Nordic Tax Law Bulletin October 2026
Highlights from Sweden
- Advance ruling on domestic tax exemption for capital gains on divestment of US LLC interests
In an advance ruling dated October 9, 2026 (case 164-25/D), the Swedish Council for Advance Tax Rulings concluded that taxing a Swedish company’s capital gains arising out of a divestment of interests in US tax-transparent limited liability companies (LLCs) would infringe on the EU principle of free movement of capital. The case concerned a Swedish company whose underlying investments were in US LLCs taxed at the owner level. The investments were passive and did not confer a controlling influence. Following the Swedish Tax Agency’s decision to tax a capital gain on the disposal of LLC interests, an advance ruling was sought, arguing that the gain should be exempt.
Under the Swedish participation exemption rules, interests in Swedish partnerships and foreign tax-transparent legal entities resident within the European Economic Area (EEA) are treated as business-related holdings when held by qualifying corporate investors. Capital gains on these interests are generally exempt, whereas equivalent interests in entities outside the EEA fall outside the statutory exemption.
The Council assessed the rules under the free movement of capital because they apply irrespective of the size of the holding. Unlike freedom of establishment, the free movement of capital also extends to investments involving third countries. The Council found that the less favorable treatment of non-EEA interests constituted a restriction and that the company’s situation was objectively comparable to that of a company disposing of an interest in a Swedish partnership.
The Council also rejected possible justifications for the restriction. On the facts presented, the Sweden-US tax treaty and FATCA agreement enabled the authorities to obtain the necessary information, meaning that effective fiscal supervision did not justify denying the exemption. Nor could the exclusion be justified on anti-avoidance grounds, as it was not specifically designed to target artificial arrangements. The Council therefore concluded that the capital gain should not be taxed.
- Swedish Government proposes new safe harbours and amendments to the Top-up Tax Act (lagen (2023:875) om tilläggsskatt) in Proposition 2026/27:4.
On 8 October 2026, the Swedish Government submitted a bill proposing amendments to the Top-up Tax Act. The proposals include two new safe harbours for groups whose ultimate parent entity is located in a jurisdiction with a minimum taxation regime approved by the OECD/G20 Inclusive Framework.
Under the proposed Side-by-Side Safe Harbour, eligible groups could elect to have top-up tax under the Income Inclusion Rule and Undertaxed Profits Rule deemed to be zero, without affecting domestic top-up tax. The separate Ultimate Parent Entity Safe Harbour would allow an election to have top-up tax under the Undertaxed Profits Rule deemed to be zero for entities in the ultimate parent entity’s jurisdiction where that jurisdiction has an approved domestic minimum taxation regime. The bill also proposes allowing qualifying expenditure-based and production-based tax incentives to increase adjusted covered taxes, subject to a cap linked to payroll costs or tangible assets. In addition, the Transitional CbCR Safe Harbour would be extended by one year to cover fiscal years beginning before 1 January 2028 and ending no later than 30 June 2029.
The amendments are proposed to enter into force on 1 January 2027 and generally apply to tax years beginning after 31 December 2026. The reporting entity could elect to apply all or certain amendments to tax years beginning after 31 December 2024, although the new parallel-regime safe harbours and tax incentive provisions could only apply to tax years beginning after 31 December 2025.
Supreme Administrative Court uses substance over form principle when determining dividend taxation for individual. Case number 7493-25.
AA is a partner in 13 Tellus AB (13AB). His shares are qualified. The company has retained earnings that have not been distributed. AA is considering transferring his share of the company’s retained earnings to his wholly-owned entity, Kallfjällets Investment AB (KIAB). The shares in this company are also qualified. AA applied for a preliminary ruling to determine whether he will be subject to dividend tax if the retained earnings are transferred to KIAB. Under the scenario, AA must first transfer a portion of his shares in 13AB to KIAB without consideration or for consideration that is less than both the market value of the shares and the cost basis. Thereafter, 13AB must redeem these shares at market value. Finally, 13AB must restore the share capital through a bonus issue, without altering the ownership structure among the shareholders of 13AB.
The Supreme Administrative Court agreed with the Swedish Tax Agency and ruled that, “Against this background, a transfer of cash and cash equivalents from 13AB to KIAB may be deemed to mean that AA has disposed of the funds in such a way that the transfer should give rise to dividend taxation of him (cf. HFD 2013 ref. 43). The fact that the transfer of funds is not made to him personally but to a limited liability company owned by him does not give rise to any different assessment (see RÅ 2004 ref. 1).”
