Tax Disputes Comparative Guide

1 Legal framework

1.1 Which laws govern taxation and tax disputes in your jurisdiction?

Generally, the Swedish tax laws are separate from the laws governing tax disputes. The most important tax laws include:

• the Income Tax Act;
• the Value Added Tax Act;
• the Real Property Tax Act;
• the Social Security Act; and
• the Withholding Tax Act.

In addition, various laws govern duties on alcohol, tobacco, energy and so on.

Tax disputes are mainly governed by laws including:

• the Tax Procedures Act;
• the Administrative Procedures Act;
• the Administrative Court Procedure Act; and
• the Act on Advance Tax Rulings.

This list is not exhaustive.

1.2 Do any other regional, national or supranational rules or regulations have relevance in this regard?

Sweden has an extensive network of tax treaties with other jurisdictions. Further, Sweden is also part of the European Union, so rulings of the Court of Justice of the European Union and EU regulations and directives add additional layers to the national rules and case law.

1.3 Which authorities are responsible for enforcing the tax laws? What is their general approach to enforcement?

The main authority responsible for enforcing the tax laws is the Swedish Tax Agency (STA). The working theory of the STA is that all taxpayers want to pay the correct taxes. Enforcement is generally upheld through:

• a broad reporting system (eg, income statements provided by employers, banks); and
• annual focus areas where the STA targets taxpayer groups or tax areas that it has identified as problematic.

1.4 To what extent do the tax authorities cooperate with (a) other national authorities and (b) their international counterparts in enforcing the tax laws? Does this vary depending on the applicable tax?

The STA cooperates with other Swedish authorities to a significant degree and there is also a level of automatic exchange of information between Swedish authorities.

The STA is further involved in considerable international cooperation, which involves, among other things:

• exchanging information with other countries to establish the correct tax and combat fraud and crime; and
• collaborating with various organisations, such as:
• • the European Union;
  • the Organisation for Economic Co-operation and Development;
  • the Intra-European Organisation of Tax Administrations; and
  • the Nordic Agenda.

The extent of cooperation in terms of enforcing the tax law will depend on a case-by-case basis in the context of what the STA deems necessary.

2 Tax investigations

2.1 How do the tax authorities monitor compliance with the tax laws? Does this vary depending on the individual taxpayer or the applicable tax?

Depending on the tax in question, the level of monitoring will vary considerably. Some taxes and fees are reported monthly to the Swedish Tax Agency (STA) – for example, through the pay as you earn tax return for preliminary tax and social security contributions. Income tax is reported through the filing of an annual income tax return.

The STA monitors tax compliance through:

• automatic reviews of submitted tax returns; and
• more focused interventions in the form of requests or tax audits of specific taxpayers.

2.2 What typically triggers a tax investigation in your jurisdiction?

In our experience, tax investigations are primarily triggered either:

• by re-reviews of submitted tax returns; or
• as the result of focused interventions on specific sector groups (eg, venture capitalists).

2.3 What is the limitation period for commencing a tax investigation in your jurisdiction?

The main rule is that the STA has the opportunity to reconsider its decisions on taxes by the end of the sixth year following the relevant fiscal year. This applies regardless of whether any new relevant information has come to light. However, after the end of the second year following the fiscal year, the STA must normally substantiate that the taxpayer has provided incorrect information which is of importance for the tax assessment in order for the STA to make a decision on its own initiative that is to the detriment of the taxpayer.

2.4 How does a tax investigation typically unfold in your jurisdiction?

In our experience, tax investigations are most commonly initiated through a formal request from the STA in which it asks the taxpayer to provide further information or supporting documents.

If the tax investigation is initiated through a tax audit, the STA usually announces the tax audit upfront by letter. In this letter, the STA will indicate the scope of the tax audit – that is, which taxes (eg, corporate income tax, wage tax, value added tax) are involved and for which fiscal years. The taxpayer should:

• cooperate with all reasonable requests for factual and financial information from the STA;
• ensure that the right documentation is available to the tax inspector and that all underlying administrative documents are in place for inspection by the STA; and
• review the necessary documentation upfront with a tax lawyer where necessary.

After the tax audit, the STA will write a report on its findings and any suggested tax assessments. The taxpayer will have the opportunity to respond to the report. The report should be reviewed carefully, especially since the courts may attach great importance to what is written in the report in the event of a court review.

