Nordic Tax Law Bulletin - September 2025

Ruling by the Norwegian Tax Directorate regarding the applicability of the Norwegian statutory anti avoidance rule on demerger and subsequent liquidation of a Norwegian company

A Norwegian company, which wholly owned by a foreign shareholder (HoldCo) held a minority stake in another Norwegian company (InvestCo). The private individual wanted to release funds for personal use while minimising his tax exposure. This was planned done to be done in the following manner:

• Completion of a share capital reduction in InvestCo, involving the redemption of all of HoldCo's shares and cash payment of the redemption amount
• Demerger of HoldCo and transfer of the cash payment of the redemption amount to a company established in connection with the demerger (NewCo), wholly owned by the private individual.
• Liquidation of NewCo, with payment of liquidation proceeds to the private individual. 

Under Norwegian tax law, dividends paid by a Norwegian company to an individual shareholder who is not a Norwegian tax resident is generally subject to Norwegian withholding tax. However, the payment of liquidation proceeds to a private individual upon the liquidation of a Norwegian company is considered realization of the shares in the liquidated company and not taxable in Norway for the foreign private shareholder. As such, the steps described in 1-3 can generally be carried out without triggering Norwegian tax for the foreign individual (nor for HoldCo, InvestCo or NewCo). 
The question for the Norwegian Tax Directorate was whether the transaction steps should be accepted under the Norwegian statutory anti-avoidance rule. Under this rule, a tax benefit can be denied if the main purpose of a transaction or a series of transactions is to achieve a tax advantage, and if, based on an overall assessment, the transaction(s) cannot form the basis of taxation. 
The Norwegian Tax Directorate concluded that the main purpose of the transactions was to achieve a tax benefit. Based on, inter alia, the fact that there were no business reasons for the demerger, and that the demerger and liquidation were carried out exclusively for tax reasons, the Norwegian Tax Directorate concluded that the transactions could not form the basis of taxation. Instead, HoldCo should be deemed to have distributed dividends to the private individual and the dividend subject to Norwegian withholding tax for the foreign private individual. 

Swedish Tax Agency Publishes Case Commentary on Supreme Administrative Court Judgment on Carried Interest

During the summer, the Supreme Administrative Court upheld an advance ruling holding that carried interest constitutes a return on investment and is therefore not taxable as employment income.

Case background

AA is employed by a Swedish company ("Advisory AB") that provides investment advice to the manager of a private equity fund.

The fund is established under Luxembourg law and most closely corresponds to a Swedish limited partnership, although it is not a legal person under Luxembourg corporate law. The founders of the fund are a S.à r.l. company ("GP") and another S.à r.l. company that serves as the initial limited partner ("ILP"). Both companies are resident in Luxembourg. The fund will be an alternative investment fund.

GP is the general partner of the fund with unlimited liability and serves as the fund manager. For its management of the fund, GP receives a management fee on arm’s-length terms. For its advice to the manager, Advisory AB receives an arm’s-length advisory fee.

The co investment made by the founders in the fund is made through ILP. The co investment amounts to 2 percent of the fund capital. ILP is a limited partner in the fund with limited liability. The fund’s other investors, primarily institutional investors, are also limited partners.

Under the fund agreement the fund results are in simplified terms allocated between the external investors and ILP as follows. First 100 percent to the investors until they have received back their invested capital. Next 100 percent to the investors until they have received an 8 percent return on invested capital. Finally 80 percent to the investors and 20 percent to ILP (i.e., the carried interest).

AA has been given the opportunity to acquire shares in a foreign holding company ("Holding") that owns all shares in GP and ILP. He intends to acquire the shares through a wholly owned closely held company. On the stated facts, the shares in the closely held company will be qualified shares since he will be actively engaged to a significant extent. Through this ownership he will be entitled to a share of the carried interest that ILP may receive.

AA applied for an advance ruling to clarify whether the carried interest paid from the fund to ILP, or a distribution from ILP to Holding, would be taxed for him as employment income (question 1). He also asked whether a distribution from Holding to the closely held company would be taxed for him as employment income (question 2). Both questions were answered in the negative. The income would not be taxed as employment income. The question before the Supreme Administrative Court was whether to uphold the advance ruling.

Supreme Administrative Court’s reasoning

The Supreme Administrative Court stated that the issue was whether the fund profit allocation should be disregarded for tax purposes. More specifically the question was whether the carried interest that ILP may receive should instead be attributed to the external investors or to GP and if so what tax consequences that would have for AA.

According to the Court, the fund may be regarded as corresponding to a Swedish limited partnership. As a starting point, the profit allocation in a limited partnership is based on the partnership agreement or what has otherwise been agreed among the partners. However, the agreed allocation may be set aside for tax purposes if it entails an improper transfer of income or appears unreasonable and is essentially tax-motivated.

GP and ILP are related parties, whereas the external investors are independent in relation to GP and ILP. Between independent parties there is generally no basis to disregard the agreed allocation for tax purposes. The allocation between, on the one hand, GP and ILP and, on the other hand, the external investors should therefore be accepted.