Highlights from Denmark
- The 2026/2027 legislative program
The 2026/2027 legislative program of the new government, which took office on 3 June 2026, includes proposals on international minimum taxation, withholding tax on interest, the tax treatment of financial contracts and taxpayers' legal certainty in tax disputes. Several of the planned bills also affect VAT and duties. Below are some key developments for Danish taxation.
Global minimum tax and wider withholding tax on interest and capital gains
The Danish government has proposed implementing the OECD’s January 2026 “Side-by-Side Package”, which amends the global minimum tax rules under Pillar Two. The rules are intended to ensure that large multinational groups are subject to an effective tax rate of at least 15%.
The package introduces four new permanent safe harbours that may reduce or eliminate a group’s top-up tax liability. These include a safe harbour for groups headquartered in jurisdictions that operate a qualifying “side-by-side” system.
The same bill proposes an extension of Denmark’s limited tax liability rules for interest and capital gains received by non-resident companies. According to the explanatory notes, the current rules may allow low-taxed lenders to avoid Danish tax on returns from Danish companies over which they exercise control. The explanatory notes identify three gaps in the existing rules:
- profit-dependent returns on controlled debt that fall outside the current rules on both interest and capital gains;
- returns on hybrid instruments without a repayment obligation, which are not treated as debt for Danish tax purposes; and
- situations in which a lender exercises joint control over the borrower under an agreement without holding shares in the borrower, for example where the lender is the management company of an alternative investment fund.To address these gaps, the bill introduces limited tax liability for “interest-like amounts”, based on the broad concept of interest under the OECD Model Tax Convention. The concept is intended to include, among other things, profit-dependent returns and financing fees.The proposed rules will also cover interest and interest-like amounts on controlled hybrid debt-like instruments. In addition, for the purposes of limited tax liability, debt will be regarded as controlled where the lender has entered into an agreement on joint control with a person connected to the borrower, even if the lender does not itself hold shares in the borrower.The exemptions available under the existing rules will also apply to the proposed extension. These include exemptions based on the EU Interest and Royalties Directive or an applicable double tax treaty. They also include the exemption that applies where the recipient demonstrates that the foreign corporate tax on the interest is at least three-quarters of the Danish corporate tax, i.e. at least 16.5%, and that the interest is not passed on to a lower-taxed company.According to the explanatory notes, the existing rules therefore in practice generally affect only low-taxed lenders outside the EU that are resident in jurisdictions with which Denmark has not concluded a double tax treaty. In our view, the extension is likely to have a similarly targeted scope. However, lenders without shares in the borrower may not be able to rely on the Interest and Royalties Directive and may instead need to rely on a tax treaty or the three-quarters rule.Danish payers will be required to withhold tax at a rate of 22% on all payments covered by the extended rules. This includes interest-like amounts and payments under covered hybrid instruments. The proposed amendments to the rules on interest and capital gains are expected to take effect on 1 April 2027.Hedging contracts to be taxed on realization
The government has proposed amending the rules on financial contracts in the Danish Capital Gains Tax Act (kursgevinstloven).
Today, long-term price hedging contracts such as power purchase agreements (PPAs) and contracts for difference (CfDs) may be taxed on a mark-to-market basis, depending on their terms. As a result, unrealized changes in value can be taxed before any corresponding payments are received.
Under the proposal, hedging contracts with a term of three years or more that qualify as financial contracts will be taxed on a realization basis, so that only the actual payments under the contract are taxed.
The contract must set a price determinable in advance for a quantity determinable in advance, and it must be entered into as part of the company's primary business to secure ongoing supplies.
The rules are to apply to contracts concluded on or after 1 January 2026. They will also apply to earlier contracts if the company has already applied the realization principle.
The proposal implements a political agreement of February 2026 and is expected to be introduced in November 2026.
Books become zero-rated
Denmark applies a standard VAT rate of 25%, while the zero rate currently only applies to newspapers and domestic plane transport. A bill has been introduced proposing to extend the 0% VAT rate to also apply to books.
The exemption will apply to all material with an ISBN (International Standard Book Number), including certain electronic materials, paint and drawing books for kids, printed lyrics as well as geographical maps.
The exemption will not include subscription services, podcasts or magazines.
The rules on zero VAT on books will apply to all suppliers of the exempted material. In other words, they will apply not only to publishers and bookstores, but also to supermarkets and specialty stores, for example. They will all have to recode their cash register and invoice systems so that they will no longer add VAT to the part of a bill that includes books. Businesses that currently use the margin scheme on used items will also be able to use the new rules.
Businesses that sell mixed or bundled supplies will also need to allocate the price between items taxed at different rates.
