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Sweden signs multilateral convention to implement tax treaty measures

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Sweden signs multilateral convention to implement tax treaty measuresOn 7 June, Sweden signed, together with 67 other countries, a multilateral convention to implement tax treaty related measures within the framework of the so-called BEPS project. It worth noting that Sweden has made a reservation against a number of the proposed changes, implying that only a few of the proposals within the BEPS project will, in practice, impact Sweden’s existing tax agreements.

The BEPS project is an international project to counter-act tax base erosion and profit shifting. The project was initiated in 2013 and completed at the end of 2015 when a total of 13 final reports and a summarizing document was published by the OECD.

Certain measures within the framework of the BEPS project require changes in countries’ bilateral tax treaties. Considering the large number of tax treaties in existence, OECD appointed a working committee with the responsibility to develop a multilateral instrument making it possible for countries to quickly introduce changes in their tax treaties concerning the areas addressed in the BEPS project.

The multilateral convention regarding tax treaties includes changes as regards a number of different points with the aim of preventing utilization mismatches in national tax legislation to achieve tax advantages. For example, a proposal is included for new contractual regulations regarding hybrid mismatch arrangements, permanent establishments and the handling of the improper use of tax treaties.

In order that the convention is to come into effect in Swedish law and be applicable to Swedish companies, there is a requirement, as with other types of tax regulations that it first be presented to Parliament for final approval.


In conjunction with the signing of the convention, Sweden presented a document to OECD with information as to the Swedish bilateral tax treaties (total of 64) to be covered by the convention in Sweden, and as to Sweden’s position as regards the convention’s various articles.

It is noteworthy that Sweden has chosen to make a reservation entirely as regards a number of points in the multilateral agreement. This implies that the proposed changes will not apply to tax treaties entered into by Sweden. For example, Sweden makes a reservation entirely against the proposal for new regulations regarding the definition of permanent establishment (which includes, amongst other things, the handling of agent structures and inventory held in another country) and the proposals regarding various types of hybrid mismatch arrangements. With just a first look it can be clearly seen that Sweden makes reservations as regards a far larger number of proposals than the reservations made by many of the other countries who signed the convention on 7 June.

However, Sweden is one of the 25 countries choosing to accept that the regulations aimed at the elimination of double taxation be strengthened in the sense that if two countries’ authorities cannot determine within three years the manner in which the right to taxation of a certain amount of income is to be granted, then, the case is to be transferred to an arbitration board for a final decision. This latter change is a most welcome improvement for Swedish companies.

Do you have any questions on corporate taxation?

Pär Magnus Wiséen & Andreas Carlsson

Pär Magnus Wiséen & Andreas Carlsson

Pär Magnus Wiséen och Andreas Carlsson arbetar på PwC:s kontor i Stockholm med internprissättning.
Pär Magnus: 010-213 32 95, paer.magnus.wiseen@pwc.com
Andreas: 010-212 95 27, andreas.carlsson@pwc.com

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