundgren
-------------------------------------------------------------------------------------
In a ruling last year that has attracted very little attention the Swedish Supreme Administrative Court (the Court), unwittingly perhaps, has paved the way for very interesting international tax planning opportunities for certain foreigners employed in Sweden. The issue as such that came up before the Court appears quite trivial and it is at first sight quite difficult to understand why the tax payer and his tax adviser (Ernst & Young) have taken the trouble of litigating what spontaneously appeared to be such a trifling matter all the way to the court of the highest instance.
The case focused on our so called expert tax regime concerning a foreign citizen who was employed as as managing director of a Swedish subsidiary of a German (parent) company. He was considered such an ”expert” that qualified him for the benefits available under our foreign expert tax regime. The most important tax break in such cases is that only 75 percent of wages paid out to such experts is subject to Swedish income tax. This amount also constitutes the base for social security charges.
Due to what was considered ”administrative reasons” it had been agreed that the German parent company should make the payments of the salaries to its Swedish subsidiary's managing director. For undisclosed reasons this would make it easier for him to cover certain costs arising in Germany during his stay in Sweden.
The problem with this arrangement, however, was that the expert tax provisions explicitly apply only to experts with Swedish employers which of course normaly makes the payments of salaries to its employees. The situation was further complicated by the fact that under chapter 1 paragraph 6 of the Swedish Tax Payments Act (skattebetalningslagen) the term employer is determined to be the person that makes the payment of the salaries in question.
It was established that the German (parent) company would charge its Swdish subsidiary for its salary disbursments and that consequently the final cost herefor would be borne by this latter company.
The tax authorities, all along, maintained that expert tax priviledges should be denied due to the explicit requirement that such priviledges only apply where the employer was Swedish and that the the employer was the person who actually made the salary payments. As already mentioned the Court, however, ruled in favour of the tax payer. Subsequently the tax authorities in a letter ruling (ställningstagande) no 130 352766-05/111 have confirmed that ”in cases where it is clearly established that salary payments have been made intermediately by a foreign payor on instructions by and on account of a Swedish employer the recipient of the salary may still be eligible for expert tax benefits”.
Comments:
As mentioned above it difficult to figure out why it was so crucial that the salary payments should be made by the German company. In our present digitalized world with deregulated finance markets one would imagine that it would be quite easy for the employee in Sweden himself to take care of simple cash payments and bank transactions also crossborder, especially within the EU. And for the Swedish (real) employer it would also be most uncomplicated, one would imagine, to include its managing director too in the normal wage payment routines of the company. Using the foreign parent company for such purposes appears complicated and costly. Such an arrangement would incur additional costs for the Swedish company for services provided by the forign company. Considering too that such payments are not at arm's length the payments must take transfer pricing problems into account. The Swedish company may also incur foreign exchange costs when reimbursing the foreign parent company. And this company may also have to charge interest for payments made in arrears. So therefore, again, why (on earth) litigate such a trivial problem as this all the way to the Supreme Court?
The answer hereto is no doubt the following: By adopting a salary payment regime as described it is possible to combine the benefits of the expert tax regime with the widespread system allowing foreign citizens with foreign employers on so called tax roll-over contracts subjecting the employee to tax only on his net-of-tax salary received from his employer. Only when the tax, based on this net amount, is assessed as a final tax in the subsequent year, does this tax amount become taxable together with the (net) salary received by the employee for this same year. The tax attributable to the net income received by the employee in the current year is thus ”rolled over” to the subsequent year. Or in other words, the tax payer enjoys a (temporary) deduction for a tax assessed on a his net income! Considering too that the final tax is paid quite late in the year of assessment of tax these tax roll-over arrangements also give rise to a considerable interest saving. (Sweden is so far as is known the only country allowing tax roll-over arrangements of this kind.).
But how (on earth) – which every wage earner would ask himself – has the preliminary pay-as-you-earn-tax which every employer must withhold and pay already in the current year been eliminated.
As such this amount must surely be added to the taxable (net) income received in that year by the employee!
The answer hereto is, however, quite simple: Foreign employers, in this case the German parent company, of Swedish resident employees subject to world wide taxation, are exempted from making current preliminary tax payments! This has been explicitly and independently decreed by the Swedish Tax Authorities. Despite it beeing in conflict with the Tax Pyments Act which does not provide any such exemption for foreign employers. According to certain sources foreign employers will sometimes actually make voluntary preliminary tax payments but will not include the amount as taxable income when subsequenly reporting the salary payments.
The bottom line is thus that a foreigner who works in Sweden on a tax roll-over contract and who also qualifies as an expert by the Scientist Tax Board (Forskarskattenämnden) will pay tax on only 75 percent of his cash salary. He thus enjoys double benefits, partly under established tax practise as regards tax roll-overs and partly under the expert tax provisions. And his employer (in Sweden)will pay social security charges on that same amount.
A couple of years ago when reporting from a seminar held by Deloitte, Stockholm, it was lamented that expert tax benefits were not available for foreign companies' experts in Sweden. I suggested that such a regime combined with tax roll-overs represented a wet dream for all tax practitioners. That dream has now come true! This report is re-printed below.
The Swedish government has announced that the expert tax regime shall be widened to allow benefits automatically to all foreigners with monthly earning of two base amounts (basbelopp) and above, currently 85 600 SEK. This round of legislation should then give an opportunity to reconsider the above reported combination of the expert tax and tax roll-overs.
Stockholm June 2011
peter@sundgren.net
onsdag 18 maj 2011
A scientific study on the taxation of 'emigrating' capital gains, (Utflyttningsbeskattning av kapitalökningar)
A scientific study on the taxation of 'emigrating' capital gains. (Utflyttningsbeskattning av kapitalökningar.)
by Peter Sundgren
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In 1983 Sweden adopted its first emigration tax regime imposing Swedish tax claims on share gains derived by shareholders migrating abroad if the sale of the shares takes place within ten years of the shareholder's departure from Sweden. This rule is therefore called the ten year rule and is embedded in chapter 3 section 19 of the Swedish Income Tax Law.
In an international context legislation of this type is by no means extraordinary. It can be found in many other countries. The rationale for Sweden's tax claim on migrating share gains is manifested (and repeated) e.g. in a government report SOU 2005:99 page 210 when it came up for renewed investigation by the conclusion that the aquisition of the shares may have been financed by loans and that the deductible interest thereon reflects the expectation of taxable annual returns and capital appreciation. Moreover, as far as controlled or closely held share holdings are concerned, dividends and capital gains can be considered to be a deferred taxation of company profits resulting from the labour performed by Swedish resident owners of the company. Originally the ten year rule only applied to the sale of shares issued by Swedish companies (and other specified Swedish securities) but was extended as of 2008 to cover also shares issued by foreign companies (if they had been aquired while the shareholder was resident in Sweden).
It is no exaggeration to say that the ten year rule (together with its interaction with our tax treaties) has become one of the most contentious and controversial rules of the Swedish international tax regime. Considering our relatively high capital (gains) tax of 30 percent and, with regard to closely held company shares, the so called 3:12 rules, which can push the gains into very high marginal income tax brackets, it is no surprise that this taxation has become the target of intense tax planning for shareholders moving abroad. Litigation has been quite intensive, applications for advance rulings very numerous and the number of articles written on this topic has been very large.
In other parts of the world, and one does not need to travel very far, there are a number of tax jurisdictions that levy very low or even non-existent capital gains taxes on share sales. Many of these countries have tax treaties with Sweden conferring the sole right of tax on such gains on the residence country. By moving to such a country and then realising the gain the Swedish tax can thus be avoided. In such an environment where also personal mobility is unrestricted it is tempting for Swedish shareholders to move from Sweden (at least for some time) if they stand to gain a couple of million Swedish crowns. (If also, which is quite common, he is retiring from active occupation, and under a tax treaty can achieve a reduced taxation of his Swedish pension income this of course will also ”sweeten the deal”).
The tax planning techniques that have been adopted in the past to avoid the tax under the ten year rule have been very ingenious and successful mainly, as just mentioned, because our tax treaties confer sole taxing rights on share gains on the residence state i.e. the state to which the shareholder has decided to move. A number of our treaties after lengthy periods of negotiation have, however, secured Swedish source taxation but new holding company strategies and careful planning and timing of transactions have circumvented these obstacles (see below). Since becoming a member of the EU the principles of free movement of individuals and capital have provided new opportunities for further tax avoidance schemes. Also, the abandonment of our foreign exchange rules (in 1989) has played into the hands of migrating shareholders.
The present circumvention technique of the ten year rule is to set up a holding company somewhere in the EU – Cyprus with its low corporate tax rate has become a favourite jurisdiction for this purpose - and then to transfer the Swedish (target) company at aquisition cost to a foreign holding company which can be done tax free under our new participation taxation regime. The shareholder then moves to a (low or no-tax) jurisdiction which as far as capital gains are concerned has a tax treaty with Sweden denying Swedish source taxation of the gains.
The erosion over the years of the Swedish capital gains tax base due to manipulations of the ten year rule has been massive. I repeat, massive. The Tax Administration have reported billions of Swedish crowns escaping the country and repeatedly called for stricter legislation. Consequently the present situation is very lucrative for the international tax planning community1 which together with their clients thus represent a strong force in favour of a status quo.
The Swedish legislator, whatever his political colour, in high-flown rhetoric, has always proclaimed his mission to defend the Swedish tax base. The counteracting measures that have been taken in practice to prevent the abuse of the ten year rule have, however, been lethargic and ineffective. The following example which became a hot issue in 2007 is revealing. It ocurred with respect to Sweden's tax treaty with Austria. In 1992, fifteen years earlier, I repeat fifteen years, Austria had introduced a step-up mechanism regarding capital gains taxation whereby the aqusition price of the shares was tied to their value at the date of immigration of the shareholder to Austria. In this situation, where Austria under the tax treaty with Sweden had sole taxing rights to the gain, an immediate subsequent sale by the shareholder would relieve him from tax not only in Sweden but also in Austria, i.e. a double non-taxation situation. A new treaty had been initialled already in 1995 but still in 2007 – that, ladies and gentlemen, is twelve years later - treaty discussions had not been finalised! According to the Tax Administration the tax loss to the Swedish treasury only in the three years 2004-06 amounted to some three billion Swedish crowns. After quite severe public opinion pressure the Finance Ministry in a whirlwind of activity negotiated a new protocol with Austria closing the tax loop-hole within a record time of about eight months! The legislative measures introduced in 2008 extending the ten year rule to the sale also of foreign shares, the purpose of which was directly aimed at frustrating the tax planning technique decribed above, also represented a total failure as many of our treaties also prohibit source state taxing rights to such capital gains.
The Swedish treasury still generally remains aloof to the tax base erosion caused by the ten year rule blaming staff recruitment problems and calling for further investigation in the matter. That latter proclamation was made in mid 2007 when the ten year rule was extended to foreign shares – a measure which could easily be circumvented. To day, three and a half years later an investigation panel regarding the ten year rule has still not even been appointed.
Recently the Swedish National Audit Office (Riksrevisionen) issued a report criticizing the Treasury for neglecting to take measures against the vast amounts of tax payer's money being lost due to the ten year rule. (RiR 2010:24). Also the Confederation of Swedish Enterprise (Svenskt Näringsliv) has berated the Government for their dilatory treatment of our tax treaty network reducing the competetivness of Swedish companies on their export markets.
In the past I have given a lot of attention to the ten year rule advocating a more energetic approach to counteract the tax avoidance measures that are practised in this field. Considering the very strong forces benefitting from the present situation these efforts have been unsuccessful.
Therefore I found it of great interest in late 2010 to learn that a 500-page doctoral thesis was going to be presented at the Uppsala University regarding emigration taxes. This, I thought hopefully, should invigorate the tax policy debate on the ten year rule in particular. The thesis titled ”Emigration taxation of capital gains – a scientific tax study on international taxation of individuals focusing on problems regarding tax treaties and EU law.” (Utflyttningsbeskattning av kapitalökningar – en skattevetenskaplig studie i internationell personbeskattning med fokus på skatteavtals- och EU-rättsliga problem) is written by Katia Cejie at the Juridical Institution of the Uppsala University and associated also to the private foundation Centrum för Skatter (supported by Deloitte, Ernst & Young, KPMG, Mannheimer Swartling Advokatbyrå, Skeppsbron Skatt och Öhrling Pricewaterhouse Coopers, (all of them of course involved too in international tax planning affairs).
In a press release (www.forskning.se) announcing the upcoming public hearing of her thesis Ms Cejie describes the problems of emigration taxes for one thing as being so considerable that they affect the willingness of individuals to move, in practise restricting the principles of free movement within the EU and, for another, that they under certain circumstances are levied in both the state from which the tax payer is moving and also in his new state of residence i.e. double taxation. ”Ms Cejie's thesis”, says her tutor and Supreme Court judge Kristina Ståhl, ”is important as it provides an instrument to courts and legislators at both the national and EU level for charting the problems in this field of taxation”.