New rules for intra-EU trade
The Government expects to introduce a bill amending the VAT Act in November. The bill implements new EU VAT rules for cross-border trade and may have a direct impact on businesses selling goods or services in more than one EU Member State. A key aim is to reduce administrative burdens, and for some businesses, the new rules may mean fewer local VAT registrations and simpler VAT handling when selling to other EU countries.
The bill also changes the rules on distance sales of goods from countries outside the EU to consumers in the EU, with the aim of ensuring correct VAT payment and a more level playing field for EU businesses.
Further, a special VAT exemption threshold is extended to cover supplies of licences to authors’ and artists’ copyright-protected works. This may be relevant for businesses that acquire, sell or manage such rights, including, in certain cases, licences supplied by heirs.
Platforms become the VAT taxpayer for short-term rentals and passenger transport
The February bill implements the ViDA rules for the platform economy. Platforms that facilitate hotel-like short-term rentals or passenger transport by road will in certain cases be treated as the supplier for VAT purposes, shifting the VAT liability from the individual host or driver, who is often not VAT registered, to the platform. This is a fundamental change to the business model: platforms will need to collect data on the underlying suppliers, adjust their pricing and handle VAT on transactions that are not taxed today.
The bill should be read alongside the strengthened supervision of short-term rentals under the Danish Summer House Act, also on this year’s programme duties.
Coffee duty abolished
The coffee duty will be abolished as part of the same omnibus bill as zero-rated VAT on books.
Highlights from Finland
Pending legislative changes
The Finnish Government has proposed several changes to Finnish tax legislation. If approved, all of these amendments are intended to enter into force at the beginning of 2027.
Proposed reduction of the corporate income tax rate and extension of the loss carry-forward period
The Finnish Government has proposed reducing the corporate income tax rate from 20 percent to 18 percent. The proposed reduction would bring Finland’s corporate income tax rate below the EU and OECD averages and is intended to strengthen the international competitiveness of Finnish businesses.
The Government has also proposed extending the period during which business losses may be carried forward from the current 10 years to 25 years. The extended carry-forward period would apply to losses incurred in the 2026 tax year and subsequent tax years. The longer period is expected to support investment, particularly in sectors where research, development and testing require substantial expenditure over several years before commercialisation, and to encourage businesses to expand their operations.
Proposed amendments to the taxation of investment funds
The Finnish Government has proposed amendments to the conditions under which investment funds and special investment funds qualify for tax exemption. The proposed amendments are intended to remove tax-related obstacles to establishing European long-term investment funds (“ELTIFs”) in Finland and to align the Finnish tax rules applicable to investment funds with the case law of the Court of Justice of the European Union.
Under the proposal, the tax exemption of a special investment fund marketed as an ELTIF would no longer require all of the fund’s investors to be professional investors. This requirement has been identified as a key tax-related obstacle to establishing ELTIFs in Finland. The proposed amendment is therefore expected to make Finland a more attractive jurisdiction for the establishment of ELTIFs.
In addition, contractual form would no longer be a condition for the tax exemption of a foreign investment fund or special investment fund. The existing contractual-form requirement has been regarded as incompatible with EU law, and the proposed amendment is intended to bring the Finnish rules into line with the relevant EU-law requirements. However, a foreign fund would be required to be tax-exempt, effectively tax-exempt or fiscally transparent in its jurisdiction of registration.
Proposed amendments to the taxation of employee stock options and employee share issues
The Finnish Government has proposed amendments to the taxation of employee stock options and employee share issues involving unlisted companies.
Under the proposed rules for employee stock options, an employee could defer the employment income tax arising from the benefit until the shares acquired through the option are sold. Under the current rules, the benefit is taxed when the option is exercised, e.g. when the employee acquires the shares.
The deferral would be subject to several conditions. Among other requirements, the employee would need to claim the deferral before the completion of their standard tax assessment, and the option could not be exercised until at least one year after it was granted. The proposed amendment is intended to prevent employees from having to pay tax before receiving any proceeds from the shares and to help Finnish growth companies attract skilled employees.
The taxation of employee share issues would also be amended. A tax-advantaged employee share issue could, subject to the applicable conditions, be extended to employees of subsidiaries within the same group. Under the current rules, the relief applies only where employees are offered shares in their own employer company. The existing limitation has been regarded as unnecessarily restrictive and as complicating the implementation of employee share issues in corporate groups.
New Finland-France double tax treaty to apply from 1 January 2027
The new double tax treaty between Finland and France, signed in 2023, entered into force on 28 August 2026 and will apply from 1 January 2027. The new treaty replaces the treaty concluded in 1970.
The treaty introduces changes concerning, among other matters, the method for eliminating double taxation, the definition of a permanent establishment, the taxation of portfolio dividends and the taxing rights applicable to private-sector pensions.
