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Taxation on loans from foreign undertakings: The Swedish legislation and its compatibility with the freedom of establishment within the European Union
Jönköping University, Jönköping International Business School, JIBS, Commercial Law.
2010 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

On January 1, 2010, the Swedish government changed the national rule on taxation of loans between Swedish companies and their shareholders to also comprise loans granted by foreign companies. By changing the rule to also comprise foreign companies, the government aimed to eliminate the newly discovered tax planning which is carried out by an owner establishing a holding company in another Member State from which he lends tax-free means for private consumption. These proceedings result in major tax revenue losses for Sweden since the shareholder’s income was not taxable in Sweden before the change. This change has been subject for criticism by the consultative bodies in the government bill and in the legal debate. The expression of discontent is due to the fact that the changes do not comply with the freedom of establishment. As far as is known, no one has analyzed whether this statement is correct. Therefore, this thesis aims to provide an answer to whether the changes of the rule on taxation of prohibited loans are compatible with the freedom of establishment and consequently whether the Swedish government made a mistake when changing the rule to also comprise foreign companies. Due to the freedom of establishment, it is prohibited for the Member States to take measures which restrict or make nationals refrain from establishing abroad. Intra-state loans are prohibited why they hardly ever occur and the taxation on loans therefore in practice only applies to foreign companies. Legislation in a Member State which only applies to foreign persons constitutes prohibited discrimination. Further, the high tax burden hinders nationals from taking advantage of another Member State’s more favourable legislation and makes the nationals refrain from establishing in other Member States. It is therefore considered that the rule is restrictive to the freedom of establishment. However, such a restrictive rule as in this case is justified by the aim of preventing tax avoidance taken together with the balanced allocation of taxing power between the Member States. Thus, the government makes Sweden breach EU law since the rule is not proportionate despite the justifications. The rule is too general designed since it is restrictive to all foreign undertakings and not just the holding companies with which the tax planning are performed. Further, there are other less restrictive solutions to the problem which have the same effect as the rule in question.

Place, publisher, year, edition, pages
2010. , 47 p.
Keyword [en]
Tax law, EU law, the freedom of establishment, prohibited loans
National Category
Law and Society
Identifiers
URN: urn:nbn:se:hj:diva-12277OAI: oai:DiVA.org:hj-12277DiVA: diva2:320587
Presentation
2010-05-17, 3009, Högskoleområdet, Gjuterigatan 5, 553 18 Jönköping, Jönköping International Business School, 13:00 (English)
Uppsok
Social and Behavioural Science, Law
Supervisors
Examiners
Available from: 2010-06-03 Created: 2010-05-26 Last updated: 2010-06-03Bibliographically approved

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CiteExportLink to record
Permanent link

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Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
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  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
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  • text
  • asciidoc
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