So, how different the description of emigration tax problems can be! On the one hand as a threatening force giving rise to double taxation and limiting the free movement in Europe, and on the other as mentioned above as instruments for wide-spread tax avoidance leading to the payment of quite insignificant taxes or even to complete double non-taxation, serving, if anything, as a driving force for the migration of tax payers!
Ms Cejie's thesis is a very comprehensive, interesting and solid report on various aspects of emigration taxation and it spans a much wider field than just the ten year rule. In particular her research and analysis of EU law in this field and the problems of whether, as aforementioned, emigration taxes constitute restrictions to the freedoms of the Treaty on the Functioning of the European Union (TFEU) and if so, whether or not they can be justified (Part III, Chapters 5-10) have made a big contribution to the understanding of these very complex matters. (She should no doubt be a strong candidate for the post doc award of Centrum för Skatter Foundation.)
Nevertheless, and as shall be gleaned from below, I have a number of serious reservations about Ms Cejie's work mainly on problems arising from the interaction betwen emigration taxes and tax treaties.
The thesis covers four different kinds of emigration taxes (some of which apply also to other types of income than capital gains). This article, however, will focus only on the ten year rule. This is a type of emigration tax categorized in Ms Cejie's thesis as a TL-rule, a trailing tax on latent income which can also be defined as a rule enforcing an exterritorial tax liability (in Sweden, the state from which the shareholder is moving) for a certain period of time. (The term ”trailing tax” is used as a synonym for ”extended income tax liability”, footnote 1716). The definition of the term ”latent income” indicates that taxation is not triggered upon emigration and that the appreciation of the shares that occurs after emigration is also subject to tax (in Sweden) when the shares are sold.
The additional three types of emigration taxes that are dealt with in the thesis are:
a) exit taxes on latent income (EL-rule). A latent income (page 513) is an income which is unrealized, i.e. the ”normal” time of the taxable event has not yet ocurred.The emigration,however, triggers the taxable event which means that that an exit tax is levied upon departure.
b) exit taxes on realised income (ER-rule). One Swedish rule that falls into this category is the rule on exchange of shares. Acording to the Swedish Income Tax Act (ITA), an exchange of shares is a taxable event. The gain is realized but the taxation of the gain is postponed until the new shares are sold or, which is of interest with regard to emigration taxes, until the taxpayer emigrates to a country outside the EEA area. The emigration is, however, regarded as a taxable event according to the rules in this case and an exit tax will be levied.
c) trailing taxes on realized income (TR-rules). One of the Swedish rules that fall into this category is the rule on deferral of the tax levy of the capital gain on the sale of a permanent home. The gain, consequently, is realized but taxation is deferred until the new home is sold. (This rule was introduced in 2007 and applied only to new homes situated in Sweden but the Luxembourg Court of Justice held that this violated the principle of free movement within the Community. This had the effect that also a new home aquired within the Community should qualify for a deferral of the capital gains tax assessed on the sale of one's Swedish home) Ms Cejie concludes that this category of emigration taxes will expand in the future.
Public discussion of Ms Cejie's thesis
Before continuing any further with my analysis of Ms Cejie's thesis I must however report what happened at the public hearing hereof at the University of Uppsala on 10 December 2010.
The chairwoman of the proceedings and Ms Cejie's tutor (and Supreme Administrative Court judge and member of the Board of Centrum för Skatter) Ms Kristina Ståhl set forth the conditions for the hearing. First this would consist of the (cross-)examination by the public opposer Professor Mats Tjerneld, Lund University . Thereafter the certification board (betygsnämnd) consisting of Professor Bertil Wiman, Uppsala University (and Director of the Centrum för Skatter Foundation), Cecile Brokelind, Lund University and Marjaana Helminen, Helsinki University would have the opportunity to raise questions. Finally the floor would be open for comments from the audience. It was explicitly pointed out that there was no specific time frame for the hearing which would thus be concluded only when no more interventions or comments remained.
The two first phases of the proceedings were concluded by approximately 12.20 hours.
I then announced my interest to raise a number of questions. After a short while I was interupted by Ms Ståhl who asked how much more time I required for my interrogation. I responded that this would be difficult to determine because it would depend on the answers and information supplied by Ms Cejie and the discusion that could emerge therefrom. It appeared that Ms Ståhl wanted to know in order to determine if an intermission would be required.
At about 12.40 it was announced that lunch would be served at 13.00 and I sensed that Ms Ståhl was anxious to complete the hearing by then. A break was, however, made at this point during which Ms Ståhl and Professor Mattias Dahlberg (Uppsala University), deputy tutor of the thesis, took me aside for a private talk. They urged me quite abrasively to abstain from delivering any comments to Ms Cejie's thesis and only to ask direct questions to her, everything to speed up the proceedings. I repeated that this disturbed the whole structure of my questioning and that it was necessary for me to develop the various problems, just like the public opposer had done, and also declare my views in order to give Ms Cejie a chance to comment thereon and to explain her opinions in her thesis. I thus repeated that it was impossible for me to determine how much longer time that was necessary for me to conclude my questioning.
At the continuation of the hearing I was again pressured to hurry up by Ms Ståhl. At one point she exclaimed; ”Now that you have put forward your question and received an answer, proceed at once to your next question.” It was thus not possible for me to follow up Ms Cejie's reply which in my view was not quite satisfactory and required further comments.
At this stage, the time was now approximately 12.50, Ms Ståhl declared that that those who so whished could leave for lunch and that she, Ms Cejie, Professor Tjerneld, the certification board and myself would remain to conclude the hearing.
At around 12.55 upon asking another question somewhat ambiguosly answered by Ms Cejie, Ms Ståhl said that I had received a reply and again instructed me to just put forward my next question. At this stage, and with the preparations of my questioning completely disrupted, when I further consulted my notes for a couple of seconds, Ms Ståhl again abrubtly intervened to declare that since I appeared not to have any further questions, the hearing, deespite my protests, was considered to be concluded. And then everybody dropped off for lunch.
Immediately after the hearing I was approached by Professor Wiman who ”thanked me” for having contributed to such a ”pleasant hearing of Ms Cejie's thesis”. Upon my question he confirmed that his statement was ironic. My response hereto was that I considered the pleasantness of a public hearing of a doctoral thesis to be of secondary importance, especially for the members of the certification board. (I have afterwards asked Professor Wiman to confirm his statement but he has not responded hereto.)
After having devoted considerable time to the scrutiny of Ms Cejie's thesis I am frustrated for having been shut up at the hearing and prevented from completing the presentation of my investigation and opinions of her thesis. My complaints hereover have been summarily dismissed by the dean of the juridical faculty at Uppsala University Mr Torbjörn Andersson.
I consider that the basic principle of free and unfettered investigation of all scientific effort, a hallmark of academic tradition of all civilised societies, has been compromised.
Analysis of Ms Cejie's thesis.
The thesis comprises four chapters of which the following discussion will deal only with chapter II sections 2.2 on interpretation of tax treaties and section 2.3. regarding the conflicting norms for determining precedence between domestic tax law and treaties highlighted by the 2008 treaty over-ride ruling of the Supreme Administrative Court RÅ 2008 ref. 24. The following presentation will include not only the issues brought up by me at the hearing but also those that I was prevented to bring up. As already mentioned this report is mainly focused on the ten year rule.
At the hearing I expressed my general disappointment that no attention had been given in the thesis to the historical development of emigration taxation that has taken part in Sweden over the last couple of decades particularly as far as the ten year rule was concerned. As already pointed out, this legislation had constituted one of the most contentious and controversial fields of our international tax regime over a very long time. Nor did the thesis disclose any kind of assessment of the enormous tax base losses suffered by the treasury regarding the ten year rule. Lacking such a historical and empirical background the reader is left unaware of the economic importance of the issues involved in emigration tax matters. The thesis is thus reduced mainly to an academic abstraction isolated from the world outside. Also disappointing is that Ms Cejie had made no attempt to construe a rule that would overcome the shortcomings of the present legislation and of our tax treaties. Her final conclusions and suggestions merely fade away in a deferential and restrained call for further research.
Tax treaty interpretation
Ms Cejie, in chapter II.2.2, has devoted no less than twenty pages to tax treaty interpretation. This, to a certain extent, may be considered unneccessary beacause this, with regard to emigration taxation is of very limited relevance in general and as far as the ten year rule is concerned I cannot recall a single tax case giving rise to any specific treaty interpretation problems. The problem of emigrating share gains is usually addressed in a special section of the capital gains tax article, usually number 13 of our tax treaties and the interpretation of these articles is quite straightforward and uncomplicated.
At the hearing I welcomed, however, the fact that I shared the same basic belief with Ms Cejie that tax treaties should be interpreted according to the principles of international law laid down in the Vienna Convention on the Law of Treaties and that the interpretation of such treaties (only on a very last resort basis) should rely on internal (Swedish) law understanding of terms not defined in the treaty. I noted however that my pioneering work on these matters, a 64 page paper in IUR-INFO no 10-11/1968, had not been noticed by Ms Cejie in her bibliography.
I also brought to attention that an article in IUR-INFO no 2/3 2007 by Stefan Ersson, former judge of the Supreme Administrative Court and a leading authority on international tax law in Sweden, had, in my view, taken a step in the wrong direction when empasizing that tax treaties, being an integral part of Swedish national law, should also be interpreted as such. I had put forward my views in a quite comprehensive response (over 18 pages) rejecting Mr Ersson's ideas suggesting that tax treaties should be interpreted in the same way as domestic tax law. Mr Ersson's article had been quoted by Ms Cejie in her thesis but not my response. The reason herefor, Ms Cejie announced at the hearing, was that my article had not been published. This, in my view, was not a satisfactory answer as it had in fact been printed in ”WebJournal on International Taxation in Sweden” (no 4/2009, Legalitetsprincipen och skatteavtal”) to which Ms Cejie is a subscriber at www.skatter.se Also, the article had been rejected publication in Skattenytt, a decision taken by Professor Mattias Dahlberg who was the editor of that magazine at the time and who, as mentioned above, also has been assistant/deputy tutor to Ms Cejie.
A further issue brought up by Ms Cejie on page 89 of her thesis, discusses the interpretation problems that may occur when treaties have been drawn up in two or more languages both declared equally authoritative. This problem became very real in the Administrative Supreme Court decision RÅ 2004 not. 59 regarding the treaty with Peru which Ms Cejie duly had reported. In 2006 i wrote a 28 page and very critical report, ”Interpretation of tax treaties authenticated in two or more languages – a case study.” on this decision which was published (!) in Svensk Skattetidning 2007. This article too, however, had eluded Ms Cejie's attention.2
A further interpretation issue brought up by Ms Cejie on pages 93-96 is to what extent a change of the Commentaries to the OECD Model Treaty should apply to the interpretation of a bilateral treaty that was made before that change if the text of the pertinent treaty article itself of the Model treaty remains unaltered. This question has been fervently discussed also by Mattias Dahlberg and Jesper Barenfeld in their doctoral thesises and by Anne-Sophie Sallander.3 The main line of their arguments, including also now that of Ms Cejie, is that revised commentaries of the Model Treaty should not be applied or only very carefully to “old” bilateral treaties based on the Model Treaty. Instead one should apply that version of the OECD Commentaries that existed at the time of the conclusion of the bilateral treaty in question, (which of course could be very much earlier).
I have a completely different view on these matters and what I suggest is a useful method for a solution of the problem, which I reported in IUR-INFO 2/2002. and again in a commentary (7 pages) to Jesper Barenfelds thesis, in no 1/2005 of WebJournal on International Taxation in Sweden. This made no impression on Mattias Dahlberg who vigorously defended his position in IUR-INFO 3 under the title “Om rättskällevärdet av OECDs modellavtal jämte kommentar”.
In my view one should remember that the Model Treaty is a document agreed by the the governments of the OECD. These are the same governments that make bilateral treaties with each other. Therefor, if they agree at “the OECD level” that modified Commentaries to the Model should be taken into account also visavi treaties that they have made before the modifications, this reflects an understanding of these governments that they have reached a consensus and given proof of their intention to observe that these treaties shall be interpreted accordingly. A tax treaty is thus a contract between the two contracting states imposing upon one another an obligation to respect and to abide by the rules thereof. In this respect they differ from an ordinary domestic tax law whereby the legislator imposes obligations upon its tax subjects.
