In January 2025, the Swedish Tax Agency (Skatteverket) lost a case before the Administrative Court of Appeal in Gothenburg concerning the application of the so-called Tax Avoidance Act (skatteflyktslagen). The ruling demonstrates that it is possible to successfully challenge the Tax Agency's decisions and highlights that the authority occasionally adopts an excessively fiscal approach without clear legal support.
What is the Tax Avoidance Act?
Since 1980, Sweden has had a Tax Avoidance Act, which serves as a broad instrument allowing the Swedish Tax Agency to challenge legal arrangements primarily intended to circumvent taxation.
The law functions as a general anti-avoidance rule (GAAR) and can be applied to a wide range of transactions, structures, or arrangements. However, such a broad clause inevitably creates legal uncertainty for taxpayers, meaning that the requirements for applying the law are relatively strict.
Another safeguard for taxpayers is that the Swedish Tax Agency itself cannot unilaterally decide to apply the law. Instead, an application must be submitted to and adjudicated by a Swedish administrative court.
What was the case before the Administrative Court of Appeal about?
The case involved a series of transactions conducted by a Swedish limited company within a Gothenburg-based corporate group engaged in shipping, real estate, and other sectors.
In simplified terms, the transactions entailed the acquisition of certain intangible assets at below-market value, followed by an intra-group sale of these assets at market price. Subsequently, the company changed ownership to the Gothenburg-based group and was merged into one of the group's entities. Upon completion of the merger, the company transferred its surplus (profit) as a group contribution (koncernbidrag) to another company within the group that had tax losses. This effectively allowed the profit—primarily generated under the previous corporate ownership—to be offset against losses in the Gothenburg-based group.
What were the Swedish Tax Agency's arguments?
The Swedish Tax Agency argued that the arrangement violated the Swedish Tax Avoidance Act and resulted in a significant tax advantage for the company. According to the authority, all the statutory conditions for applying the law were met.
A key issue in the case was the Swedish Tax Agency’s reliance on statements in Swedish legislative preparatory works (förarbeten) to support its claim that the transactions contravened the purpose of tax legislation—a requirement for applying the Swedish Tax Avoidance Act. However, both the Administrative Court and later the Administrative Court of Appeal held that such a purpose must be evident from the wording of the law itself.
How did the court rule?
In summary, the court concluded that the Swedish Tax Agency failed to demonstrate that the transaction structure contravened the purpose of the law. As a result, the Tax Avoidance Act could not be applied.
The company thus prevailed against the Swedish Tax Agency. The outcome underscores that taxpayers can successfully challenge the Swedish Tax Agency’s attempts to apply the Tax Avoidance Act, reinforcing the principle that tax law must be interpreted strictly and in accordance with legislative intent.
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