Before the STA decides on a case which is to the detriment of the taxpayer and which was initiated by the STA, it must also communicate a proposal for a decision which sets out, among other things, the reasons that the STA intends to be the basis for its decision. The STA's decision may be appealed by the taxpayer to the Administrative Court.

2.5 What is the typical timeframe for the investigation?

An audit must not last longer than necessary, but there are no fixed deadlines. In our experience, an audit may last anywhere from a few months to a year or more.

2.6 What powers do the tax authorities have in conducting their investigation, in relation to (a) the taxpayer itself, (b) its employees and (c) third parties?

Swedish tax law stipulates that a taxpayer must provide the STA, upon request, with all information, books and documents that may be relevant to its Swedish tax position. The powers of the STA to request information are wide-ranging in relation to the taxpayer itself, its employees and third parties. In principle, a tax inspector may demand all information and explanations that could be relevant for the purpose of (or related to) the imposition of correct Swedish tax assessments. All information provided to the STA is subject to confidentiality. However, the STA's tax decisions are not confidential.

The STA also has the option of ordering third parties – such as banks, suppliers and customers that have been in contact with the taxpayer – to submit documents and other information to the STA. In practice, the STA often requests information from third parties. Normally, the STA does not disclose in advance which orders concerning the taxpayer it has issued.

2.7 On what grounds, if any, can taxpayers refuse to disclose commercial information during the investigation?

Certain information may not be audited by the STA – for example, information that is of significant protective interest to the taxpayer. This might include, for example, confidential information between the taxpayer and its lawyer. If the STA and the taxpayer do not agree in this regard, the taxpayer can request the administrative court to order that certain documents be exempted from the review.

2.8 Can the taxpayer object to or challenge the tax investigation? Are any other avenues available for resolving the matter?

No, a tax investigation in the form of a tax audit cannot in itself be challenged (but the tax decisions may be appealed). Further, it is not possible to enter into a settlement with the STA in respect of the assessment of taxes.

2.9 What actions can the tax authorities take if the taxpayer does not cooperate in the investigation?

As mentioned in question 2.6, the STA also has the option of ordering third parties – such as banks, suppliers and customers that have been in contact with the taxpayer – to submit documents and other information to the STA. If the taxpayer or a third party does not voluntarily submit requested information to the STA, the STA can combine its orders with a fine. Furthermore, if the taxpayer does not participate in the investigation, the STA can apply to the administrative court for so-called 'proof security' and 'payment security' – that is, that evidence and assets should be secured.

2.10 Can the tax authorities exercise discretion in their treatment of the taxpayer in exceptional circumstances (eg, insolvency)?

The STA is formally required to make necessary reassessments if the STA discovers that, for example, taxation in a prior fiscal year was incorrect. The STA does not have discretionary powers in this regard. However, the STA may decide to accept the information provided by the taxpayer and not pursue an issue further, as long as it has not become clear that, for example, the taxation is incorrect.

2.11 Do tax authorities have any leeway to settle in the course of tax investigations?

There is no possibility of entering into a binding agreement with the STA regarding taxation. However, it is becoming increasingly common to enter into insurance contracts to manage tax risks.

2.12 If the investigation concludes that taxes are overdue, what powers do the tax authorities have to collect them? Does this vary depending on the applicable tax?

Unpaid tax debts are normally automatically handed over on a monthly basis to the Swedish Enforcement Authority, which has far-reaching authority to seize assets, for example. Further, in certain circumstances, in the case of a company that has tax debts, the STA may also target representatives (eg, chief executive officers; board members) and hold them personally liable to pay the taxes owed by the company.

2.13 On what grounds are penalties imposed and how are these calculated?

Tax surcharges can be levied by the STA if:

• the tax return contains incorrect or false information; or
• no tax return has been filed at all.

The tax surcharge is calculated on the tax that has been incorrectly withheld from the STA at a rate of:

• 40% for income tax; and
• 20% for most other taxes (eg, value-added tax).

If the withheld tax is significant, a criminal investigation may be initiated (see question 2.16).