The remaining question according to the Court was whether the allocation entails an improper transfer of income from GP to ILP or whether the fact that GP is not entitled to the carried interest means the allocation is tax-motivated. ILP has committed to invest 2 percent of the fund capital. AA stated that there are business reasons why ILP and not GP makes this commitment. Against this background the founders decision not to have GP invest in the fund and thereby receive the carried interest cannot be regarded as an improper transfer of income from GP to ILP or as a tax-motivated allocation.

The Supreme Administrative Court concluded that ILP is entitled to the carried interest and that it constitutes a return on the investment made by ILP in the fund. Therefore, the income does not give rise to any tax consequences for AA.

Swedish Tax Agency case commentary

In its commentary, the Swedish Tax Agency notes that the Supreme Administrative Court found that the fund formed in Luxembourg may be regarded as a Swedish limited partnership. As a matter of established practice, the starting point in such cases is that profit allocation is governed by the partnership agreement or by any other agreement between the partners. However, the agreed allocation may be set aside for tax purposes if it entails an improper transfer of income, or if it appears unreasonable and is essentially tax-motivated. The Swedish Tax Agency considers that the same principles should apply to funds formed in other jurisdictions with a structure comparable to that of the fund at issue, such as limited partnerships established under the laws of England, Guernsey, or Jersey.

The Swedish Tax Agency further notes that the way in which related-party ownership was structured between the fund’s GP and the ILP had no independent bearing on the Supreme Administrative Court’s assessment. In The Swedish Tax Agency’s view, the Court’s reference to case-law on profit allocation indicates that the agreed allocation in the fund must be assessed on a case-by-case basis. 

Finally, the Swedish Tax Agency observes that, because the case concerned a fund structure not established in Sweden, the Court did not take a position on how taxation would be determined if the ILP had been a Swedish company.

DLA Piper Sweden comments on the Swedish Tax Agency’s commentary

With numerous pending cases concerning the taxation of carried interest, expectations for the Swedish Tax Agency’s commentary were high. However, because it is framed in general terms, the commentary provides little guidance on how the judgment may affect the cases the Tax Agency is pursuing.

However, following the judgment, the Tax Agency now appears to accept an approach whereby the classification of carried interest as capital income under the fund agreement is generally respected and will be set aside only if the agreement entails an improper transfer of income or appears unreasonable and essentially tax-motivated.

We will continue to monitor developments going forward.

The Supreme Administrative Court (“SAC”) issued a ruling on the parent company's right to deduct VAT on expert services related to the acquisition of a subsidiary on September 2, 2025.

The case involved Finnish company A Oy, which was established to acquire the parent company of a corporate group and subsequently operate as its new parent. A Oy was majority-owned by a private equity fund, managed by an equity investor through foreign holding companies. Following the acquisition, A Oy provided management services to C Oy, a subsidiary it indirectly owned, but not to B Oy, which it directly acquired. The central question was whether A Oy could deduct VAT on expert services related to the acquisition of B Oy. These services included share acquisition, due diligence, financing and incentive planning, and notifications to competition authorities.

The SAC first clarified that selling management services to an indirectly owned subsidiary confers the same taxable status under the VAT Act as selling services to a directly owned subsidiary. Therefore, the fact that A Oy did not provide services to B Oy directly did not exclude the acquisition and related services from its VAT-liable business activities.

The Court also examined the nature of the acquired services and their connection either to A Oy’s own VAT-deductible business or to the activities of the private equity investors and funds positioned above A Oy in the ownership structure.

The SAC emphasized that simply purchasing and paying for expert services related to a share deal does not automatically make those costs deductible as general business expenses for VAT purposes. The deductibility depends on the content of the services and their relevance to the company’s operations. The assessment may also include whether the services benefited parties other than the company itself. Based on the available information, it may be necessary to allocate VAT between the company’s deductible business activities and non-deductible uses.

The SAC stated that services such as due diligence, valuation, and contract advisory were largely acquired in the interest of the private equity investor and its funds, but were also necessary for A Oy. As a result, A Oy was entitled to a partial VAT deduction for these costs. Similarly, competition law advisory services were deemed to benefit both A Oy and entities higher up in the investment structure, justifying a partial deduction. A Oy also had a partial right to deduct financing-related services connected to trade negotiations, its own financing, and incentive schemes. However, financial advisory services related to UK legislation were considered to primarily benefit the parent entities and were therefore not deductible.

The SAC annulled the previous decisions and referred the matter back to the Tax Administration for recalculation of the deductible portion. It also stated that the taxpayer bears the burden of proof and must be able to identify which costs relate to its own taxable business.

This ruling underline the importance of a case-by-case assessment when determining VAT deductibility for expert services in corporate acquisitions and group restructurings. While it confirms a partial right to deduct VAT, it also makes clear that no deduction is allowed for services primarily benefiting equity investors or shareholders. The decision leaves room for interpretation and highlights the need for detailed analysis of service content and beneficiaries, especially in private equity and fund structures.
 

