In 2012, the Swedish Administrative Court of Appeal concluded that Sweden’s withholding tax rules are not compatible with EC law when Swedish withholding tax is levied on dividend payments made to a Luxembourg SICAV fund. This is because dividends received and distributed by a Swedish investment fund were (at this point of time) deductible, a deduction which foreign investment funds were not entitled to. The unequal treatment of the SICAV fund as compared with a Swedish investment fund could not be justified. This has resulted in a huge amount of reclaim processes in Sweden where foreign investment funds have received a refund of Swedish withholding tax.
In a recent ruling, it was made clear that a US regulated investment company (RIC) is also comparable with a Swedish investment fund meaning that the Swedish withholding tax rules discriminate against US RICs when applying the EC law. Hence, from this ruling it follows that US RICs are also entitled to a refund of Swedish withholding tax levied on dividend payments.
These rulings create a great opportunity for foreign investment funds, within or outside the EU, that have suffered Swedish withholding tax to request a refund of the tax withheld in Sweden. The statute of limitation in Sweden is five years and a single refund request can cover all years in scope. Given there are also rulings supporting the fact that the withholding tax should be calculated with interest, the refunded amount should include interest on the tax withheld as well.
We would be pleased to further elaborate on the above and assist with requesting repayment of withholding tax withheld in Sweden during the last five year period.
Erik Björkeson is a partner and Emelie Coleman is an associate with DLA Nordic, based in Stockholm.