Global Tax Alert (News from Transfer Pricing) | 24 March 2017

Swedish Parliament passes new legislation regarding transfer pricing documentation and Country-by-Country Reporting

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Executive summary

On 1 March 2017, the Swedish Parliament passed the Government’s proposed legislation on transfer pricing documentation and Country-by-Country (CbC) Reporting. The legislation expands the current rules for transfer pricing documentation in accordance with the new Organisation for Economic Co-operation and Development (OECD) standard and introduces an additional CbC reporting obligation. An automatic exchange of said reports among the tax authorities within the European Union (EU) and with jurisdictions which have signed the multilateral treaty regarding CbC reporting is also included.

The new rules, which will come into effect on 1 April 2017, are linked to Action 13 in the OECD Base Erosion and Profit Shifting (BEPS) project. The rules regarding CbC reporting will be applied for financial years beginning after 31 December 2015 whereas the documentation requirements will be applied for financial years beginning after 31 March 2017.

Detailed discussion

New documentation requirements for transfer pricing

The transfer pricing documentation rules are expanded through the new legislation and will cover Swedish partnerships as well as Swedish and foreign permanent establishments. Individuals and companies which were part of a group with less than 250 employees and either had a turnover below SEK450 million or assets below SEK400 million the year before the relevant financial year are excluded from the documentation requirements. Groups exceeding the above thresholds are subject to the documentation requirements.

According to the rules, groups covered by the requirements shall prepare a Master File containing an overview of the group and its business operations. In addition to the Master File, a Local File shall be prepared for each legal entity in order to provide a more detailed description of the specific entity’s business operations and intra-group transactions. The documentation shall be prepared for each financial year and is to be filed with the Swedish Tax Agency upon request. It should be noted that groups not covered by the documentation requirements still have to apply arm’s length pricing for intra-group transactions in accordance with the Swedish Income Tax Act and the OECD’s guidelines for transfer pricing.

CbC reporting and notification requirements

Multinational groups with a total turnover of at least SEK7 billion are subject to the CbC reporting rules. Generally this means that the parent entity is required to file a CbC report for the entire group in the country where it resides. Swedish parent companies of groups exceeding the threshold are required to file the CbC report with the Swedish Tax Agency within twelve months of the end of the financial year covered by the report. For financial year 2016, the CbC report must be filed by 31 December 2017.

A notification requirement is linked to the CbC reporting, meaning that all Swedish entities and Swedish permanent establishments covered by the rules have to notify the Swedish Tax Agency of which entity will file the group’s CbC report. The notification shall be filed with the Swedish Tax Agency before the close of the financial year covered by the report and can be made in Swedish or English. For financial years beginning after 31 December 2015 and closing before 1 April 2017 the deadline has been extended to 30 April 2017.

For additional information with respect to this Alert, please contact the following:

Ernst & Young AB, Stockholm
  • Olov Persson
    +46 8 520 590 00
    olov.persson@se.ey.com
Ernst & Young AB, Göteborg
  • Anna Lindström
    +46 31 63 75 82
    anna.lindstrom@se.ey.com
Ernst & Young LLP, Scandinavian Tax Desk, New York
  • Nina S Brodersen
    +1 212 773 1727
    nina.brodersen1@ey.com
  • Tone Marit Frøland Hagen
    +1 929 302 0833
    tonemaritfroland.hagen@ey.com

EYG no. 01328-171Gbl