Corporate tax cut and changes to the Swedish interest deduction limitation regime 

The new Swedish interest deduction limitation regime can be summarized as follows:

• All interest on debt to affiliated companies is not tax deductible.
• Companies are affiliated if one of them, directly or indirectly, through ownership or otherwise has a significant influence over the other or if the companies are under substantially common management. 
• Deductions may still be allowed if the recipient of the interest income is subject to a tax rate of at least ten percent (the “10% rule”), or if the debt is primarily incurred for business reasons (the “business reason test”).
• The “10% rule” is extended so that it applies to companies that are subject to the yield tax. 
• The “10% rule” will not apply if the primary reason (approx. 75% or more) of the debt relationship is to obtain a significant tax advantage. 
• The “business reasons test” is applicable only where the recipient of the interest income is located in a country in the EEA or in a country with which Sweden has an income tax treaty for the avoidance of double taxation. 
• In assessing whether the “business reasons test” is applicable, consideration must be given to whether funding could instead have been provided through a capital contribution from the company that holds the claim or from a company that, directly or indirectly, through ownership or otherwise has a significant influence in the borrowing company. 
• The interest limitation for back-to-back external loans will apply only for loans for financing intra-group acquisitions of shares.