Country-by-Country reporting – a description of the Swedish tax proposal

The Ministry of Finance’s proposal for the implementation of Country-by-Country Reporting has been distributed for consultation. The proposal is that the Country-by-Country Reporting should include, amongst other things, aggregate information relating to revenues, profit before income tax, paid income tax, number of employees, and tangible fixed assets for each country in which there are operations.

This Country-by-Country Reporting is to apply, according to the proposal, to mulitnational groups with total revenues in excess of SEK 7 billion at group level. In addition, there are some 3,000 to 4,000 Swedish companies in groups with foreign parent companies who may be covered by this Country-by-Country reporting obligation. This new reporting provison is proposed to come into effect from 1 April 2017.

The proposal implies, amongst other things, that Swedish parent companies in multinational groups will be required to provide Country-by-Country reports to the Swedish Tax Agency if the group’s total revenues, on a consolidated basis, are in excess of SEK 7 billion. The major rule is that the parent company in the group is to present the report to the tax authorities in their country of residence. It is also possible that Swedish companies, belonging to foreign multinational groups of this size, will be required to submit such a report to the Swedish Tax Agency, for example if the parent company is not liable to provide such a report in their country of residence.

All Swedish subsidiaries included in the concerned groups are to submit details, before the end of the financial year, to the Tax Agency specifying the company in their group which is to report on behalf of the group.

A Country-by-Country Report is to be presented to the Tax Agency within one year from the end of the financial year to which the report refers.

The first financial year to be covered by the Country-by-Country disclosure requirements is 2016. The reports for this financial year are to be presented to the Tax Agency on no later than 31 Decmeber 2017. Information as to which company is to report must, however, be submitted to the Tax Agency on no later than 30 April 2017, according to special transition rules.

These Country-by-Country Reports are to be exchanged with tax authorities in other countries. However, not all of the countries have signed the agreement on the exchange of information. The underlying purpose of the reports and exchange of information is that the details provided are to assist in ensuring that companies pay the right amount of tax in the right country.

The proposal states that there are approximately 75 Swedish groups who will be liable to present Country-by-Country Reports. As mentioned above, there are, in addition, between 3,000 and 4,000 Swedish subsidiares in groups with foreign parent companies. If the foreign parent company is not to submit, for some reason, a Country-by-Country Report, the subsidiaries in other countries will be obliged to do so. In practice, and in such a case, only one of the subsidiaries will most likely be assigned to provide a report and this can, of course, be a subsidiary in a country other than Sweden. As a result, it is not possible to estimate in advance how many Swedish subsidiaries will actually be required to submit Country-by-Country Reports in Sweden.

Comments

The difference between the Council on Legislation’s reply and the Tax Agency’s previously presented memorandum is that the new regulations, according to the former proposal, are to apply from 1 April 2017, instead of from 1 January 2017. Consequently, the first reporting applies to financial year 2016, and this report is to be presented on no later than 31 December 2017.

Another new apsect with the Council’s response is that companies are granted a further month to provide the information to the Tax Agency stipulating the group company which is to provide the Country-by-Country Report, and this deadline has been set at, at latest, 30 April 2017.

It is also important to remember that a Swedish subsidiary in a foreign multinational group can, in certain cases, be required to send in a report for the entire group in another country. In addition to reporting in Sweden, a Swedish parent company in a multinational group can also be required to assume responsibility to present information in other countries confirming the name of the company in their group which is to provide the Country-by-Country Report. For example, in Austria and Belgium this information is to be presented already in December 2016.

Due to this expanded requirement of the provision of information and the exchange of information between countries, companies can expect a larger number of queries from the Tax Agency arising from the details included in these Country-by-Country Reports. The provision of these fiscal details will also imply that the Tax Agency will secure the basis for a continued examination of the tax incurred by a group in its various countries of operation. The reporting provision comprises a new administrative obligation for the companies concerned, something that will require time to execute and which will, therefore, result in extra costs. This new Country-by-Country Reporting will be subject to evaluation, and such evaluation is to take place already in 2020.