In theory, but quite impractical of course, the contracting parties, if they have made a bilateral treaty in the past, the text of which is identical to the Model and if they recognize the validity of the new Commentaries to the Model, could terminate the treaty and then immediately, upon the modifications of the Model Commentaries, let it re-enter into force. In that way there would never be any bilateral model-based treaties that are older than the latest modification of the Model Commentaries!
In my paper regarding Barenfeld's thesis I wrote: Nor is it quite clear why Mr. Barenfeld is so reluctant to the ambulatory approach of using modified Commentaries also to old treaties, but by his reference to the position of the tax payer, it seems that his hesitation stems from a consideration for legal certainty. Or, in other words, the taxpayer must be able to rely on the treaty as it was once concluded. This seemingly suggests that the modifications of the treaty are always to the detriment of the tax payer. But one should of course also remember that the modification just as likely may be to the benefit of the tax payer. In this case everybody would probably agree that it would be a great shame not to apply the modified version of the Model.
At the same time, and this is something upon which everybody agrees, it is very complicated always having to determine at what point a specific modification of the Commentaries took place with regard to the relevant treaty under interpretation. Considering moreover that the Contracting parties as revealed in the recommendations of Model Treaty authors have no reservations about allowing application of modified Commentaries to treaties concluded before these modifications, a useful solution of the problem would be to adopt a method whereby the modified Commentaries shall be accepted for interpretation purposes only with regard to investments made and income derived after the adoption of the modifications. The validity of new Commentaries should thus be referred not to when they were adopted but to the point in time when the income was derived. In this way the problem of certainty for the tax payer is always accommodated. (This is an idea I raised already a couple of years ago, see IUR-INFO 2/02.)
I am pleased to note that this idea has taken root at the Swedish Tax Administration who in a recent opinion (ställningstagande) regarding the Model Commentaries' new thinking on the definition of the term “employer” (article 15) have decided that it should apply as of 2011.
Considering his deep involvment in the issue and in Ms Cejie's thesis it is suprising that Professor Dahlberg has not advised her to include a reference of the above discussion in the thesis. It thus only reflects Dahlberg's opinion on the applicability of new Commentaries to “old” treaties whereas my contribution to this issue has been completely ignored by Ms Cejie.
Purposes and functions of tax treaties (section 2.1.2)
On page 71 of the thesis Ms Cejie brings up one of the purposes of a tax treaty as being to divide taxing rights between the contracting states. This in my view should not be considered as a purpose of a treaty in itself but rather as a means of avoiding double taxation. This is accomplished either by the exemption or the credit method on a reciprocal basis. It is of course a matter of negotiation to determine the level of tax sharing for instance when establishing the level of withholding taxes between the source state and the residence state. Recently Sweden has also concluded a couple of treaties (with Austria and Denmark) where double taxation is avoided not by dividing the tax liability but by splitting the tax base, a rule which, incidentally, applies specifically to capital gains in emigration situations. Sweden as the state of source may thus tax the appreciation of the shares that has taken place up and until the point of emigration whereas the residence state will tax the appreciation that occurs between that point in time and the time of alienation of the shares. The thesis would have benefited from a discussion of this new trend.
A further view regarding the purposes and functions of tax treaties (which there was no time to explore at the public hearing of Ms Cejies thesis) is their role to prevent anti (international) tax avoidance. Ms Cejie's approach and investigation of this matter is very interesting and I agree with her conclusion (pages 121-125) that neither our domestic five year rule imposing (continuing) full tax liability during five years on individuals migrating from Sweden if they have “essential ties” with Sweden, nor our ten year rule imposing capital gains tax liability on company shares on migrating non resident individuals can justify a non-recognition of a treaty just because these Swedish rules are intended to prevent tax avoidance.
A further question regarding tax avoidance and tax treaties with special reference to the ten year rule is to what extent Sweden's general anti tax avoidance regime may be invoked in such situations. This has been highlighted in both the recent Thailand case and the Switzerland and Greece cases (see below) focussing basically on whether the ten year (emigration tax) rule should override Sweden's tax treaties with these countries. The bottom line decision by the Advance Rulings Board in the first mentioned case was that the treaty prevailed but in the two latter cases the Board in accordance with the Supreme Administrative Court's ruling in RÅ 2008 ref.24 gave the opposite answer i.e. that the ten year rule had precedence over the treaties, i.e treaty override. In these two latter cases three members of the minority addressed the question of the relevance of the general anti-avoidance rule visavi the treaties (all of them coming to the conclusion that it did not apply as such.)4
I have written a comprehensive report on the Thailand case (see below) which, after it too was denied publication in Skattenytt by its editor Professor Dahlberg, was printed in no 4/2009 of WebJournal on International Taxation in Sweden. It has, however, not been considered by Ms Cejie.
The “golden rule” and conflicting tax liabilities under domestic and treaty law.
This is a very big question in general and because of Ms Cejie's opinion one of some controversy visavi my standpoint. Due to the limited time allowed for my intervention at the hearing this was discussed only briefly.
The golden rule is laid down, (usually in paragraph 2), in each and every law incorporating our tax treaties. It reads as follows: “The rules of the treaty shall be applied only to the extent that they give rise to a limitation of the tax liability that would otherwise occur.” The term “that would otherwise occur” naturally refers to the tax liability that would follow if no treaty existed i.e. the tax liability resulting from application of pure domestic law. The application of the golden rule is actually quite straightforward: First one determines how much tax Sweden can levy under domestic tax law. If no taxation occurs the matter is closed. There is no need to consult the treaty. If, on the other hand a tax liability occurs under Swedish tax law, then one must consult the appropriate treaty and determine how much tax should be paid in Sweden according to the treaty. If this amount is lower than that which follows from the application of Swedish law, Sweden may not levy a higher tax than what follows from the application of the treaty. Important to note is that the golden rule is nothing that follows from some kind of principle or general (international) maxim. It is a Swedish (unilateral) decree/law imposed by our legislator (parliament). It is repeated in each and every law incorporating our treaties. These laws are hierarchically equal to any other law enacted by parliament including our domestic tax laws and our tax treaties. None of these laws are superiour to any of the others.
On page 75 of her thesis Ms Cejie, referring inter alia to an article I wrote in 1995 (page 463), points out: “A common opinion in doctrine is that treaties are superior (emphasis added) to domestic law and that this is based on the so called golden rule. I don't share this opinion about the golden rule but I raise the question in this context based on the said opinion”. After having quoted the golden rule and given an explanation of its limiting effect as reported above Ms Cejie concludes that “if on the other hand the treaty will allow Sweden to tax so be it.” This must be understood that there is no limiting effect by the treaty and Sweden can go ahead and levy the tax that follows from an application of its domestic law. On pages 76-77 Ms Cejie then continues: “The golden rule has further been been interpreted as conferring upon treaties a superior role visavi domestic law. Also in doctrine abroad the golden rule has been interpreted as giving preference to treaties where a conflict of laws appears. This approach, that tax treaties have preference to domestic law,has been held for a long time. I am , however, not convinced that this viewpoint can be derived from the golden rule. According to its wording the golden rule says nothing about the sovereignty (dignitet) of the various legal sources (i.e. that tax treaties are superior to domestic law, a form of vertical effect). Thus I do not share the customary view in doctrine about the understanding of the golden rule. In my opinion the golden rule should be understood as nothing more than a rule under which the tax liability under domestic law cannot be extended by a treaty (a form of horisontal effect). This means that if Sweden is afforded taxing rights under the treaty this taxing right must be confirmed also under national law”.
Sure enough, Sweden can of course never impose taxation, treaty or no treaty, unless confirmed in national Swedish law. Or in other words, we don't need a treaty to confirm our right to tax under national law! It is also true that neither the golden rule nor a treaty rule says anything about the superiority (or inferiority) of either rule or domestic law. Under our constitution on the other hand domestic law, treaty law and the golden rule itself, which is indeed also a domestic law rule adopted by parliament, all have the same constitutional “ranking”. None of these rules therefore have preference as such before any ot the others. As already mentioned none of them is superiour to the others from a constitutional viewpoint. And nothing else, in Swedish doctrine, has ever been suggested! Ms Cejie's allegation (above) that traditional doctrine views, quoting my 1995 (page 463) article in Skattenytt and Bokström,K&Tyllström's national report in Cahier de Droit Fiscal 1993, that treaties are superior to domestic laws represents a serious misunderstanding. As I pointed out in my 1995 article, the role of the golden rule is to be nothing but a tie-breaker (lagvalsregel) when tax liability under Swedish tax law differs from that of the treaty. It is true, as Ms Cejie suggests, that tax treaties cannot extend Swedish tax claims under Swedish law. But that is only bacause the golden rule explicitly says so. If our parliament so chooses it could alter the golden rule so that treaties always have precedence. Nor would such a change of the golden rule change the equilibrium of the ranking between domestic and treaty law. The limiting effect of treaties i.e. that in such situations they trump domestic law, and I repeat it once again, is nothing that follows from nature. It is, as just explained, due to an act of parliament.
Professor Mats Tjerneld, the public opposer of the thesis, brought Ms Cejie's opinions on the golden rule to attention contenting himself, however, and to my disappointment, by merely establishing that they were bold and interesting.
I have further expanded my views regarding the relationship between domestic law and tax treaties in an article under the title “Montesquieu and the Swedish income tax regime (and some thoughts on the relationship between domestic tax law and tax treaties.)”. It was printed in “WebJournal on International Taxation no 6/2007 after being denied publication in Svensk Skattetidning for being “too critical”. Nor has this article been cited in Ms Cejie's thesis.
The OMX-case RÅ 2008 ref. 24
This case presented by the Supreme Administrative Court on 3 April 2008 deals specifically with the problems discussed in the preceding section regarding the relationship between domestic tax law and tax treaties and represents probably the most criticized decision ever by that Court, certainly with regard to tax treaty matters. Ms Cejie discusses the case over no less than fifteen pages under sections 2.3. and 2.4. of her thesis.
In footnote 327, under what appears to be an exhaustive list, Ms Cejie has quoted eleven authors who have discussed the OMX case. In addition to her list I have written another three articles in various contexts (in Swedish) on the subject which, however, have either not been observed by Ms Cejie or have been ignored by her. They are published in:
1.No 4/2008 of WebJournal on International Taxation in Sweden, “Treaty Override”, http://www.skatter.se/index.php?q=node/2533.
2.No 5/2009 of WebJournal on International Taxation in Sweden, “Försäljning av aktier efter utflyttning, del 1 (Thailandsmålet) more hereinafter, http://www.skatter.se/index.php?q=node/2625.
3 No 3/2010 of WebJournal on International Taxation in Sweden, “Normhierarki och regelkonkurrens mellan intern skatterätt och skatteavtal”, http://www.skatter.se/index.php?q=node/3318.
The OMX case dealt with the question whether our Controlled Foreign Corporation (CFC) legislation should prevail over our tax treaties, (a question which has arisen in several other countries with CFC-legislations). The Advance rulings Board, after a very interesting and meticulous analysis and interpretation of the pertinent tax treaty (with Switzerland), found that this was the case i.e. that Sweden could go ahead and tax and that the treaty did not prevent Sweden from executing its domestic CFC-rules. On appeal the Supreme Administrative Court came to the same bottom line conclusion but they did so without consulting the treaty at all! They explicitly declared that there was no need to analyze the treaty.
Or as professor Mutén put it, the Court resolved the matter “by a Gordian stroke of the sword” allowing the domestic Swedish CFC rules to override the treaty. This is what – quite majestically - the Court said: “Upon making a tax treaty Sweden (may) surrender tax claims following from Swedish law. From an international law point of view Sweden is bound by the treaty. The obligations under the treaty become effective by adoption in Swedish law. As far as Switzerland is concerned this took place according to Law (1987:1182) on (incorporation of) the tax treaty between Sweden and Switzerland. Such a law has no exeptional ranking in relation to other laws. When thus, as outlined under paragraph 2 of of the said law in its version under Law 1992:856, it is declared that “the rules of the treaty shall apply only to the extent that they incur a limitation of the tax liability in Sweden that would otherwise occur” this only suggests that the treaty cannot expand the tax claims determined from Swedish law. Therefore, the stipulation does not prevent Sweden in a subsequent law to expand its tax claims regardless of the repercussions that would entail under international law. If two laws prove to be irreconcilable the dispute over which law should prevail shall be resolved according to the principles of conflicts of laws. In doing so it is clear that not only have the CFC rules been adopted after the incorporation of the treaty but also that they take aim specifically at such activities as performed by the Swiss company. Accordingly it is clear that the CFC rules shall prevail and have effect regardless of the result following from the treaty rules. An analysis of of the regulations of the treaty is thus not required.”