2.14 On what grounds is interest levied and how is this calculated?

Interest is calculated as set out in the Tax Procedures Act. Roughly, interest on due tax is divided into two groups:

• the low interest bracket, consisting solely of the base rate; and
• the high interest rate, which is the base rate increased by 15 percentage points.

The base rate is determined on a monthly basis and stood at 5% as of March 2024.

The low interest rate is typically calculated on the income tax due from the middle of the second month after the end the fiscal year. The high tax rate is calculated from the day after the date on which the tax became due and payable (eg, in accordance with the final tax notice).

2.15 What defences are typically available to the taxpayer?

The taxpayer has the right to engage a representative, such as a lawyer, to file its claim and represent it in any proceedings. The best approach is unique to each individual case, depending on the type of measure undertaken by the STA.

2.16 Can the results of the tax investigation have criminal implications for the taxpayer? Does this vary depending on the individual taxpayer?

Yes, criminal charges can be pursued by a prosecutor. A person can be convicted of tax fraud if he or she:

• intentionally provides false information to an authority in a manner other than verbally (active offence); or
• fails to submit a tax return, income statement or any other prescribed information to an authority (passive offence).

The STA must report to a prosecutor if it finds that there are grounds to initiate a preliminary investigation for tax fraud. As a main rule, an individual can be held criminally responsible from the age of 15.

2.17 If the tax investigation has criminal implications for the taxpayer, are the answers to any of the above questions different?

Criminal charges cannot be pursued by a prosecutor if the taxpayer (an individual) has already been subject to tax surcharges on the same act ('ne bis in idem').

Therefore, the STA usually does not issue tax surcharges if it has referred the matter to the prosecutor (the STA cannot itself bring forth criminal charges). In a criminal case, the taxpayer may be required to pay surcharges and fines or be sentenced to imprisonment. However, the STA reserves the right to levy tax surcharges should the prosecutor not bring forth any criminal charges.

3 Voluntary disclosure and amnesties

3.1 Are any voluntary disclosure or amnesty programmes applicable in your jurisdiction? Does this vary depending on the applicable tax?

Historically, the Swedish Tax Agency (STA) has aimed to have an open, flexible and practical approach with a strong focus on providing upfront certainty for taxpayers. The STA's working theory is that all taxpayers wants to pay the correct taxes.

As such, most taxes and tax-related fees can be voluntarily disclosed to prevent tax surcharges or criminal charges. However, such a disclosure must be at the taxpayer's own accord – that is, prior to initiation by the STA.

4 Forum for tax disputes

4.1 In what forum(s) are tax disputes heard in your jurisdiction? Is there any choice of forum available?

Tax decisions by the Swedish Tax Agency (STA) are appealed to the Swedish administrative courts. There is no choice of forum available. There are three instances of the Swedish administrative courts:

• the administrative courts;
• the courts of appeal; and
• the Supreme Administrative Court.

An advance tax ruling by the Tax Board – consisting of, for example, judges and professors appointed by the Swedish government – offers the taxpayer certainty on the Swedish tax implications of a specific planned transaction/structure at low cost. It should concern the application of Swedish tax laws and regulations to a specific situation for a specific taxpayer.

4.2 Who is the fact finder in a tax dispute? Does this change based on venue?

There are no rules in respect of a specific fact finder; each party is responsible for identifying relevant facts in accordance with its burden of proof.

5 Filing a tax dispute

5.1 What is the limitation period for filing a tax dispute in your jurisdiction?

The Swedish Tax Agency (STA) must normally reconsider its decision if the taxpayer so requests. The taxpayer also has the opportunity to appeal the STA's decision to an administrative court. The main rule is that a request for reconsideration or appeal must be filed with the STA before the end of the sixth year following the relevant fiscal year. However, in respect of decisions of the STA issued late in this six-year revision period, a request for reconsideration or appeal can be submitted within two months of the date of notification of the STA's decision. Regardless of whether the taxpayer requests a reconsideration or appeal, the STA must conduct a review of its previous decision.

The STA may nonetheless make a decision to the benefit of the taxpayer without any limit of time.

5.2 What are the formal requirements for filing a tax dispute?

A taxpayer may always request the STA to reconsider its decision or appeal the STA's decision, as long as such a request is made in writing and within the specified timeframe as described in question 5.1.

