Sweden: Court confirms tax treatment of some Luxembourg investment funds is discriminatory
The Swedish Administrative Court of Appeal (SACA - second tier) has published several decisions with regard to the taxation of foreign and domestic investment funds.
Luxembourg SICAVs
The SACA has issued positive decisions with regard to Luxembourg SICAVs in respect of their reclaim of Swedish withholding tax, concluding that the levy of withholding tax infringes EU law.
However, the Swedish Tax Authorities (STA) have decided to lodge an appeal before the SACA against this decision.
The SACA has now decided, in two pilot cases, one regarding a Luxembourg SICAV and one regarding a Finnish investment company, that it will not grant leave to appeal to the STA, which means that the decisions that Swedish legislation is contrary to EU Law are now final.
73 similar cases (including Luxembourg SICAVs, UK investment funds (OEICs) and Norwegian investment funds) were treated the same way, where the SACA decided not to grant leave to appeal.
The SACA’s decisions are legally binding and we believe that there are now strong opportunities for foreign corporate investment funds to file withholding tax reclaims in Sweden. The STA should now be unable to reject in principle such reclaims and therefore no judicial appeals should be necessary in Sweden.
Luxembourg FCPs
In 2012, the SACA ruled that a Luxembourg FCP should not have been subject Swedish withholding tax under Swedish law. The FCP was therefore entitled to a full repayment of the Swedish tax withheld.
Further to this decision, the STA decided to lodge an appeal before the SACA. However, the SACA refused to grant leave to appeal and their decision has therefore become final.
The STA are now arguing that the unit holders (and not the FCP) are the beneficial owners of the income and that they may be liable to withholding tax. As a consequence, the STA have filed several appeals to the SACA regarding FCPs.
We have been informed by consultants that several cases with regard to FCPs have been appealed by the STA before the SACA.
It should not take more than approximately seven months for the SACA to decide whether or not it is going to grant leave to appeal and a decision could therefore be expected in autumn 2013. If it does not grant leave to appeal, we would consider that the decision also becomes legally binding for Luxembourg FCPs.
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