The Administrative Court ruled that the Act on Temporary Profit Tax on the Electricity and Fossil Fuel Sectors (the "Profits Tax Act") could not be applied, finding it to be incompatible with Council Regulation (EU) 2022/1854, on 9 June 2025.

The Profits Tax Act was introduced based on the EU Regulation, which mandates a “profit cap” of EUR 180/MWh, above which Member States are required to collect market revenues from certain electricity producers. During the legislative drafting process, it was assumed that the Regulation allowed Member States sufficient flexibility to implement alternative models beyond a direct market revenue cap. Finland opted for a 30% profit tax, levied in addition to annual income tax, when the return on electricity operations exceeds a 10% threshold—calculated as an imputed return on equity from the previous financial year.

However, the Administrative Court found that the provisions of the Profits Tax Act diverge from the EU Regulation in several key respects, including the tax rate, calculation method, and period of application. The Court also concluded that the Act’s provisions depart from the Regulation’s underlying purpose and objectives.

Given that the profit tax model is fundamentally different from the market revenue cap outlined in the Regulation, the Court determined that the Profits Tax Act cannot be interpreted in a way that aligns with EU law. As a result, the company in question cannot be taxed under the Profits Tax Act—at least not for the duration of the Regulation’s applicability.

Accordingly, the Administrative Court annulled the Tax Administration’s advance ruling and issued a new one, stating that the provisions of the Profits Tax Act concerning the amount and calculation method of the electricity sector profit tax do not apply to the company’s taxation.

The ruling is not yet final (likely appealed to the SAC). If upheld, it would make the Profits Tax Act ineffective, since the Administrative Court has stated that the key parts of the Act—how the tax is calculated and how much is charged—cannot be applied.
 

The Finnish Government adopted a proposal to strengthen tax control of crypto assets on September 11, 2025.

The proposal is based on Council Directive (EU) 2023/2226 (DAC8) and introduces new reporting obligations for cryptocurrency service providers. These providers will be required to report the total annual volume of cryptocurrency exchange and transfer transactions conducted by individuals and companies to the Finnish Tax Administration. Additionally, Finnish crypto asset service providers will face broader reporting requirements than those outlined in the directive, including the obligation to submit information necessary for capital gains taxation.

To date, the Tax Administration has lacked comprehensive visibility into crypto asset transactions, relying primarily on self-reporting by taxpayers and its own supervisory efforts. The reform aims to strengthen international tax oversight and reduce the shadow economy.

The legislation is expected to enter into force at the beginning of 2026.

New legislation on tax succession

As a general rule, the transfer in the family line of a business for no consideration will trigger gift (or inheritance) tax for the recipient and capital gains tax for the transferor (despite the fact the transferor does not receive any consideration). However, rules on tax succession form a legal mechanism under Danish tax law that allow the transfer of businesses without triggering any capital gains taxation for the transferor at the time of transfer.

Instead, the recipient assumes the transferor’s tax position, including acquisition costs, depreciations, and any latent tax liabilities. This means that taxation is deferred until a later point in time, typically when the recipient disposes of the assets or business. Succession is often used in connection with generational transfers, where it can be advantageous to avoid an immediate tax payment that may strain the liquidity of the transferred business or property.

On 8 April 2025, the Danish Parliament adopted a number of new, more lenient rules on ownership transition of Danish businesses. The rules, which took effect from 1 January 2025, reduce the tax burden on intra-family ownership transitions and provide a legal right, in the event of ownership transition, to valuation of businesses according to a schematic method, etc.

Reduced gift tax and inheritance tax

The gift tax and inheritance tax rates are reduced to 10 per cent when a business is transferred to a close family member instead of the usual 15 per cent. Siblings will, in future, be comprised by the rules on close family members and will, effective as from 2027, be able to receive gifts and inheritance at the now lower gift tax and inheritance tax rates.

Valuation of a business

The value of the business to be transferred can be determined using a schematic valuation method based on information set out in the financial statements of the business. Under the new rules, the transferor has a legal right to use the schematic valuation method to determine the basis for the calculation of inheritance and gift taxes.

However, the legal right to use the schematic valuation method applies only for inheritance and gift taxes, but not, for example, for the calculation of capital gains tax on a taxable transfer.

Extension of the scope

Real estate rental activity has so for not been considered a business activity eligible for tax succession. From now on, active real estate rental activity will be treated as other business activities in the event of ownership transition to the effect that, upon the transfer of active real estate rental activity, the transferee may succeed into the transferor’s tax position, thus deferring tax liability.

The rental activity must be ‘active real estate rental' in family-owned businesses. In these cases, it will now be possible to transfer a business including real estate rental activity while allowing the transferee to succeed to the transferor’s tax position, thus deferring tax liability, at the low inheritance tax or gift tax rate of 10 per cent.

What is active rental activity?

Active rental activity basically means that the task of concluding agreements of financial significance for the operation of the rental activity is mainly carried out but the owner of the business, and not by an independent external administrator.

Consequently, rental properties forming part of active real estate rental activities are no longer considered to be a portfolio investment.