Sweden: Beneficial tax regimes

01 November 2014

In Sweden, foundations and non-profit cooperatives with a purpose of public benefit are generally tax-exempted. However, this is not always the case and several foundations and non-profit cooperatives do carry out business activities that are liable to tax.

Typical taxable entitites

In Sweden all taxable entities are taxed as separate taxpayers. No general fiscal unity exists whereby affiliated companies are taxed on a consolidated level. The corporate tax rate is currently 22 percent of the taxable income.

Swedish Limited Companies (Aktiebolag) and cooperatives (Ekonomisk förening) are subject to this tax rate.

Swedish foundations (Stiftelse) and non-profit organizations are normally subject to the corporate tax rate.

Swedish partnerships (Handelsbolag/Kommanditbolag) are not subject to taxation. Taxes are instead levied at the level of partners according to tax law. Partnerships are accordingly transparent for tax purposes in Sweden.

Mandatory classification

In Sweden the classification of an entity from a tax perspective is not granted upon application. The classification is a matter of fact, and the outcome is mandatory. There is no optional system that allows one to choose the status as a taxable entity. To clarify the tax classification of an entity it is possible to apply for a legally binding advance ruling by the Swedish Council of Advance Tax Rulings.

Non-taxable entities

Certain foundations and non-profit organisations, and other legal persons expressly named in the Swedish Income Tax Act, carrying on certain non-profit activities may be treated as tax exempt entities under certain circumstances. The Swedish Income Tax Act stipulates the tax status of certain specified entities which are either completely non-taxable, or non-taxable for certain income and/or under certain circumstances.

Specific rules for tax exempt entities

The main rule is that Swedish foundations, non-profit cooperatives and registered religious communities are liable to income tax for all incomes. They are also liable for other taxes such as VAT and property tax.

Some foundations, non-profit cooperatives and registered religious communities can be subject to limited taxation or be fully exempt from taxation if several conditions are fulfilled.

Cooperatives with non-profit business most often also have income that  is exempt from taxation. Typically such incomes are member fees and contributions or gifts which are intended for the non-profit business. Correspondingly costs for the non-profit business are not deductible.

Specific rules apply for non-profit cooperatives and foundations with purposes of public benefits. Such cooperatives are only taxed for income related to specific incomes (property- and business income). This requires that the purpose of the public benefit is fulfilled. Purposes that are considered to be of public benefit are for example: sports, culture, care of the environment, care of children and youth, political activities, political activities, nursing, science and other similar activities.