Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Sweden

Sweden has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review) except for identifying past rulings (ToR I.4.1.2) and for identifying all potential exchange jurisdictions for future rulings (ToR I.4.2.1). Sweden has reviewed its process for identifying both past and future rulings and given that the error in identifying additional past rulings in 2017 is not a recurring issue, no recommendation is made. However, the recommendation from the prior year peer review for Sweden to amend its rulings practice to require taxpayers to provide information on potential exchange jurisdictions as part of the ruling process remains in place.

Sweden can legally issue three types of rulings within the scope of the transparency framework.

In practice, Sweden has issued 28 past rulings; for the period 1 April 2016 - 31 December 2016, Sweden issued five future rulings; and for the year in review, Sweden issued three future rulings within the scope of the transparency framework.

No peer input was received in respect of the exchanges of information on rulings received from Sweden.

Introduction

1261.  This peer review covers Sweden’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

1262.  Sweden can legally issue the following three types of rulings within the scope of the transparency framework: (i) rulings related to preferential regimes;1 (ii) PE rulings; and (iii) related party conduit rulings. In Sweden, rulings are issued both by the National Board of Advance Tax Rulings (“National Board”)2 and the Swedish Tax Agency (“STA”). Some of these rulings are published in anonymised form.3

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

1263.  For Sweden, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2014.

1264.  In the prior year peer review report, it was determined that Sweden’s undertakings to identify past rulings were sufficient to meet the minimum standard. However, Sweden indicated that four additional past rulings were identified in February and June 2017 (three of which related to OECD/G20 countries and one related to a member joining the Inclusive Framework in 2016) in addition to the 24 past rulings reported in the prior year report. The STA explained that the past rulings, which were identified only during the year of review, had been issued by a separate department within the STA, which had not yet been introduced to the transparency framework and therefore had been erroneously left out of the calculation of the number of rulings within scope of Action 5. The STA notes that the issue has been addressed and that each department went through all the relevant rulings once more to ensure that all rulings in scope were correctly identified. Since this issue has been remedied and should not be a recurring issue, no recommendation is made.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

1265.  For Sweden, future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

1266.  In the prior year peer review report, it was determined that Sweden’s ruling process did not necessarily contain information on all potential exchange jurisdictions and a recommendation was issued for Sweden to amend its rulings practice to require taxpayers to provide all information on potential exchange jurisdictions for future rulings.

1267.  The STA has acknowledged that there is a need to amend the process for issuing rulings both within the STA and the National Board to obtain all information required under Action 5. The Ministry of Finance have also acknowledged the need for legislative amendments in order to collect information on potential exchange jurisdictions and the Ministry of Finance is looking into this process.

1268.  In order to ensure that all future rulings are correctly identified, the STA has implemented several measures in its rulings process to ensure that all relevant rulings are captured which includes additional training being given to a number of experienced tax officers to support the other officers in the process of identifying tax rulings which may be in scope of Action 5. In addition, the STA has published a position paper which explains its interpretation of the transparency framework. Among other issues, the position paper covers the scope, definitions, timelines and potential exchange jurisdictions under Action 5. The STA has also reviewed the process for identifying future rulings in order to ensure that all rulings are identified in a timely manner, including with respect to the department within STA where the additional past rulings were more recently identified. The STA has furthermore informed the relevant heads for each relevant department of the updated process and information is also published on the intranet of the STA.

1269.  In the year of review, there was no change from the prior year process adopted by the STA to identify the information on potential exchange jurisdictions for the relevant future rulings, which consisted in consulting the text of the ruling. As such, the recommendation issued to Sweden remains in place.

Review and supervision mechanism (ToR I.4.3)

1270.  In the prior year peer review report, it was determined that the STA’s review and supervision mechanisms were sufficient to meet the minimum standard. In addition, the STA has enhanced its review and supervision mechanism. The STA has provided training for its staff to ensure that the personnel working on the implementation of the transparency framework are well equipped to make decisions on questions arising in their work. The STA has also set out a process for dealing with practical and theoretical issues related to the exchange of rulings. In addition, the STA has published a position paper outlining the requirements under Action 5. Therefore the STA’s implementation in this regard continues to meet the minimum standard.

Conclusion on section A

1271.  Sweden has met all the ToR for the information gathering process, except for the identification of past rulings (ToR I.4.1.2) and the identification of all potential exchange jurisdictions for future rulings (ToR I.4.2.1). The STA has reviewed the process for identifying rulings in order to ensure that in the future, all rulings are identified in timely manner. Therefore, as this issue has already been remedied and should not be a recurring issue, no recommendation is issued with regards to the identification of rulings within scope of Action 5. With regard to identifying potential exchange jurisdictions, Sweden is taking steps to address the issue and is recommended to continue to work on the necessary legislative amendments for identifying all potential exchange jurisdictions for future rulings. As such, the recommendation remains in place.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

1272.  Sweden has the necessary domestic legal basis to exchange information spontaneously. Sweden notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

1273.  Sweden is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”), (ii) the Directive 2011/16/EU with all other European Union Member States, (iii) the Nordic Convention on Assistance in Tax Matters and (iv) double tax agreements in force with 62 jurisdictions.4

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

1274.  Sweden uses the EU Central Directory developed by the European Commission to exchange information on rulings and APAs among the EU Member States as well as non-EU countries. The process for the completion and exchange of templates has been updated to incorporate the use of the Central Directory.

