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Sweden Scraps Exit Tax Proposal

by Ulrika Lomas, Tax-News.com, Brussels

28 March 2018


The Swedish Government has announced that it will not proceed with a proposal to introduce an exit tax after hearing concerns about the measure's design.

Proposed as an anti-avoidance measure by the tax authority in November 2017, the exit tax would have replaced the existing "10-year rule," which the Government now intends to modify instead.

The Skatteverket's proposal would have taxed the unrealized capital gains of individuals emigrating from Sweden at a rate of 30 percent, provided that the person had lived in Sweden for at least five years in the preceding ten years.

Gains of less than SEK100,000 (USD8,600) would not have been subject to the tax, and those emigrating to European Economic Area countries would have been allowed to defer payment of the tax until the assets were divested.

The tax would have had wide scope and applied to most asset classes, as well as to cross-border inheritances.

The exit tax was intended to replace the 10-year rule, under which individuals previously resident in Sweden continue to incur capital gains tax liability when disposing of holdings in Swedish shares and certain other assets for a period of ten years after leaving the country.

A "debate article" by Finance Minister Magdalena Andersson and published on the finance ministry website on March 25 said that the exit tax idea was being scrapped after comments exposed "real problems with the design of the proposal."

Andersson wrote that the tax would have posed difficulties for Swedish companies when expanding abroad and damaged Sweden's competitiveness.

"Therefore, today we announce that the government will not proceed with the tax agency's proposal for [exit] taxation," she stated. "However, this means that the problems with the ten-year rule remain."

Andersson said that the Government would soon begin a "constructive dialogue" on reforms to the 10-year rule that will strike a balance between maintaining Sweden's competitiveness and securing its tax base.

TAGS: individuals | capital gains tax (CGT) | Finance | tax | interest | tax authority | Sweden | exit tax | Europe

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