The proposal by a Committee to introduce management and control as a criteria for residence in Sweden has not yet been submitted to the Parliament.

The Ministry of Finance has proposed some amendments as regards restructuring of companies:

A. Today it is possible to sell the shares in a subsidiary to a foreign group company at a loss and get deduction for the loss (if it is a "real" loss) against other incomes of the selling company. It is proposed not to admit deductions for such losses on sales taking place after the end of 1996.

B. Today it is possible to get a postponement of the taxation if a transfer of shares take place in accordance with the rules in the EG-merger directive in the form of an exchange of shares. It is also possible to get a similar tax deferral under domestic legislation. Under the merger directive the gain to be postponed shall be decided on at the time of the share exchange as well as the acquisition value of the received shares while under the Swedish domestic rule the shares received will inherit the acquisition value of the exchanged shares. There are also some other differences between the two rules. At present the internal rule is not applicable when the rule under the merger directive is applicable. However, under this new proposal the taxpayer may chose which rule he wants to apply.

C. The Government has announced certain changes in tax legislation to be presented during the autumn. Some of the important ones are:

A temporary decrease of the stamp duty on the sale of real estate down to 1% (0,5% for individuals) of the sales price has been introduced between June 12, 1996 to December 31, 1997.

The economic double taxation on dividends paid on shares in non-listed Swedish companies is partly abolished, according to a Committee proposal. Part of the dividend received by a shareholder, being a physical person, will be tax exempt.

The set off to the profit equalisation reserve, today amounting to 25% of the profit of the year, will decrease to 20% from the year of assessment 1998.

EXPATRIATE AND IMPATRIATE TAX DEVELOPMENTS

The Government announcement mentioned above also includes suggestions to change the taxation of the benefits of company cars. The details have not yet been finalised but the purpose is to introduce a system that takes into consideration the size of the private use of the car.

A proposal will also be presented under which international experts being residents in Sweden for a temporary period shall get some tax benefits compared with other residents. No details are yet known.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information contact Per Snellman on tel: +468 613 9000, fax: +468 791 7511, e-mail: per.snellman@ey.se or enter a text search 'Ernst & Young' and 'Business Monitor'.