5.3 What are the procedural and substantive requirements for filing a tax dispute?

A tax dispute must be filed in writing and submitted in due time; otherwise, there are no specific procedural or substantive requirements in this regard. The procedure before the STA is usually in writing. Similarly, the procedure in the administrative courts is normally in writing. However, if the taxpayer so requests, the court may hold an oral hearing – for example, if it is necessary to hear witnesses. The STA and the courts have a fundamental obligation to investigate the issue in question, including those aspects that speak in favour of the taxpayer.

The taxpayer has the right to engage a representative, such as a lawyer, to file its claim and represent it in any proceedings.

A request for reconsideration or an appeal should normally be made in Swedish.

5.4 Is there any possibility for collective proceedings (eg, involving several taxpayers or multiple tax assessments)?

As the procedure before the courts is generally in writing, it is possible to file a single appeal for several appellants, as long they are clearly identifiable. The court will process the cases jointly for practical purposes. However, the court will issue formally separate decisions with unique case numbers.

In our experience, however, the STA does not use this 'joint' approach.

5.5 Must the sum in contention be paid into court before a tax dispute is filed?

No. In principle, no payment of the tax in advance is required in order to have the right to appeal. However, the obligation to pay tax according to the STA's decision (the due date is normally within about one month of the date of the decision) applies regardless of whether the taxpayer appeals.

5.6 Has the filing of a tax dispute any effect on the payment of tax or the collection possibilities for the authorities?

In connection with an appeal, the taxpayer can apply for a deferral of payment of the tax with the STA. Such an application must be approved, among other things, if it is doubtful whether the STA's decision will be upheld by the court. A negative decision on such a deferral matter by the STA may be appealed to the administrative courts without the need for leave to appeal; after which any continued legal proceedings (ie, with the courts of appeal) will require such leave to appeal.

If the decision of the STA contains tax surcharges, an application for the deferral of payment of said surcharges must be approved.

5.7 If the tax dispute is decided in favour of the authorities, is late interest due if the tax has not been settled? If the tax dispute is decided in favour of the taxpayer and the tax had already been settled, is interest due by the state?

Yes, if the court rules in favour of the STA and a deferral of payment has been granted, normally the low interest rate (as described in question 2.13) will apply from the original due date of the tax until payment is made to the taxpayer's tax account. After the decision of the court, the STA will also issue a new due date for the tax to be paid in. The high interest rate (as described in question 2.13) will apply from the day after this new due date.

If the court rules in favour of the taxpayer, interest becomes due by the STA. The interest is exempt from income tax and is calculated in a similar manner as described above. However, there is only one applicable interest rate, which is also considerably lower than when the tax is due by the taxpayers. Currently (March 2024), the rate is 2.25%. However, this is unusually high due to the current rate of inflation in Sweden.

6 Disclosure and privilege

6.1 What rules apply to disclosure in your jurisdiction? Do any exceptions apply?

See above question 2.7.

6.2 What rules on third-party disclosure apply in your jurisdiction?

See above questions 2.6-2.7.

6.3 What rules on privilege apply in your jurisdiction?

See above questions 2.6-2.7.

7 Evidence

7.1 What types of evidence are permissible in tax disputes in your jurisdiction? Is expert evidence accepted?

There are no rules on the types of evidence that may be presented to the courts or how evidence should be valued – in other words, all evidence is permissible. It is up to the court to decide on the value of the presented evidence.

7.2 What is the applicable standard of proof?

With regard to ordinary taxation, the party on which the burden of proof rests must generally demonstrate that it is probable that there is a taxable income or a deductible expense, respectively.

The requirement for sufficient evidence is higher in case of reconsideration due to incorrect information and where the Swedish Tax Agency (STA) is to impose a tax surcharge. The evidence requirement in this regard is that the incorrect information must be "clearly shown" or "highly probable".

7.3 On whom does the burden of proof rest?

With regard to ordinary taxation, the main rule is that the STA bears the burden of proof that the taxpayer should be taxed on certain income. Similarly, the taxpayer must prove that it has had a specific expense in order to be granted the requested deduction.

In case of reconsideration due to incorrect information, the STA bears the burden of proof. As above, if the STA presents sufficient evidence in this regard, the burden of proof can pass over to the taxpayer.

