Sandvik To Avoid SEK5bn Swedish Tax Bill From IP Move

by Ulrika Lomas, Tax-News.com, Brussels

14 January 2008

Swedish engineering firm Sandvik has announced that it does not expect to pay an additional SEK5 billion (USD793 million) for the 2005 tax year relating to a reorganisation of the company's intellectual property rights.

In a statement released last week, the steel and tool maker revealed that the the Swedish National Tax Board had approved the company's income tax return for 2005, when Sandvik AB conducted a reorganization of the ownership and management of intellectual property rights.

Under the company's restructuring programme, all of Sandvik's Swedish-owned patents and brands were transferred to Sandvik Intellectual Property AB. According to the firm, the reason for the reorganization was to streamline intellectual property operations into a separate company, which would, as a result, emphasise the value of intellectual property rights and generate operative gains.

The National Tax Board has however, subsequently appealed its own tax ruling through the Public Attorney with regard to the effect of the reorganization. Nonetheless, even if the appeal is approved, Sandvik believes the ruling "would not impact earnings".

"If this is the case, the additional tax expense of SEK5 billion would correspond to the taxable value of amortizations in the IP company," the company stated.

On the other hand, if Sandvik’s view is accepted by the court, "it would entail a reduction in Sandvik’s tax expense of approximately SEK5 billion, which will be taken up as revenue in the Group when the Court order has gained legal force," the statement explained.

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