On 23 May 2016, the Government presented a proposal to the Swedish Parliament for the introduction of a Swedish tonnage tax system. The bill contains no major surprises in comparison with the draft presented to the Council on Legislation in November 2015.
Previously this year, in February, we reported in Tax matters that a government committee had presented a proposal for the introduction of a Swedish tonnage tax system. Now, the government has presented their proposal. This bill suggests that the new regulations come into effect somewhat later than previously proposed, that is, on 20 July 2016 and that they be applied for the first time to the income year beginning after 31 December 2016. However, a condition is that the EU Commission grants its approval.
The Government bill is the same, largely speaking, as both the committee’s proposal and the exposure draft of the Council on Legislation, but it also contains some significant differences. Amongst other things, such differences refer to the latest point in time when an application can be presented to the Tax Agency to enter into the new tax system. This application is to be presented no later than five months prior to the beginning of the first income year to which the application refers. As a result, a company wishing to enter into the tax system already in financial year 2017 would need to apply no later than 31 July 2016.
Similar to the exposure draft to the Council on Legislation, the bill contains a proposal that the difference between the book and tax value of machinery and equipment (excess depreciation) should be determined when entering into the tonnage tax system. However, due to criticism arising during the exposure draft reviews, the Government has proposed another technical solution for handling the so-called “differential amount”, even if the intention is that the final result will be the same. This differential amount is to be reported as revenue in the first tonnage tax year, but can be deducted, at a maximum in the same amount, provided an equivalent allocation is made to a so-called excess depreciation fund in the accounts. This allocation reserve is subsequently reported for taxation at a minimum of 25 percent each fifth year to begin following the year of entry into the tonnage tax system, provided the company has not increased its tonnage to a certain degree. The Government points out that an advantage with this system is that this type of treatment is similar to, for example, the handling of tax allocation reserves.
The Government has also made a couple of minor adjustments and clarifications of other aspects, for example, as regards the possibility of reporting depreciation in the accounts, and when equipment should be referred to the tonnage taxed operations or to the conventionally taxed operations.
An interesting question is how the proposed tonnage tax system is to be financed. According to the proposal, the system is to be financed partly through the reporting of a standard revenue amount in the excess depreciation fund (similar to the system for tax allocation reserves for legal entities) and partly through reduced appropriations to the public transportation infrastructure and to the existing shipping subsidy, to begin in 2017. As regards the shipping support which, simplified, implies that the employer does not need to pay seafarer’s tax and social security contributions for Swedish registered ships, there is currently no information as to the effect such a reduced level of appropriation will have. However, what we note that, currently, appropriations to the shipping subsidy are being reduced by SEK 20 million per year, which can be compared to the 2016 Budget Bill’s total appropriation of approximately SEK 1.6 billion. PwC will follow these developments with interest and if you have any questions you are, of course, very welcome to contact us.
Ulrika Lundh Eriksson and Rebecka Fröjd
010-213 14 17
+46 10 213 14 17