The ruling is very cryptic and the number of arguments that have been suggested analyzing the case are innumerable. The first article that was put forward was by professor Mattias Dahlberg of Uppsala University, and one of Sweden's leading authorities on international taxation in Sweden. The article was published in the summer of 2008 in Skattenytt (of which Mr Dahlberg was then chief editor) 2008 pages 482-489. His main line of thought is that the Court had abandoned its traditional principles under international law for the interpretation of tax treaties. In no less than sixteen different contexts of his article Mr Dahlberg refers to the erroneous interpretation of the treaty committed by the Court suggesting further that it had adopted a domestic principle of tax interpretation in conflict with the international law method (folkrättslig metod) laid down by the Court in its (famous) “Luxembourg ruling” RÅ 1996 ref. 84 under which the interpretation of tax treaties should be governed by the international law standards of the Vienna Convention on the Law of Treaties as they appear in articles 31-33.
In response to Professor Dahlberg's article I also slated the treaty override perpetrated by the Court in RÅ 2008 ref.24 but strongly disagreed with Dahlberg's suggestion that this had its root in an interpretation of the treaty. As already mentioned the Court had completely ignored the treaty, very clearly determining that it did not require any analysis. And an interpretation of a treaty can only follow from an examination or an analysis of the treaty text. Or in other words, how can one interpret a treaty text if it is not analyzed? (And how could the Court have reached the conclusion that the CFC rules constituted “lex specialis” visavi the treaty if the treaty had not been considered?)
My paper that was sixteen pages long was submitted for publication in Skattenytt in October 2008. But it took Professor Dahlberg only eighteen minutes (according to the time indicated on his email) to return it, rejecting publication on the grounds that it added nothing of substance to the matter.
My analysis of the case which I further explored in my article (3 above) titled “Hierarchy of norms and conflicts of law between domestic tax laws and treaty rules” and which contrasted (I believe) to all of those of other authors was that the conflict of law suggested by the Court was not between the domestic CFC rule and the treaty but between the CFC rule and paragraph 2 of the law of incorporation of the treaty. This article was also denied publication, not by Professor Dahlberg but by his colleague at the Uppsala University Assistant Professor Jan Bjuvberg who is editor of Svensk Skattetidning but is, as mentioned above, printed in the WebJournal on International Taxation in Sweden.
Ms Cejie's opinion on the OMX-case, apart of course for concluding too that it constitutes a treaty override, is not alltogether clear. She has not dismissed the opinion of Professor Dahlberg, her assistant tutor. On the other hand, (page 105) she concludes that it appears from the wording of the judgement that no interpretation process has taken place. In footnote 338 she also concurs with the opinion of Maria Hilling (Intertax, Vol.36, Issue 10, 2008) who (page 458) comes to the conclusion too that the Court did not find it necessary to interpret the treaty in order to deal with the question of whether or not it hinders CFC taxation. I found it quite frustrating not to have been given the opportunity to discuss this matter at the public hearing of Ms Cejie's thesis.
It is of course also disappointing to have one's papers denied publication by the most prominent tax periodicals but as such decisions also may be based on commercial grounds this is something that every author must accept. In an academic context, however, ignoring, as Ms Cejie has done, what in this case is relevant material is a different matter. It affects the scientific quality of her thesis.
The Thailand case. (Decision 73-08/D, April 2 2009 by the Advance Rulings Board)
This case also deals directly with the aforementioned problem regarding the relationship between domestic and treaty law and the disastrous treaty override result in the Supreme Administrative Court's decision iRÅ 2008 ref.24. Also of interest is that the Thailand case is all about emigration taxation dealing specifically with the priority between the domestic ten year rule and the capital gains article of, in this case, the Thailand) treaty.
This was the situation that arose in this case. A Swedish resident shareholder of a Swedish company formed a Netherlands company in1998. In 2008 he transferred his Swedish company to the Netherlands company (taxfree under Swedish law). He then moved to Thailand and sold the Netherlands company. He applied to the Swedish Advance Rulings Board wondering where the gain should be taxed? Under the Swedish ten year rule which had been changed in 2008 and extended to cover also capital gains on all kinds of foreign shares sold within ten years of emigration from Sweden, it was clear that Sweden could tax the gain on the sale of the Netherlands company. Under the treaty with Thailand made in 1998 it was, however, equally clear that Thailand had sole taxing rights. The Advance Rulings Board exempted the shareholder from Swedish tax according to the treaty. The great surprise in this case was that the Board ignored the Supreme Administrative Court's decision RÅ 2008. ref 24. under which à "new" domestic rule should trump an old treaty.
There has been some controversy over the interpretation of this case which focuses on the basic principles of the relationship between domestic law and treaty law.
Professor Dahlberg who is (also) a judge of the Advance Rulings Board and participated in the Thailand ruling declared that there was no conflict between national law and the treaty, thereby indicating that under the ten year rule too the gain was exempted from Swedish tax. Or in other words, both domestic law and the treaty exempted the gain from Swedish tax. But if so, as I suggested in my article, the Board would not have exempted the gain according to the treaty as mentioned above but according to domestic law. Or, in other words, if domestic law exempts an income from taxation there is no reason to consult a treaty to establish the same exemption. In my article I therefore pointed out professor Dahlberg's misunderstanding of the case. As already mentioned, this article was denied publication in Skattenytt, of which magazine professor Dahlberg at the time was editor, but subsequently printed in ”WebJournal on International Taxation in Sweden”, issue no 5/2009 ,”Försälning av aktier efter utflyttning, Del 1, (Thailandsmålet). See http://www.skatter.se/index.php?q=node/2625. (The article was also denied publication by Svensk Skattetidning, a tax periodical of which' editorial board Ms Kristina Ståhl is one of the members).
Ms Ann-Sofi Sallander of The Jönköping International Business School, who's article ”I kölvattnet av RÅ 2008 ref. 24” was indeed published in Svensk Skattetidning also addresses the Thailand case repeats Professor Dahlbergs mistaken opinion. Or in other words, she also considers that the capital gain was exempted from tax also under domestic Swedish tax law.
This controversy, of course, made me very curious to hear Ms Cejie's view on the matter because there was no mention thereof in her thesis. At the public hearing, on my direct question, she agreed with my interpretation of the case i.e. that there was indeed a conflict between the ten year rule and the Thailand treaty and that the treaty had prevailed. Considering that Professor Dahlberg was also her assistant tutor one would have expected that she would have mentioned that she disagreed with his ruling. Nor has Ms Cejie in her thesis mentioned or analyzed the important fact that the Advance Rulings Board in their decision of the Thailand case, ignored the Supreme Administrative Court's treaty override in RA 2008 ref 28. Also she has ignored or overlooked my aforementioned article. This, in my view, and as already suggested does not live up to acceptable standards of academic research.
Emigration taxation and double taxation
In her thesis Ms Cejie has expressed repeated concern over the fact that emigration taxes so often may give rise to double taxation. Also in tax treaty situations. The reason herefor is simply that tax treaties, as mentioned by Ms Cejie on page 218, are not written and negotiated with emigration taxes in mind. The only remedy in most of these cases is to appeal to the competent authorities of the tax treaty for a mutual agreement settlement by the contracting states. This, as also pointed out by Ms Cejie, involves, however, a beaureaucratic procedure and an unpredictable outcome.
The ten year rule will, however, never give rise to double taxation if a tax treaty exists. The treaty will either give sole taxing rights to the residence state excluding completely the source state (Sweden) from taxation or it will give Sweden primary right of tax with an obligation for the residence state, i.e. the state to which the shareholder has moved, to allow a credit for the Swedish tax or, more seldom, to exempt the gain. The problem with this latter type of treaty is for Sweden to negotiate it because it means that the other state must pick up the tab to avoid double taxation. This may then oblige Sweden to make other sacrifices in the treaty either by reducing the scope of the ten year rule normally by reducing the ten year ”quarentine” period or give up other taxing rights.
At the public hearing , and seemingly with Ms Cejie's approval, I broached the idea that Sweden in these situations should offer a reverse credit mechanism i.e. allowing a credit for the capital gains tax of the residence state tax. Considering that the tax avoidance strategies used regarding the ten year rule will always involve low or no tax jurisdictions the tax credit will normally be quite negligible or even non-existent and thus very inexpensive for the Swedish treasury and probably frustrate the tax planning alltogether.
(Sweden has adopted reverse credits in some of its tax treaties regarding Swedish source pension income. As such tax is levied in Sweden as a preliminary (monthly) source tax upon payment and can be reclaimed only after a final tax assessment in the residence state has taken place quite some time thereafter, the reverse credit mechanism gives rise to a temporary double taxation and a complicated administrative procedure and has thus been justifiably crticized. These problems are, however, not relevant with regard to capital gains taxes.)
A further and more sweeping suggestion for reducing double tax problems involving the ten year rule would simply be to limit the scope thereof, at least as far as treaty states are concerned. One could thus limit its range only to closely held or controlled companies and exempt gains below certain thresholds. And in our treaties one could suggest to exempt citizens of the other contracting state from the ten year rule tax.
The double taxation problem as far as emigration taxes are concerned are, as just pointed out, very thoroughly discussed by Ms Cejie. This topic is thus repeatedly dealt with separately for each and every category of emigration tax both EL-, ER-, TL- and TR-rules under the subtitle ”Methods for elimination of double taxation” and then again under a concluding section. The other ”side of the coin”, i.e. the situation where emigration taxes, particularly the ten year rule tax, give rise to unwarranted double non-taxation effects is, however, completely ignored. Considering the severe effects of this aspect of emigration taxation on capital gains a discussion thereof in the thesis would have been justified.
Tax collection problems regarding trailing taxes om realised income (TR).
The statement in one of my opening remarks of the lack in Ms Cejie's thesis of any references to empirical data on emigration taxation is not alltogether correct. On page 507, in one of the closing sections of her work (11.5.4. Conclusions and viewpoints for the future) she gives some figures on the amounts of tax deferred with regard to trailing taxes on realised income (TR-rules). A big problem with such rules, she says, "is the difficulty, despite the (EU) directive on tax collection, to determine and supervise when to exercise the tax levy. The deferral of the tax can easily become a permanent exemption unless the collection of tax is effectivly monitored”. Also, she observes: ”The accumulated total amount of deferred capital gains taxes regarding private home dwellings in 2008 amounted to 216 billion SEK corresponding to a tax claim of 50 billion. The number of deferrals regarding exchanges of dwellings in the 2000-2008 period rose by 600 percent. Of the 216 billion only 1.3 billion apply to deferrals of home owners who have moved abroad. With regard to share exchanges that qualify for tax deferral the amount of capital gains taxes deferred amounted to about 15 billion SEK out of which 257 million SEK applied to shareholders that had moved abroad. The (aggregate) amount of deferrals concerning capital gains taxes of tax payers that have moved abroad amounted to about 1.5 billion SEK corresponding to a potential tax shortfall (emphasis added) of 354 million SEK." In a footnote Ms Cejie then also observes that "despite this high amount it only represents 0.03 percent of the total amount of tax collected by the treasury". Ms Cejie thus starts out by pointing out that the potential shortfall of tax attributable to foreign capital gains represents "a big problem" but finally concludes that it amounts only a fraction of a percent of total taxes due!
A more unsettling aspect is, however, that Ms Cejie in this context has completly failed to mention the shortfall of tax attributable to share gains avoided by manipulations of the ten year rule. As already noted these amounts are quite enormous, and has prompted the Tax Administration to call for emergency measures. In their official report no 1 of 2008 of the combined tax shortfall in Sweden (Skattefelskarta för Sverige) the amount of tax avoided under the ten year rule rises to about 1.2 billion SEK or about four times the figure attributable to deferrals of gains relating to foreign home owners and share exchanges quoted by Ms Cejie. Moreover, the 1.2 billion is an annual figure whereas the other taxes represent an accumulated amount.
Ms Cejie's opinion regarding the aforementioned potential tax shortfalls due to the problems of tax collection under TR-rules echoes the same arguments raised in an official government investigation (SOU 2009:33) regarding the ten year rule conducted by County Administrative Court judge Leif Gäwerth. As I pointed out in a quite disparaging analysis of his report, I suggested that an argument advocating non-interference with the present and aforementioned factual tax shortfall resulting from the manipulation of the ten year rule compared to a potential risk of non-collection under prospective new measures against such abuse was, with all due respect, quite silly. Or in other words, the risk of a potential tax shortfall under a TR regime compared to the present TR situation where taxation can easily be avoided is not a very strong argument for rejecting a change of the rules. Moreover, and more importantly, Mr Gäwerth, and consequently also Ms Cejie, have completely ignored the preventive or obstructive effects of a TL-rule on emigrating share gains. The manipulations of the ten year rule, setting up holding companies in various countries and intra-group company transfers only for tax avoidance purposes, has given rise to a virtual ”industry” in international tax planning circles. By introducing a TL-rule on share gains – something that has successfully been done in other countries – where such gains eventually will trigger a taxation in Sweden would thus frustrate such tax planning alltogether. Or in other words, a market where a tax planning/avoidance scheme only defers the tax temporarily will quickly dry up. Finally, which I also pointed out in my article regarding Mr Gäwerth's report, one should consider the growing effectiveness of exchange of information and tax collection agreements and procedures between treaty partners, including the growing numbers of such treaties also with notorious tax haven jurisdictions, which no doubt should discourage tax payers from not reporting their taxes.
