Quick Summary. Sweden taxes resident legal entities on their worldwide income, while non-resident entities are subject to tax derived from a Swedish source. Sweden taxes non-residents based, in part upon whether they work for an employer with a permanent establishment in Sweden and based upon days of physical presence in Sweden. Sweden implemented a pay-as-you-earn (PAYE) system in 2019 for individuals.
Sweden implemented new limitation rules and hybrid mismatch rules as of 2019 and 2020, respectively. The hybrid mismatch rules, implemented in light of the EU ATAD directive and the BEPS project, provide that certain expenses that are related to hybrids due to a Permanent Establishment are not deductible.
The Swedish Tax Agency has historically emphasized enforcement of the arm’s-length rule and carried interest treatment with respect to owners of private equity companies.