8 Proceedings

8.1 Are tax proceedings in your jurisdiction public or private? If the former, are any options available to the parties to keep the proceedings or related information confidential?

Tax proceedings are public and are brought before the administrative courts. The courts may, however, order that certain information should not be disclosed. Oral hearings in the administrative courts are also generally public; but if confidential information is presented in the hearing, the court may order that the information should not be disclosed. All information provided to the Swedish Tax Agency (STA) is subject to confidentiality. However, the STA's tax decisions are not confidential. As an example, gross capital or salary income is not confidential information, while information regarding the source of such income is.

8.2 How do the proceedings unfold in your jurisdiction?

The STA is normally obliged to reconsider its decisions if the taxpayer so requests. However, the taxpayer can also appeal the STA's decision to an administrative court. The main rule is that a request for reconsideration or appeal must be filed with the STA before the end of the sixth year following the relevant fiscal year. However, in respect of decisions of the STA issued late in this six-year revision period, a request for reconsideration or appeal can be submitted within two months of the date of notification of the STA's decision. Regardless of whether the taxpayer requests a reconsideration or appeal, the STA must conduct a review of its previous decision.

The procedure in the administrative courts is normally in writing. However, if the taxpayer so requests, the court may hold an oral hearing – for example, if this is necessary to hear witnesses.

Typically, after the taxpayer has filed its appeal, the court gives the STA the opportunity to provide its view on the appeal/tax issue in a written statement. Similarly, the taxpayer will be given the same opportunity to provide its view on the aforementioned written statement by the STA. Several written statements may be presented to the court in this manner, with each party responding to the other's written statement. It is entirely up to the court to decide:

• how many 'rounds' of written statements will suffice; and
• to what extent a writ by one party will be communicated to the other party.

Once the court deems that the issue has been sufficiently processed, it will issue its decision.

8.3 What is the typical timeframe for proceedings?

The timeframe will vary depending on numerous factors, such as:

• the scope of the tax issue;
• the processing time at the court; and
• the processing time at the STA.

In our experience, proceedings within a single court can take anywhere from three months to a couple of years. Several years may pass from a decision of the STA until a decision of the Administrative Court of Appeal.

8.4 Are settlements possible between the taxpayer and the tax authorities once judicial proceedings have been opened?

No.

8.5 Do the courts in your jurisdiction have full power to review facts and legal questions?

Yes.

9 Remedies

9.1 What remedies are available in tax disputes in your jurisdiction?

Other than successful appeal of a decision and compensation for costs associated with that appeal, there are no remedies available.

9.2 What factors will the court consider in deciding on the appropriate remedies?

See question 9.1.

10 Appeals

10.1 Can the decision of the court be appealed? If so, on what grounds and what is the process?

There are three instances of the Swedish administrative courts:

• the administrative courts;
• the courts of appeal; and
• the Supreme Administrative Court.

Decisions of the administrative courts may be appealed within two months. As a main rule, no leave to appeal is needed in order for the courts of appeal to try tax cases.

An appeal against a court of appeal judgment in a tax case must be filed within two months. The Supreme Administrative Court is in principle purely a court of precedent. The extent to which a case may pertain to a precedential matter is decided by the court on a discretionary basis, but the appellant is expected to explain why leave to appeal has been requested. The court can also take up cases if there are special reasons for doing so – for example, where the court of appeal's judgment is clearly wrong. The Supreme Administrative Court is not a so-called 'court of cassation' but can fully try the cases it takes up. In our experience, the court takes up only 1% to 2% of all cases.

11 Costs, fees and funding

11.1 What costs and fees are incurred in tax disputes in your jurisdiction? Can the winning party recover its costs?

Under certain conditions, taxpayers are entitled to compensation from the Swedish Tax Agency (STA) for their costs in connection with matters at the STA and cases in the administrative courts. There is a right to compensation if:

• the applicant's claims are approved in whole or in part;
• the matter or the case refers to an issue that is of a precedential nature; or
• there are special reasons for compensation.

An application for compensation must be made at the instance where the cost was incurred. Compensation is granted only in an amount that the authority considers reasonable.

On the other hand, the taxpayer cannot be ordered to pay the STA's costs; nor are there any other fees for appeal.