My article regarding Mr Gäwerth's report was first approved for publication in Svensk Skattetidning by its editor, the aforementioned Jan Bjuvberg, but this decision was then abruptly revoked by himself (!) and the editorial board without explanation.
The article was subsequently printed in no 1/2010 of WebJournal on International Taxation in Sweden but, seemingly, has been overlooked by Ms Cejie.
Conclusion
The above observations regarding Ms Cejie's thesis should not overshadow the valuable and interesting work that she has done regarding emigration taxation. I repeat, however, my regret of the fact that her thesis has been isolated from its historical context in Sweden and the socioeconomic realities of the world outside. Scientific research must never be confined to a closed academic 'ivory tower'.
Emigration taxes, and particularly the ten year rule, give rise to considerable problems in international taxation in our country. Not only those of double taxation and freedom of movement within the EU which have been the main topics of Ms Cejie's thesis. But also, as especially share gains are concerned, they lead to unbridled tax base erosion and therefore also to an erosion of the integrity of the tax system as such. Other countries have suffered from similar problems but have taken (as it seems) effective counteracting measures. This, also, would have merited a discussion in Ms Cejie's thesis. At the public hearing Ms Cejie responded affirmitively to my question whether she thought she could construe effective rules that would both prevent double taxation and promote free movement within the EU but also restrain the widespread tax avoidance resulting from the manipulation of emigration taxes on capital gains. Also, the Commission has – quite some time ago - provided guidelines for member States how to deal with these problems, Kom (2006) 825 final. These aspects inter alia have also been dealt with in an excellent study over 53 pages by Anna Buhre and Elisabeth Mörck at the Jönköping International Business School under the title ”Is the ten-year- rule in chapter 3 section 19 of the Income Tax Law in compliance with EC-law?, a study which also has been overlooked by Ms Cejie.
What a pity therefore that Ms Cejie didn't take the opportunity to ”rock the boat” in this field of taxation! With her background, knowledge and experience regarding emigration taxes her voice would no doubt have been heard in shaping public opinion in this regard, prompting the Swedish legislator to get moving. Instead he can now go back to sleep and migrating Swedish shareholders and their tax advisors (including the benefactors of Centrum för Skatter) can relax and keep on laughing all the way to the bank.....
Stockholm May 2011
peter@sundgren.net
by Peter Sundgren
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In 1983 Sweden adopted its first emigration tax regime imposing Swedish tax claims on share gains derived by shareholders migrating abroad if the sale of the shares takes place within ten years of the shareholder's departure from Sweden. This rule is therefore called the ten year rule and is embedded in chapter 3 section 19 of the Swedish Income Tax Law.
In an international context legislation of this type is by no means extraordinary. It can be found in many other countries. The rationale for Sweden's tax claim on migrating share gains is manifested (and repeated) e.g. in a government report SOU 2005:99 page 210 when it came up for renewed investigation by the conclusion that the aquisition of the shares may have been financed by loans and that the deductible interest thereon reflects the expectation of taxable annual returns and capital appreciation. Moreover, as far as controlled or closely held share holdings are concerned, dividends and capital gains can be considered to be a deferred taxation of company profits resulting from the labour performed by Swedish resident owners of the company. Originally the ten year rule only applied to the sale of shares issued by Swedish companies (and other specified Swedish securities) but was extended as of 2008 to cover also shares issued by foreign companies (if they had been aquired while the shareholder was resident in Sweden).
It is no exaggeration to say that the ten year rule (together with its interaction with our tax treaties) has become one of the most contentious and controversial rules of the Swedish international tax regime. Considering our relatively high capital (gains) tax of 30 percent and, with regard to closely held company shares, the so called 3:12 rules, which can push the gains into very high marginal income tax brackets, it is no surprise that this taxation has become the target of intense tax planning for shareholders moving abroad. Litigation has been quite intensive, applications for advance rulings very numerous and the number of articles written on this topic has been very large.
In other parts of the world, and one does not need to travel very far, there are a number of tax jurisdictions that levy very low or even non-existent capital gains taxes on share sales. Many of these countries have tax treaties with Sweden conferring the sole right of tax on such gains on the residence country. By moving to such a country and then realising the gain the Swedish tax can thus be avoided. In such an environment where also personal mobility is unrestricted it is tempting for Swedish shareholders to move from Sweden (at least for some time) if they stand to gain a couple of million Swedish crowns. (If also, which is quite common, he is retiring from active occupation, and under a tax treaty can achieve a reduced taxation of his Swedish pension income this of course will also ”sweeten the deal”).
The tax planning techniques that have been adopted in the past to avoid the tax under the ten year rule have been very ingenious and successful mainly, as just mentioned, because our tax treaties confer sole taxing rights on share gains on the residence state i.e. the state to which the shareholder has decided to move. A number of our treaties after lengthy periods of negotiation have, however, secured Swedish source taxation but new holding company strategies and careful planning and timing of transactions have circumvented these obstacles (see below). Since becoming a member of the EU the principles of free movement of individuals and capital have provided new opportunities for further tax avoidance schemes. Also, the abandonment of our foreign exchange rules (in 1989) has played into the hands of migrating shareholders.
The present circumvention technique of the ten year rule is to set up a holding company somewhere in the EU – Cyprus with its low corporate tax rate has become a favourite jurisdiction for this purpose - and then to transfer the Swedish (target) company at aquisition cost to a foreign holding company which can be done tax free under our new participation taxation regime. The shareholder then moves to a (low or no-tax) jurisdiction which as far as capital gains are concerned has a tax treaty with Sweden denying Swedish source taxation of the gains.
The erosion over the years of the Swedish capital gains tax base due to manipulations of the ten year rule has been massive. I repeat, massive. The Tax Administration have reported billions of Swedish crowns escaping the country and repeatedly called for stricter legislation. Consequently the present situation is very lucrative for the international tax planning community1 which together with their clients thus represent a strong force in favour of a status quo.
The Swedish legislator, whatever his political colour, in high-flown rhetoric, has always proclaimed his mission to defend the Swedish tax base. The counteracting measures that have been taken in practice to prevent the abuse of the ten year rule have, however, been lethargic and ineffective. The following example which became a hot issue in 2007 is revealing. It ocurred with respect to Sweden's tax treaty with Austria. In 1992, fifteen years earlier, I repeat fifteen years, Austria had introduced a step-up mechanism regarding capital gains taxation whereby the aqusition price of the shares was tied to their value at the date of immigration of the shareholder to Austria. In this situation, where Austria under the tax treaty with Sweden had sole taxing rights to the gain, an immediate subsequent sale by the shareholder would relieve him from tax not only in Sweden but also in Austria, i.e. a double non-taxation situation. A new treaty had been initialled already in 1995 but still in 2007 – that, ladies and gentlemen, is twelve years later - treaty discussions had not been finalised! According to the Tax Administration the tax loss to the Swedish treasury only in the three years 2004-06 amounted to some three billion Swedish crowns. After quite severe public opinion pressure the Finance Ministry in a whirlwind of activity negotiated a new protocol with Austria closing the tax loop-hole within a record time of about eight months! The legislative measures introduced in 2008 extending the ten year rule to the sale also of foreign shares, the purpose of which was directly aimed at frustrating the tax planning technique decribed above, also represented a total failure as many of our treaties also prohibit source state taxing rights to such capital gains.
The Swedish treasury still generally remains aloof to the tax base erosion caused by the ten year rule blaming staff recruitment problems and calling for further investigation in the matter. That latter proclamation was made in mid 2007 when the ten year rule was extended to foreign shares – a measure which could easily be circumvented. To day, three and a half years later an investigation panel regarding the ten year rule has still not even been appointed.
Recently the Swedish National Audit Office (Riksrevisionen) issued a report criticizing the Treasury for neglecting to take measures against the vast amounts of tax payer's money being lost due to the ten year rule. (RiR 2010:24). Also the Confederation of Swedish Enterprise (Svenskt Näringsliv) has berated the Government for their dilatory treatment of our tax treaty network reducing the competetivness of Swedish companies on their export markets.
In the past I have given a lot of attention to the ten year rule advocating a more energetic approach to counteract the tax avoidance measures that are practised in this field. Considering the very strong forces benefitting from the present situation these efforts have been unsuccessful.
Therefore I found it of great interest in late 2010 to learn that a 500-page doctoral thesis was going to be presented at the Uppsala University regarding emigration taxes. This, I thought hopefully, should invigorate the tax policy debate on the ten year rule in particular. The thesis titled ”Emigration taxation of capital gains – a scientific tax study on international taxation of individuals focusing on problems regarding tax treaties and EU law.” (Utflyttningsbeskattning av kapitalökningar – en skattevetenskaplig studie i internationell personbeskattning med fokus på skatteavtals- och EU-rättsliga problem) is written by Katia Cejie at the Juridical Institution of the Uppsala University and associated also to the private foundation Centrum för Skatter (supported by Deloitte, Ernst & Young, KPMG, Mannheimer Swartling Advokatbyrå, Skeppsbron Skatt och Öhrling Pricewaterhouse Coopers, (all of them of course involved too in international tax planning affairs).
In a press release (www.forskning.se) announcing the upcoming public hearing of her thesis Ms Cejie describes the problems of emigration taxes for one thing as being so considerable that they affect the willingness of individuals to move, in practise restricting the principles of free movement within the EU and, for another, that they under certain circumstances are levied in both the state from which the tax payer is moving and also in his new state of residence i.e. double taxation. ”Ms Cejie's thesis”, says her tutor and Supreme Court judge Kristina Ståhl, ”is important as it provides an instrument to courts and legislators at both the national and EU level for charting the problems in this field of taxation”.
So, how different the description of emigration tax problems can be! On the one hand as a threatening force giving rise to double taxation and limiting the free movement in Europe, and on the other as mentioned above as instruments for wide-spread tax avoidance leading to the payment of quite insignificant taxes or even to complete double non-taxation, serving, if anything, as a driving force for the migration of tax payers!
Ms Cejie's thesis is a very comprehensive, interesting and solid report on various aspects of emigration taxation and it spans a much wider field than just the ten year rule. In particular her research and analysis of EU law in this field and the problems of whether, as aforementioned, emigration taxes constitute restrictions to the freedoms of the Treaty on the Functioning of the European Union (TFEU) and if so, whether or not they can be justified (Part III, Chapters 5-10) have made a big contribution to the understanding of these very complex matters. (She should no doubt be a strong candidate for the post doc award of Centrum för Skatter Foundation.)
Nevertheless, and as shall be gleaned from below, I have a number of serious reservations about Ms Cejie's work mainly on problems arising from the interaction betwen emigration taxes and tax treaties.
The thesis covers four different kinds of emigration taxes (some of which apply also to other types of income than capital gains). This article, however, will focus only on the ten year rule. This is a type of emigration tax categorized in Ms Cejie's thesis as a TL-rule, a trailing tax on latent income which can also be defined as a rule enforcing an exterritorial tax liability (in Sweden, the state from which the shareholder is moving) for a certain period of time. (The term ”trailing tax” is used as a synonym for ”extended income tax liability”, footnote 1716). The definition of the term ”latent income” indicates that taxation is not triggered upon emigration and that the appreciation of the shares that occurs after emigration is also subject to tax (in Sweden) when the shares are sold.
The additional three types of emigration taxes that are dealt with in the thesis are:
a) exit taxes on latent income (EL-rule). A latent income (page 513) is an income which is unrealized, i.e. the ”normal” time of the taxable event has not yet ocurred.The emigration,however, triggers the taxable event which means that that an exit tax is levied upon departure.
b) exit taxes on realised income (ER-rule). One Swedish rule that falls into this category is the rule on exchange of shares. Acording to the Swedish Income Tax Act (ITA), an exchange of shares is a taxable event. The gain is realized but the taxation of the gain is postponed until the new shares are sold or, which is of interest with regard to emigration taxes, until the taxpayer emigrates to a country outside the EEA area. The emigration is, however, regarded as a taxable event according to the rules in this case and an exit tax will be levied.
c) trailing taxes on realized income (TR-rules). One of the Swedish rules that fall into this category is the rule on deferral of the tax levy of the capital gain on the sale of a permanent home. The gain, consequently, is realized but taxation is deferred until the new home is sold. (This rule was introduced in 2007 and applied only to new homes situated in Sweden but the Luxembourg Court of Justice held that this violated the principle of free movement within the Community. This had the effect that also a new home aquired within the Community should qualify for a deferral of the capital gains tax assessed on the sale of one's Swedish home) Ms Cejie concludes that this category of emigration taxes will expand in the future.