1275.  Sweden indicates that when the officer issuing a tax ruling determines that it is within scope of Action 5, the identified ruling is reported to one of the appointed encoders at the STA responsible for preparing an information template using the EU Central Directory database. The template is then sent to a reviewer for a quality check to ensure that the information template is accurate and compliant with the Action 5 requirements. It is then submitted by certain appointed tax officers (“the Competent Authority”) to the relevant jurisdiction in a secure and timely manner. Each ruling is sent in two different file types: an XML file created by the Central Directory and a pdf file, which reflects the fields contained in the template in Annex C of the 2015 Action 5 Report (OECD, 2015).

1276.  For completing the summary section of the template, the STA points out that the summary is written in English and provides the following information: (i) the category of transaction or activity covered by the ruling, (ii) a description of the relevant circumstances, (iii) the STA’s decision including key conclusions and (iv) an explanation for the STA’s view of the interpretation of the tax law, where relevant.

1277.  For the year in review, the timeliness of exchanges is as follows:

 

Past rulings in the scope of the transparency framework	Number of exchanges transmitted by 31 December 2017	Delayed exchanges
		Number of exchanges not transmitted by 31 December 2017	Reasons for the delays	Any other comments
	4	0		See below
Future rulings in the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	3	0	N/A
Total	7	0

 

Follow up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	0	N/A	N/A

1278.  Sweden notes that four past rulings were identified in 2017, three of which related to the OECD/G20 countries and should have been exchanged by 31 December 2016. The STA explained that two of the rulings were exchanged in February 2017 and one was exchanged in June 2017.

Conclusion on section B

1279.  Although information on three past rulings should have been exchanged in 2017, the issue was on account of an error in the identification process explained in Part A. Once the rulings were identified, the exchange process was completed swiftly. Sweden has met all of the ToR for the exchange of information process and no recommendations are made.

C. Statistics (ToR IV)

1280.  The statistics for the year in review are as follows:

 

Category of ruling	Number of exchanges	Jurisdictions exchanged with
Rulings related to preferential regimes	Included in de minimis	N/A
Cross-border unilateral advance pricing agreements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles	N/A	N/A
Cross-border rulings providing for a unilateral downward adjustment to the taxpayer’s taxable profits that is not directly reflected in the taxpayer’s financial / commercial accounts	N/A	N/A
Permanent establishment rulings	Included in de minimis	N/A
Related party conduit rulings	Included in de minimis	N/A
De minimis rule	7	N/A
IP regimes: total exchanges on taxpayers benefitting from the third category of IP assets, new entrants benefitting from grandfathered IP regimes; and taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption	N/A	N/A
Total	7

D. Matters related to intellectual property regimes (ToR I.4.1.3)

1281.  Sweden does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015) were imposed.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
Sweden did not identify all past rulings.	No recommendation is made because Sweden identified additional past rulings in 2017 which it has exchanged by June 2017 and Sweden has reviewed its process for identifying past and future rulings to ensure that this is not a recurring issue.
Sweden did not identify all potential exchange jurisdictions for future rulings. This is a continuing recommendation from the prior year peer review.	Sweden is recommended to amend its rulings practice to require taxpayers to provide information on all potential exchange jurisdictions for future rulings as soon as possible.

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Notes

← 1.  With respect to the Tonnage tax regime which takes effect as of the fiscal year starting 1 January 2017.

← 2.  In Swedish: “Skatterättsnämnden”.

← 3.  Available at www.skatterattsnamnden.se (accessed 20 November 2018).

← 4.  Parties to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. Parties to the Nordic Convention on Assistance in Tax Matters are Denmark, Faroe Islands, Finland, Iceland and Sweden. Sweden also has bilateral agreements with Argentina, Australia, Austria, Barbados, Belgium, Botswana, Brazil, Bulgaria, Canada, Chile, China (People’s Republic of), Croatia, Czech Republic, Egypt, Estonia, France, Georgia, Germany, Greece, Hungary, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Kenya, Korea, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mauritius, Mexico, Netherlands, New Zealand, Nigeria, Pakistan, Poland, Portugal, Romania, Russia, Saudi Arabia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Switzerland, Thailand, Trinidad and Tobago, Turkey, Ukraine, United Kingdom, United States, Viet Nam and Zambia.