In theory, all costs as described above can be reimbursed to the taxpayer. However, full reimbursement is rare, as the relevant authority often holds that only a fraction of the amount may be justified as reasonable.

11.2 Are contingency fees and similar arrangements permitted in your jurisdiction?

Contingency fees are considered unethical by the Swedish Bar Association.

Further, a contingency fee is one of the hallmarks of an 'arrangement' within the meaning of EU Directive 2018/822, the so-called 'DAC6 Directive'. Such an arrangement must be reported to the STA as set out in the directive.

11.3 Is third-party funding permitted in your jurisdiction?

To our knowledge, there is no legislation that prohibits third-party funding of tax disputes by, for example, an insurance company.

12 International tax disputes

12.1 What is your jurisdiction's position on the resolution of international tax disputes (eg, advance pricing agreements, mutual agreement procedures, arbitrations)?

Both advance pricing agreements (APAs) and the mutual agreement procedure (MAP) are available in Sweden. However, only bilateral APAs are available (ie, no unilateral APAs will be issued in Sweden). The competent authority for both APAs and the MAP is the Swedish Tax Agency (STA) (albeit a standalone part of the STA).

12.2 Has your jurisdiction implemented the Organisation for Economic Co-operation and Development (OECD) minimum standards with respect to international tax dispute resolution or is it a party to other agreements in this respect?

Yes, Sweden is a party to:

• the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting; and
• the Convention on the Elimination of Double Taxation in Connection with the Adjustment of Profits of Associated Enterprises (90/436/EEC).

12.3 Does your jurisdiction's position differ significantly from Article 25 of the OECD Model Tax Convention (including commentary)? If so, in what respects?

In many Swedish tax treaties, the first paragraph stipulates that a taxpayer should present his or her case to the competent authority:

• in his or her state of residence; or
• in the case of the prohibition against discrimination, in the state of which he or she is a citizen.

This is in contrast to the current wording of the aforementioned paragraph, which provides that the taxpayer may present his or her case to either contracting state.

Further, paragraph 5 of the Model Tax Convention contains provisions regarding arbitration. Almost all of Sweden's tax treaties lack an equivalent to paragraph 5 on arbitration. However, exceptions exist, such as Article 23(5) in the treaty with Great Britain and Northern Ireland.

12.4 How do domestic and international tax dispute resolution mechanisms interplay in your jurisdiction?

There is little to no interplay between the two. Generally, domestic tax dispute resolution is a wholly separate measure from international tax dispute resolution, which is predominantly used only if the former is unsuccessful.

13 Trends and predictions

13.1 How would you describe the current tax dispute landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

For the past 10 years, the Swedish Tax Agency (STA) has targeted fund structures where the fund managers receive so-called 'carried interest'. Although the case law has remained relatively stable, our view is that in recent years the STA has begun substantially testing the limits of this case law. The issue stems from the fact that collectable tax from capital income for individuals is vastly lower (30% at most) than salary income (progressive income tax rate of 30% to 50%, as well as social security contributions of 31.42%). Consequently, there has been an increased focus on determining income as salary income rather than capital income, irrespective of the actual legal form it takes (eg, a dividend distribution).

Further, we have seen an increased focus on permanent establishments, whereby a single employee working from home in Sweden risks constituting a permanent establishment of a foreign employer.

There are several ongoing legislative trends. From an international perspective, the most prominent is the various disclosure rules and implementation of measures inspired by the Base Erosion and Profit Shifting project of the OECD. Further, the Withholding Tax Act is under review and is planned to be replaced entirely by a new act.

From a national perspective, there are several legislative proposals or investigations into the potential simplification of certain tax rules – most notably the closely held company regime.

14 Tips and traps

14.1 What would be your recommendations to parties facing a tax dispute in your jurisdiction and what potential pitfalls would you highlight?

It is far better to prevent than to cure. Historically, the Swedish Tax Agency (STA) has aimed to have an open, flexible and practical approach with a strong focus on providing upfront certainty for taxpayers. We therefore always recommend pursuing a good relationship with the STA. For example, to prevent, minimise or mitigate tax risks, it may be a sensible option to request a Swedish tax ruling.

Our strong recommendation is to take a proactive approach. Without proper management, even seemingly straightforward enquiries or compliance checks by the STA can quickly spiral out of control.

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.