Public discussion of Ms Cejie's thesis
Before continuing any further with my analysis of Ms Cejie's thesis I must however report what happened at the public hearing hereof at the University of Uppsala on 10 December 2010.
The chairwoman of the proceedings and Ms Cejie's tutor (and Supreme Administrative Court judge and member of the Board of Centrum för Skatter) Ms Kristina Ståhl set forth the conditions for the hearing. First this would consist of the (cross-)examination by the public opposer Professor Mats Tjerneld, Lund University . Thereafter the certification board (betygsnämnd) consisting of Professor Bertil Wiman, Uppsala University (and Director of the Centrum för Skatter Foundation), Cecile Brokelind, Lund University and Marjaana Helminen, Helsinki University would have the opportunity to raise questions. Finally the floor would be open for comments from the audience. It was explicitly pointed out that there was no specific time frame for the hearing which would thus be concluded only when no more interventions or comments remained.
The two first phases of the proceedings were concluded by approximately 12.20 hours.
I then announced my interest to raise a number of questions. After a short while I was interupted by Ms Ståhl who asked how much more time I required for my interrogation. I responded that this would be difficult to determine because it would depend on the answers and information supplied by Ms Cejie and the discusion that could emerge therefrom. It appeared that Ms Ståhl wanted to know in order to determine if an intermission would be required.
At about 12.40 it was announced that lunch would be served at 13.00 and I sensed that Ms Ståhl was anxious to complete the hearing by then. A break was, however, made at this point during which Ms Ståhl and Professor Mattias Dahlberg (Uppsala University), deputy tutor of the thesis, took me aside for a private talk. They urged me quite abrasively to abstain from delivering any comments to Ms Cejie's thesis and only to ask direct questions to her, everything to speed up the proceedings. I repeated that this disturbed the whole structure of my questioning and that it was necessary for me to develop the various problems, just like the public opposer had done, and also declare my views in order to give Ms Cejie a chance to comment thereon and to explain her opinions in her thesis. I thus repeated that it was impossible for me to determine how much longer time that was necessary for me to conclude my questioning.
At the continuation of the hearing I was again pressured to hurry up by Ms Ståhl. At one point she exclaimed; ”Now that you have put forward your question and received an answer, proceed at once to your next question.” It was thus not possible for me to follow up Ms Cejie's reply which in my view was not quite satisfactory and required further comments.
At this stage, the time was now approximately 12.50, Ms Ståhl declared that that those who so whished could leave for lunch and that she, Ms Cejie, Professor Tjerneld, the certification board and myself would remain to conclude the hearing.
At around 12.55 upon asking another question somewhat ambiguosly answered by Ms Cejie, Ms Ståhl said that I had received a reply and again instructed me to just put forward my next question. At this stage, and with the preparations of my questioning completely disrupted, when I further consulted my notes for a couple of seconds, Ms Ståhl again abrubtly intervened to declare that since I appeared not to have any further questions, the hearing, deespite my protests, was considered to be concluded. And then everybody dropped off for lunch.
Immediately after the hearing I was approached by Professor Wiman who ”thanked me” for having contributed to such a ”pleasant hearing of Ms Cejie's thesis”. Upon my question he confirmed that his statement was ironic. My response hereto was that I considered the pleasantness of a public hearing of a doctoral thesis to be of secondary importance, especially for the members of the certification board. (I have afterwards asked Professor Wiman to confirm his statement but he has not responded hereto.)
After having devoted considerable time to the scrutiny of Ms Cejie's thesis I am frustrated for having been shut up at the hearing and prevented from completing the presentation of my investigation and opinions of her thesis. My complaints hereover have been summarily dismissed by the dean of the juridical faculty at Uppsala University Mr Torbjörn Andersson.
I consider that the basic principle of free and unfettered investigation of all scientific effort, a hallmark of academic tradition of all civilised societies, has been compromised.
Analysis of Ms Cejie's thesis.
The thesis comprises four chapters of which the following discussion will deal only with chapter II sections 2.2 on interpretation of tax treaties and section 2.3. regarding the conflicting norms for determining precedence between domestic tax law and treaties highlighted by the 2008 treaty over-ride ruling of the Supreme Administrative Court RÅ 2008 ref. 24. The following presentation will include not only the issues brought up by me at the hearing but also those that I was prevented to bring up. As already mentioned this report is mainly focused on the ten year rule.
At the hearing I expressed my general disappointment that no attention had been given in the thesis to the historical development of emigration taxation that has taken part in Sweden over the last couple of decades particularly as far as the ten year rule was concerned. As already pointed out, this legislation had constituted one of the most contentious and controversial fields of our international tax regime over a very long time. Nor did the thesis disclose any kind of assessment of the enormous tax base losses suffered by the treasury regarding the ten year rule. Lacking such a historical and empirical background the reader is left unaware of the economic importance of the issues involved in emigration tax matters. The thesis is thus reduced mainly to an academic abstraction isolated from the world outside. Also disappointing is that Ms Cejie had made no attempt to construe a rule that would overcome the shortcomings of the present legislation and of our tax treaties. Her final conclusions and suggestions merely fade away in a deferential and restrained call for further research.
Tax treaty interpretation
Ms Cejie, in chapter II.2.2, has devoted no less than twenty pages to tax treaty interpretation. This, to a certain extent, may be considered unneccessary beacause this, with regard to emigration taxation is of very limited relevance in general and as far as the ten year rule is concerned I cannot recall a single tax case giving rise to any specific treaty interpretation problems. The problem of emigrating share gains is usually addressed in a special section of the capital gains tax article, usually number 13 of our tax treaties and the interpretation of these articles is quite straightforward and uncomplicated.
At the hearing I welcomed, however, the fact that I shared the same basic belief with Ms Cejie that tax treaties should be interpreted according to the principles of international law laid down in the Vienna Convention on the Law of Treaties and that the interpretation of such treaties (only on a very last resort basis) should rely on internal (Swedish) law understanding of terms not defined in the treaty. I noted however that my pioneering work on these matters, a 64 page paper in IUR-INFO no 10-11/1968, had not been noticed by Ms Cejie in her bibliography.
I also brought to attention that an article in IUR-INFO no 2/3 2007 by Stefan Ersson, former judge of the Supreme Administrative Court and a leading authority on international tax law in Sweden, had, in my view, taken a step in the wrong direction when empasizing that tax treaties, being an integral part of Swedish national law, should also be interpreted as such. I had put forward my views in a quite comprehensive response (over 18 pages) rejecting Mr Ersson's ideas suggesting that tax treaties should be interpreted in the same way as domestic tax law. Mr Ersson's article had been quoted by Ms Cejie in her thesis but not my response. The reason herefor, Ms Cejie announced at the hearing, was that my article had not been published. This, in my view, was not a satisfactory answer as it had in fact been printed in ”WebJournal on International Taxation in Sweden” (no 4/2009, Legalitetsprincipen och skatteavtal”) to which Ms Cejie is a subscriber at www.skatter.se Also, the article had been rejected publication in Skattenytt, a decision taken by Professor Mattias Dahlberg who was the editor of that magazine at the time and who, as mentioned above, also has been assistant/deputy tutor to Ms Cejie.
A further issue brought up by Ms Cejie on page 89 of her thesis, discusses the interpretation problems that may occur when treaties have been drawn up in two or more languages both declared equally authoritative. This problem became very real in the Administrative Supreme Court decision RÅ 2004 not. 59 regarding the treaty with Peru which Ms Cejie duly had reported. In 2006 i wrote a 28 page and very critical report, ”Interpretation of tax treaties authenticated in two or more languages – a case study.” on this decision which was published (!) in Svensk Skattetidning 2007. This article too, however, had eluded Ms Cejie's attention.2
A further interpretation issue brought up by Ms Cejie on pages 93-96 is to what extent a change of the Commentaries to the OECD Model Treaty should apply to the interpretation of a bilateral treaty that was made before that change if the text of the pertinent treaty article itself of the Model treaty remains unaltered. This question has been fervently discussed also by Mattias Dahlberg and Jesper Barenfeld in their doctoral thesises and by Anne-Sophie Sallander.3 The main line of their arguments, including also now that of Ms Cejie, is that revised commentaries of the Model Treaty should not be applied or only very carefully to “old” bilateral treaties based on the Model Treaty. Instead one should apply that version of the OECD Commentaries that existed at the time of the conclusion of the bilateral treaty in question, (which of course could be very much earlier).
I have a completely different view on these matters and what I suggest is a useful method for a solution of the problem, which I reported in IUR-INFO 2/2002. and again in a commentary (7 pages) to Jesper Barenfelds thesis, in no 1/2005 of WebJournal on International Taxation in Sweden. This made no impression on Mattias Dahlberg who vigorously defended his position in IUR-INFO 3 under the title “Om rättskällevärdet av OECDs modellavtal jämte kommentar”.
In my view one should remember that the Model Treaty is a document agreed by the the governments of the OECD. These are the same governments that make bilateral treaties with each other. Therefor, if they agree at “the OECD level” that modified Commentaries to the Model should be taken into account also visavi treaties that they have made before the modifications, this reflects an understanding of these governments that they have reached a consensus and given proof of their intention to observe that these treaties shall be interpreted accordingly. A tax treaty is thus a contract between the two contracting states imposing upon one another an obligation to respect and to abide by the rules thereof. In this respect they differ from an ordinary domestic tax law whereby the legislator imposes obligations upon its tax subjects.
In theory, but quite impractical of course, the contracting parties, if they have made a bilateral treaty in the past, the text of which is identical to the Model and if they recognize the validity of the new Commentaries to the Model, could terminate the treaty and then immediately, upon the modifications of the Model Commentaries, let it re-enter into force. In that way there would never be any bilateral model-based treaties that are older than the latest modification of the Model Commentaries!
In my paper regarding Barenfeld's thesis I wrote: Nor is it quite clear why Mr. Barenfeld is so reluctant to the ambulatory approach of using modified Commentaries also to old treaties, but by his reference to the position of the tax payer, it seems that his hesitation stems from a consideration for legal certainty. Or, in other words, the taxpayer must be able to rely on the treaty as it was once concluded. This seemingly suggests that the modifications of the treaty are always to the detriment of the tax payer. But one should of course also remember that the modification just as likely may be to the benefit of the tax payer. In this case everybody would probably agree that it would be a great shame not to apply the modified version of the Model.
At the same time, and this is something upon which everybody agrees, it is very complicated always having to determine at what point a specific modification of the Commentaries took place with regard to the relevant treaty under interpretation. Considering moreover that the Contracting parties as revealed in the recommendations of Model Treaty authors have no reservations about allowing application of modified Commentaries to treaties concluded before these modifications, a useful solution of the problem would be to adopt a method whereby the modified Commentaries shall be accepted for interpretation purposes only with regard to investments made and income derived after the adoption of the modifications. The validity of new Commentaries should thus be referred not to when they were adopted but to the point in time when the income was derived. In this way the problem of certainty for the tax payer is always accommodated. (This is an idea I raised already a couple of years ago, see IUR-INFO 2/02.)
I am pleased to note that this idea has taken root at the Swedish Tax Administration who in a recent opinion (ställningstagande) regarding the Model Commentaries' new thinking on the definition of the term “employer” (article 15) have decided that it should apply as of 2011.
Considering his deep involvment in the issue and in Ms Cejie's thesis it is suprising that Professor Dahlberg has not advised her to include a reference of the above discussion in the thesis. It thus only reflects Dahlberg's opinion on the applicability of new Commentaries to “old” treaties whereas my contribution to this issue has been completely ignored by Ms Cejie.
Purposes and functions of tax treaties (section 2.1.2)
On page 71 of the thesis Ms Cejie brings up one of the purposes of a tax treaty as being to divide taxing rights between the contracting states. This in my view should not be considered as a purpose of a treaty in itself but rather as a means of avoiding double taxation. This is accomplished either by the exemption or the credit method on a reciprocal basis. It is of course a matter of negotiation to determine the level of tax sharing for instance when establishing the level of withholding taxes between the source state and the residence state. Recently Sweden has also concluded a couple of treaties (with Austria and Denmark) where double taxation is avoided not by dividing the tax liability but by splitting the tax base, a rule which, incidentally, applies specifically to capital gains in emigration situations. Sweden as the state of source may thus tax the appreciation of the shares that has taken place up and until the point of emigration whereas the residence state will tax the appreciation that occurs between that point in time and the time of alienation of the shares. The thesis would have benefited from a discussion of this new trend.