Under the current treaty, double taxation is generally eliminated using the exemption method. The new treaty replaces this with the credit method, under which the state of residence generally taxes the income but grants a credit for tax paid in the source state. The change may affect, for example, the taxation of dividend income, employment income, profits attributable to a permanent establishment, and rental income and capital gains from real estate and shares in housing companies.
The definition of a permanent establishment is also updated to broadly reflect the latest OECD Model Tax Convention. Among other changes, the treaty contains provisions addressing the fragmentation of activities between closely related enterprises. In addition, the independent-agent exception may not be available where a person acts exclusively or almost exclusively on behalf of one or more enterprises to which that person is closely related. The revised provisions may therefore increase permanent establishment exposures in certain group arrangements.
Under the previous treaty, the source state’s right to tax portfolio dividends was restricted. Under the new treaty, the source state may generally levy withholding tax at a rate of up to 15 percent on portfolio dividends. A zero rate may nevertheless continue to apply to certain qualifying corporate holdings, subject to the conditions set out in the treaty.
The source state’s taxing rights in respect of private-sector pensions will also be extended. Under the new treaty, the source state may also generally tax these pensions.
Highlights from Norway
- Norwegian Tax Appeals Board decision: Dividend taxation of loan repayment under the general Norwegian non-statutory anti-avoidance rule (GAAR)
The case concerned an individual taxpayer (Taxpayer) who had purchased a receivable against an empty debtor company (Debtor) for less than its face value. At the same time, the Taxpayer's wholly owned holding company (Holding) acquired all of the shares in the Debtor. Holding then lent money to the Debtor, enabling the Debtor to repay its debt to the Taxpayer.Repayment of a receivable constitutes realization for Norwegian tax purposes, cf. Section 9-2(1) litra d of the Norwegian Tax Act. Since the Taxpayer had purchased the receivable for less than its face value, repayment gave rise to a gain. As a starting point, gains on receivables not connected with a business are not taxable, cf. Section 9-3(1) litra c of the Norwegian Tax Act. It was undisputed that the receivable was not a business receivable for the Taxpayer. Accordingly, the Taxpayer's gain was, as a starting point, tax-free.The question before the Tax Appeals Board was whether repayment of the Taxpayer's claim against the Debtor should nevertheless be taxed as a dividend under the non-statutory general anti-avoidance rule (GAAR) (the GAAR is now codified in Section 13-2 of the Norwegian Tax Act, but the case concerned events that occurred before its codification).For the GAAR to apply, two conditions must be met. First, (i) the predominant motive for the transaction or several transactions must be to save tax (the basic condition). Second, (ii) following an overall assessment of the effects of the transaction(s) (including its independent commercial value), the taxpayer's purpose in undertaking the transaction(s), and the other circumstances, it would be contrary to the purpose of the tax rules to accept the transaction(s) as the basis for taxation (the overall assessment).The Tax Appeals Board first concluded that, in determining whether the GAAR applied, the transactions had to be considered together: the Taxpayer's purchase of the receivable, Holding's acquisition of the Debtor, Holding's loan to the Debtor, and the Debtor's repayment of the receivable to the Taxpayer. The Tax Appeals Board relied in particular on the fact that the receivable was repaid shortly after the Debtor received funds from a related party – Holding.The Tax Appeals Board found that the transactions were clearly undertaken primarily to obtain a tax saving and that they had, in fact, resulted in a substantial tax saving. The basic condition - that the predominant purpose of the transactions was to obtain a tax saving - was therefore satisfied.The Tax Appeals Board also concluded that, following an overall assessment, the transactions could not be accepted as the basis for taxation. Treating the Debtor’s payments as repayments of a loan rather than as taxable dividends would be contrary to the purpose of the relevant tax rules.In its overall assessment, the Tax Appeals Board placed particular emphasis on the fact that the tax-free repayment of the Taxpayer’s receivable was funded with capital accumulated in Holding, rather than in the Debtor. The repayment was also made possible by the Taxpayer’s sole ownership of Holding and, in the Tax Appeals Board's view, therefore amounted, in substance, to a distribution of capital from Holding.Had the Debtor generated income after the Taxpayer acquired the receivable and Holding acquired the shares in the Debtor, that income could have been used to repay the receivable without the repayment being recharacterized under the GAAR and taxed as a dividend to the Taxpayer. However, because repayment occurred before the Debtor had generated any income, the payment had to be treated as a (dividend) distribution of funds from Holding.
Key takeawaysBoth Norwegian and international investors in Norwegian companies should be mindful of the Norwegian anti-avoidance framework, which may trigger unforeseen tax liabilities without careful review and planning of contemplated transactions.
