Carried interest case seen to 'doom' PE in Sweden

Jonathan Boyd
Carried interest case seen to 'doom' PE in Sweden

SVCA, the Swedish Private Equity & Venture Capital Association, has reacted to a legal win by the Swedish Tax Agency (Skatteverket) on a matter of carried interest by noting that it will be very hard for the country to try to take over London’s role in the European venture capital market post-Brexit given the uncertainty that the ruling as created for those working in the industry.

The Administrative Court of Appeal (Kammarrätten) in Stockholm effectively agreed with the Tax Agency that the returns or profits on capital should be treated as income from services according to rules that apply to companies instead of being taxed as capital returns.

The companies – and their venture capital funds – affected by the ruling include Altor, EQT, IK, Litorina, Nordic Capital, Segulah and Triton, but the case overall sets limits on all companies and associated individuals in the venture capital industry in Sweden. This is because the court focused on the tax liabilities of individuals associated with these venture capital companies or funds, rather than the businesses themselves.

The court said that because the funds, ownership structures in the companies, and the functions of the individuals affected are all different, the impact of the ruling would be different in each case. The court actually handed down 85 judgements in the matter, it noted.

In reaction to the ruling, EQT said that it did not agree that those individuals affected by the ruling had the role that the Tax Agency said they did, and that it was a shame that the court did not see the logic in that these cases involved returns from investments. The uncertainty in the Swedish tax system would remain until any test in a higher court, it added.

Full details on the cases considered by the court can be seen here:

Other tax issues

Meanwhile, the Swedish government is proposing new rules around the granting of options by smaller companies, which the SVCA said do not go far enough.

The government has proposed that to encourage the formation of more smaller and growth companies, they should be able to offer options to incentivise staff. But the SVCA said that the definition of options in the proposals was too limited to encourage more investments into such companies.

it said that the proposals would only affect companies with fewer than 50 employees and turnover less than SEK80m (€7m). The Assocation said the definitions used ought to reflect those in use in the UK, which would mean limits of up to 250 employees and some SEK320m (€28m) in turnover.

The proposals as such were put forward in a document in March 2016 – – with a suggestion that the new rules would take effect from 1 January 2018.

Also looking ahead to 2018, the Swedish government has outlined further proposals around the so-called 3.12 rule – also cited by EQT in regards to its response on the most recent tax court case – although the full budget proposals are subject to further negotiation in the country’s parliament given the need for the ruling coalition to gain the support of opposition parties to pass any budget.

Further details are available at


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