A further view regarding the purposes and functions of tax treaties (which there was no time to explore at the public hearing of Ms Cejies thesis) is their role to prevent anti (international) tax avoidance. Ms Cejie's approach and investigation of this matter is very interesting and I agree with her conclusion (pages 121-125) that neither our domestic five year rule imposing (continuing) full tax liability during five years on individuals migrating from Sweden if they have “essential ties” with Sweden, nor our ten year rule imposing capital gains tax liability on company shares on migrating non resident individuals can justify a non-recognition of a treaty just because these Swedish rules are intended to prevent tax avoidance.
A further question regarding tax avoidance and tax treaties with special reference to the ten year rule is to what extent Sweden's general anti tax avoidance regime may be invoked in such situations. This has been highlighted in both the recent Thailand case and the Switzerland and Greece cases (see below) focussing basically on whether the ten year (emigration tax) rule should override Sweden's tax treaties with these countries. The bottom line decision by the Advance Rulings Board in the first mentioned case was that the treaty prevailed but in the two latter cases the Board in accordance with the Supreme Administrative Court's ruling in RÅ 2008 ref.24 gave the opposite answer i.e. that the ten year rule had precedence over the treaties, i.e treaty override. In these two latter cases three members of the minority addressed the question of the relevance of the general anti-avoidance rule visavi the treaties (all of them coming to the conclusion that it did not apply as such.)4
I have written a comprehensive report on the Thailand case (see below) which, after it too was denied publication in Skattenytt by its editor Professor Dahlberg, was printed in no 4/2009 of WebJournal on International Taxation in Sweden. It has, however, not been considered by Ms Cejie.
The “golden rule” and conflicting tax liabilities under domestic and treaty law.
This is a very big question in general and because of Ms Cejie's opinion one of some controversy visavi my standpoint. Due to the limited time allowed for my intervention at the hearing this was discussed only briefly.
The golden rule is laid down, (usually in paragraph 2), in each and every law incorporating our tax treaties. It reads as follows: “The rules of the treaty shall be applied only to the extent that they give rise to a limitation of the tax liability that would otherwise occur.” The term “that would otherwise occur” naturally refers to the tax liability that would follow if no treaty existed i.e. the tax liability resulting from application of pure domestic law. The application of the golden rule is actually quite straightforward: First one determines how much tax Sweden can levy under domestic tax law. If no taxation occurs the matter is closed. There is no need to consult the treaty. If, on the other hand a tax liability occurs under Swedish tax law, then one must consult the appropriate treaty and determine how much tax should be paid in Sweden according to the treaty. If this amount is lower than that which follows from the application of Swedish law, Sweden may not levy a higher tax than what follows from the application of the treaty. Important to note is that the golden rule is nothing that follows from some kind of principle or general (international) maxim. It is a Swedish (unilateral) decree/law imposed by our legislator (parliament). It is repeated in each and every law incorporating our treaties. These laws are hierarchically equal to any other law enacted by parliament including our domestic tax laws and our tax treaties. None of these laws are superiour to any of the others.
On page 75 of her thesis Ms Cejie, referring inter alia to an article I wrote in 1995 (page 463), points out: “A common opinion in doctrine is that treaties are superior (emphasis added) to domestic law and that this is based on the so called golden rule. I don't share this opinion about the golden rule but I raise the question in this context based on the said opinion”. After having quoted the golden rule and given an explanation of its limiting effect as reported above Ms Cejie concludes that “if on the other hand the treaty will allow Sweden to tax so be it.” This must be understood that there is no limiting effect by the treaty and Sweden can go ahead and levy the tax that follows from an application of its domestic law. On pages 76-77 Ms Cejie then continues: “The golden rule has further been been interpreted as conferring upon treaties a superior role visavi domestic law. Also in doctrine abroad the golden rule has been interpreted as giving preference to treaties where a conflict of laws appears. This approach, that tax treaties have preference to domestic law,has been held for a long time. I am , however, not convinced that this viewpoint can be derived from the golden rule. According to its wording the golden rule says nothing about the sovereignty (dignitet) of the various legal sources (i.e. that tax treaties are superior to domestic law, a form of vertical effect). Thus I do not share the customary view in doctrine about the understanding of the golden rule. In my opinion the golden rule should be understood as nothing more than a rule under which the tax liability under domestic law cannot be extended by a treaty (a form of horisontal effect). This means that if Sweden is afforded taxing rights under the treaty this taxing right must be confirmed also under national law”.
Sure enough, Sweden can of course never impose taxation, treaty or no treaty, unless confirmed in national Swedish law. Or in other words, we don't need a treaty to confirm our right to tax under national law! It is also true that neither the golden rule nor a treaty rule says anything about the superiority (or inferiority) of either rule or domestic law. Under our constitution on the other hand domestic law, treaty law and the golden rule itself, which is indeed also a domestic law rule adopted by parliament, all have the same constitutional “ranking”. None of these rules therefore have preference as such before any ot the others. As already mentioned none of them is superiour to the others from a constitutional viewpoint. And nothing else, in Swedish doctrine, has ever been suggested! Ms Cejie's allegation (above) that traditional doctrine views, quoting my 1995 (page 463) article in Skattenytt and Bokström,K&Tyllström's national report in Cahier de Droit Fiscal 1993, that treaties are superior to domestic laws represents a serious misunderstanding. As I pointed out in my 1995 article, the role of the golden rule is to be nothing but a tie-breaker (lagvalsregel) when tax liability under Swedish tax law differs from that of the treaty. It is true, as Ms Cejie suggests, that tax treaties cannot extend Swedish tax claims under Swedish law. But that is only bacause the golden rule explicitly says so. If our parliament so chooses it could alter the golden rule so that treaties always have precedence. Nor would such a change of the golden rule change the equilibrium of the ranking between domestic and treaty law. The limiting effect of treaties i.e. that in such situations they trump domestic law, and I repeat it once again, is nothing that follows from nature. It is, as just explained, due to an act of parliament.
Professor Mats Tjerneld, the public opposer of the thesis, brought Ms Cejie's opinions on the golden rule to attention contenting himself, however, and to my disappointment, by merely establishing that they were bold and interesting.
I have further expanded my views regarding the relationship between domestic law and tax treaties in an article under the title “Montesquieu and the Swedish income tax regime (and some thoughts on the relationship between domestic tax law and tax treaties.)”. It was printed in “WebJournal on International Taxation no 6/2007 after being denied publication in Svensk Skattetidning for being “too critical”. Nor has this article been cited in Ms Cejie's thesis.
The OMX-case RÅ 2008 ref. 24
This case presented by the Supreme Administrative Court on 3 April 2008 deals specifically with the problems discussed in the preceding section regarding the relationship between domestic tax law and tax treaties and represents probably the most criticized decision ever by that Court, certainly with regard to tax treaty matters. Ms Cejie discusses the case over no less than fifteen pages under sections 2.3. and 2.4. of her thesis.
In footnote 327, under what appears to be an exhaustive list, Ms Cejie has quoted eleven authors who have discussed the OMX case. In addition to her list I have written another three articles in various contexts (in Swedish) on the subject which, however, have either not been observed by Ms Cejie or have been ignored by her. They are published in:
1.No 4/2008 of WebJournal on International Taxation in Sweden, “Treaty Override”, http://www.skatter.se/index.php?q=node/2533.
2.No 5/2009 of WebJournal on International Taxation in Sweden, “Försäljning av aktier efter utflyttning, del 1 (Thailandsmålet) more hereinafter, http://www.skatter.se/index.php?q=node/2625.
3 No 3/2010 of WebJournal on International Taxation in Sweden, “Normhierarki och regelkonkurrens mellan intern skatterätt och skatteavtal”, http://www.skatter.se/index.php?q=node/3318.
The OMX case dealt with the question whether our Controlled Foreign Corporation (CFC) legislation should prevail over our tax treaties, (a question which has arisen in several other countries with CFC-legislations). The Advance rulings Board, after a very interesting and meticulous analysis and interpretation of the pertinent tax treaty (with Switzerland), found that this was the case i.e. that Sweden could go ahead and tax and that the treaty did not prevent Sweden from executing its domestic CFC-rules. On appeal the Supreme Administrative Court came to the same bottom line conclusion but they did so without consulting the treaty at all! They explicitly declared that there was no need to analyze the treaty.
Or as professor Mutén put it, the Court resolved the matter “by a Gordian stroke of the sword” allowing the domestic Swedish CFC rules to override the treaty. This is what – quite majestically - the Court said: “Upon making a tax treaty Sweden (may) surrender tax claims following from Swedish law. From an international law point of view Sweden is bound by the treaty. The obligations under the treaty become effective by adoption in Swedish law. As far as Switzerland is concerned this took place according to Law (1987:1182) on (incorporation of) the tax treaty between Sweden and Switzerland. Such a law has no exeptional ranking in relation to other laws. When thus, as outlined under paragraph 2 of of the said law in its version under Law 1992:856, it is declared that “the rules of the treaty shall apply only to the extent that they incur a limitation of the tax liability in Sweden that would otherwise occur” this only suggests that the treaty cannot expand the tax claims determined from Swedish law. Therefore, the stipulation does not prevent Sweden in a subsequent law to expand its tax claims regardless of the repercussions that would entail under international law. If two laws prove to be irreconcilable the dispute over which law should prevail shall be resolved according to the principles of conflicts of laws. In doing so it is clear that not only have the CFC rules been adopted after the incorporation of the treaty but also that they take aim specifically at such activities as performed by the Swiss company. Accordingly it is clear that the CFC rules shall prevail and have effect regardless of the result following from the treaty rules. An analysis of of the regulations of the treaty is thus not required.”
The ruling is very cryptic and the number of arguments that have been suggested analyzing the case are innumerable. The first article that was put forward was by professor Mattias Dahlberg of Uppsala University, and one of Sweden's leading authorities on international taxation in Sweden. The article was published in the summer of 2008 in Skattenytt (of which Mr Dahlberg was then chief editor) 2008 pages 482-489. His main line of thought is that the Court had abandoned its traditional principles under international law for the interpretation of tax treaties. In no less than sixteen different contexts of his article Mr Dahlberg refers to the erroneous interpretation of the treaty committed by the Court suggesting further that it had adopted a domestic principle of tax interpretation in conflict with the international law method (folkrättslig metod) laid down by the Court in its (famous) “Luxembourg ruling” RÅ 1996 ref. 84 under which the interpretation of tax treaties should be governed by the international law standards of the Vienna Convention on the Law of Treaties as they appear in articles 31-33.
In response to Professor Dahlberg's article I also slated the treaty override perpetrated by the Court in RÅ 2008 ref.24 but strongly disagreed with Dahlberg's suggestion that this had its root in an interpretation of the treaty. As already mentioned the Court had completely ignored the treaty, very clearly determining that it did not require any analysis. And an interpretation of a treaty can only follow from an examination or an analysis of the treaty text. Or in other words, how can one interpret a treaty text if it is not analyzed? (And how could the Court have reached the conclusion that the CFC rules constituted “lex specialis” visavi the treaty if the treaty had not been considered?)
My paper that was sixteen pages long was submitted for publication in Skattenytt in October 2008. But it took Professor Dahlberg only eighteen minutes (according to the time indicated on his email) to return it, rejecting publication on the grounds that it added nothing of substance to the matter.
My analysis of the case which I further explored in my article (3 above) titled “Hierarchy of norms and conflicts of law between domestic tax laws and treaty rules” and which contrasted (I believe) to all of those of other authors was that the conflict of law suggested by the Court was not between the domestic CFC rule and the treaty but between the CFC rule and paragraph 2 of the law of incorporation of the treaty. This article was also denied publication, not by Professor Dahlberg but by his colleague at the Uppsala University Assistant Professor Jan Bjuvberg who is editor of Svensk Skattetidning but is, as mentioned above, printed in the WebJournal on International Taxation in Sweden.
Ms Cejie's opinion on the OMX-case, apart of course for concluding too that it constitutes a treaty override, is not alltogether clear. She has not dismissed the opinion of Professor Dahlberg, her assistant tutor. On the other hand, (page 105) she concludes that it appears from the wording of the judgement that no interpretation process has taken place. In footnote 338 she also concurs with the opinion of Maria Hilling (Intertax, Vol.36, Issue 10, 2008) who (page 458) comes to the conclusion too that the Court did not find it necessary to interpret the treaty in order to deal with the question of whether or not it hinders CFC taxation. I found it quite frustrating not to have been given the opportunity to discuss this matter at the public hearing of Ms Cejie's thesis.
It is of course also disappointing to have one's papers denied publication by the most prominent tax periodicals but as such decisions also may be based on commercial grounds this is something that every author must accept. In an academic context, however, ignoring, as Ms Cejie has done, what in this case is relevant material is a different matter. It affects the scientific quality of her thesis.
The Thailand case. (Decision 73-08/D, April 2 2009 by the Advance Rulings Board)
This case also deals directly with the aforementioned problem regarding the relationship between domestic and treaty law and the disastrous treaty override result in the Supreme Administrative Court's decision iRÅ 2008 ref.24. Also of interest is that the Thailand case is all about emigration taxation dealing specifically with the priority between the domestic ten year rule and the capital gains article of, in this case, the Thailand) treaty.
This was the situation that arose in this case. A Swedish resident shareholder of a Swedish company formed a Netherlands company in1998. In 2008 he transferred his Swedish company to the Netherlands company (taxfree under Swedish law). He then moved to Thailand and sold the Netherlands company. He applied to the Swedish Advance Rulings Board wondering where the gain should be taxed? Under the Swedish ten year rule which had been changed in 2008 and extended to cover also capital gains on all kinds of foreign shares sold within ten years of emigration from Sweden, it was clear that Sweden could tax the gain on the sale of the Netherlands company. Under the treaty with Thailand made in 1998 it was, however, equally clear that Thailand had sole taxing rights. The Advance Rulings Board exempted the shareholder from Swedish tax according to the treaty. The great surprise in this case was that the Board ignored the Supreme Administrative Court's decision RÅ 2008. ref 24. under which à "new" domestic rule should trump an old treaty.
There has been some controversy over the interpretation of this case which focuses on the basic principles of the relationship between domestic law and treaty law.
Professor Dahlberg who is (also) a judge of the Advance Rulings Board and participated in the Thailand ruling declared that there was no conflict between national law and the treaty, thereby indicating that under the ten year rule too the gain was exempted from Swedish tax. Or in other words, both domestic law and the treaty exempted the gain from Swedish tax. But if so, as I suggested in my article, the Board would not have exempted the gain according to the treaty as mentioned above but according to domestic law. Or, in other words, if domestic law exempts an income from taxation there is no reason to consult a treaty to establish the same exemption. In my article I therefore pointed out professor Dahlberg's misunderstanding of the case. As already mentioned, this article was denied publication in Skattenytt, of which magazine professor Dahlberg at the time was editor, but subsequently printed in ”WebJournal on International Taxation in Sweden”, issue no 5/2009 ,”Försälning av aktier efter utflyttning, Del 1, (Thailandsmålet). See http://www.skatter.se/index.php?q=node/2625. (The article was also denied publication by Svensk Skattetidning, a tax periodical of which' editorial board Ms Kristina Ståhl is one of the members).
Ms Ann-Sofi Sallander of The Jönköping International Business School, who's article ”I kölvattnet av RÅ 2008 ref. 24” was indeed published in Svensk Skattetidning also addresses the Thailand case repeats Professor Dahlbergs mistaken opinion. Or in other words, she also considers that the capital gain was exempted from tax also under domestic Swedish tax law.
This controversy, of course, made me very curious to hear Ms Cejie's view on the matter because there was no mention thereof in her thesis. At the public hearing, on my direct question, she agreed with my interpretation of the case i.e. that there was indeed a conflict between the ten year rule and the Thailand treaty and that the treaty had prevailed. Considering that Professor Dahlberg was also her assistant tutor one would have expected that she would have mentioned that she disagreed with his ruling. Nor has Ms Cejie in her thesis mentioned or analyzed the important fact that the Advance Rulings Board in their decision of the Thailand case, ignored the Supreme Administrative Court's treaty override in RA 2008 ref 28. Also she has ignored or overlooked my aforementioned article. This, in my view, and as already suggested does not live up to acceptable standards of academic research.
Emigration taxation and double taxation
In her thesis Ms Cejie has expressed repeated concern over the fact that emigration taxes so often may give rise to double taxation. Also in tax treaty situations. The reason herefor is simply that tax treaties, as mentioned by Ms Cejie on page 218, are not written and negotiated with emigration taxes in mind. The only remedy in most of these cases is to appeal to the competent authorities of the tax treaty for a mutual agreement settlement by the contracting states. This, as also pointed out by Ms Cejie, involves, however, a beaureaucratic procedure and an unpredictable outcome.
The ten year rule will, however, never give rise to double taxation if a tax treaty exists. The treaty will either give sole taxing rights to the residence state excluding completely the source state (Sweden) from taxation or it will give Sweden primary right of tax with an obligation for the residence state, i.e. the state to which the shareholder has moved, to allow a credit for the Swedish tax or, more seldom, to exempt the gain. The problem with this latter type of treaty is for Sweden to negotiate it because it means that the other state must pick up the tab to avoid double taxation. This may then oblige Sweden to make other sacrifices in the treaty either by reducing the scope of the ten year rule normally by reducing the ten year ”quarentine” period or give up other taxing rights.
At the public hearing , and seemingly with Ms Cejie's approval, I broached the idea that Sweden in these situations should offer a reverse credit mechanism i.e. allowing a credit for the capital gains tax of the residence state tax. Considering that the tax avoidance strategies used regarding the ten year rule will always involve low or no tax jurisdictions the tax credit will normally be quite negligible or even non-existent and thus very inexpensive for the Swedish treasury and probably frustrate the tax planning alltogether.
(Sweden has adopted reverse credits in some of its tax treaties regarding Swedish source pension income. As such tax is levied in Sweden as a preliminary (monthly) source tax upon payment and can be reclaimed only after a final tax assessment in the residence state has taken place quite some time thereafter, the reverse credit mechanism gives rise to a temporary double taxation and a complicated administrative procedure and has thus been justifiably crticized. These problems are, however, not relevant with regard to capital gains taxes.)
A further and more sweeping suggestion for reducing double tax problems involving the ten year rule would simply be to limit the scope thereof, at least as far as treaty states are concerned. One could thus limit its range only to closely held or controlled companies and exempt gains below certain thresholds. And in our treaties one could suggest to exempt citizens of the other contracting state from the ten year rule tax.
The double taxation problem as far as emigration taxes are concerned are, as just pointed out, very thoroughly discussed by Ms Cejie. This topic is thus repeatedly dealt with separately for each and every category of emigration tax both EL-, ER-, TL- and TR-rules under the subtitle ”Methods for elimination of double taxation” and then again under a concluding section. The other ”side of the coin”, i.e. the situation where emigration taxes, particularly the ten year rule tax, give rise to unwarranted double non-taxation effects is, however, completely ignored. Considering the severe effects of this aspect of emigration taxation on capital gains a discussion thereof in the thesis would have been justified.
Tax collection problems regarding trailing taxes om realised income (TR).
The statement in one of my opening remarks of the lack in Ms Cejie's thesis of any references to empirical data on emigration taxation is not alltogether correct. On page 507, in one of the closing sections of her work (11.5.4. Conclusions and viewpoints for the future) she gives some figures on the amounts of tax deferred with regard to trailing taxes on realised income (TR-rules). A big problem with such rules, she says, "is the difficulty, despite the (EU) directive on tax collection, to determine and supervise when to exercise the tax levy. The deferral of the tax can easily become a permanent exemption unless the collection of tax is effectivly monitored”. Also, she observes: ”The accumulated total amount of deferred capital gains taxes regarding private home dwellings in 2008 amounted to 216 billion SEK corresponding to a tax claim of 50 billion. The number of deferrals regarding exchanges of dwellings in the 2000-2008 period rose by 600 percent. Of the 216 billion only 1.3 billion apply to deferrals of home owners who have moved abroad. With regard to share exchanges that qualify for tax deferral the amount of capital gains taxes deferred amounted to about 15 billion SEK out of which 257 million SEK applied to shareholders that had moved abroad. The (aggregate) amount of deferrals concerning capital gains taxes of tax payers that have moved abroad amounted to about 1.5 billion SEK corresponding to a potential tax shortfall (emphasis added) of 354 million SEK." In a footnote Ms Cejie then also observes that "despite this high amount it only represents 0.03 percent of the total amount of tax collected by the treasury". Ms Cejie thus starts out by pointing out that the potential shortfall of tax attributable to foreign capital gains represents "a big problem" but finally concludes that it amounts only a fraction of a percent of total taxes due!
A more unsettling aspect is, however, that Ms Cejie in this context has completly failed to mention the shortfall of tax attributable to share gains avoided by manipulations of the ten year rule. As already noted these amounts are quite enormous, and has prompted the Tax Administration to call for emergency measures. In their official report no 1 of 2008 of the combined tax shortfall in Sweden (Skattefelskarta för Sverige) the amount of tax avoided under the ten year rule rises to about 1.2 billion SEK or about four times the figure attributable to deferrals of gains relating to foreign home owners and share exchanges quoted by Ms Cejie. Moreover, the 1.2 billion is an annual figure whereas the other taxes represent an accumulated amount.
Ms Cejie's opinion regarding the aforementioned potential tax shortfalls due to the problems of tax collection under TR-rules echoes the same arguments raised in an official government investigation (SOU 2009:33) regarding the ten year rule conducted by County Administrative Court judge Leif Gäwerth. As I pointed out in a quite disparaging analysis of his report, I suggested that an argument advocating non-interference with the present and aforementioned factual tax shortfall resulting from the manipulation of the ten year rule compared to a potential risk of non-collection under prospective new measures against such abuse was, with all due respect, quite silly. Or in other words, the risk of a potential tax shortfall under a TR regime compared to the present TR situation where taxation can easily be avoided is not a very strong argument for rejecting a change of the rules. Moreover, and more importantly, Mr Gäwerth, and consequently also Ms Cejie, have completely ignored the preventive or obstructive effects of a TL-rule on emigrating share gains. The manipulations of the ten year rule, setting up holding companies in various countries and intra-group company transfers only for tax avoidance purposes, has given rise to a virtual ”industry” in international tax planning circles. By introducing a TL-rule on share gains – something that has successfully been done in other countries – where such gains eventually will trigger a taxation in Sweden would thus frustrate such tax planning alltogether. Or in other words, a market where a tax planning/avoidance scheme only defers the tax temporarily will quickly dry up. Finally, which I also pointed out in my article regarding Mr Gäwerth's report, one should consider the growing effectiveness of exchange of information and tax collection agreements and procedures between treaty partners, including the growing numbers of such treaties also with notorious tax haven jurisdictions, which no doubt should discourage tax payers from not reporting their taxes.
My article regarding Mr Gäwerth's report was first approved for publication in Svensk Skattetidning by its editor, the aforementioned Jan Bjuvberg, but this decision was then abruptly revoked by himself (!) and the editorial board without explanation.
The article was subsequently printed in no 1/2010 of WebJournal on International Taxation in Sweden but, seemingly, has been overlooked by Ms Cejie.
Conclusion
The above observations regarding Ms Cejie's thesis should not overshadow the valuable and interesting work that she has done regarding emigration taxation. I repeat, however, my regret of the fact that her thesis has been isolated from its historical context in Sweden and the socioeconomic realities of the world outside. Scientific research must never be confined to a closed academic 'ivory tower'.
Emigration taxes, and particularly the ten year rule, give rise to considerable problems in international taxation in our country. Not only those of double taxation and freedom of movement within the EU which have been the main topics of Ms Cejie's thesis. But also, as especially share gains are concerned, they lead to unbridled tax base erosion and therefore also to an erosion of the integrity of the tax system as such. Other countries have suffered from similar problems but have taken (as it seems) effective counteracting measures. This, also, would have merited a discussion in Ms Cejie's thesis. At the public hearing Ms Cejie responded affirmitively to my question whether she thought she could construe effective rules that would both prevent double taxation and promote free movement within the EU but also restrain the widespread tax avoidance resulting from the manipulation of emigration taxes on capital gains. Also, the Commission has – quite some time ago - provided guidelines for member States how to deal with these problems, Kom (2006) 825 final. These aspects inter alia have also been dealt with in an excellent study over 53 pages by Anna Buhre and Elisabeth Mörck at the Jönköping International Business School under the title ”Is the ten-year- rule in chapter 3 section 19 of the Income Tax Law in compliance with EC-law?, a study which also has been overlooked by Ms Cejie.
What a pity therefore that Ms Cejie didn't take the opportunity to ”rock the boat” in this field of taxation! With her background, knowledge and experience regarding emigration taxes her voice would no doubt have been heard in shaping public opinion in this regard, prompting the Swedish legislator to get moving. Instead he can now go back to sleep and migrating Swedish shareholders and their tax advisors (including the benefactors of Centrum för Skatter) can relax and keep on laughing all the way to the bank.....
Stockholm May 2011
peter@sundgren.net
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