Tax Treaty Case Law around the Globe 2014

Part Six Other Income, Avoidance of Double Taxation and Non-Discrimination

S. 271Chapter 26 Sweden: Is Fictitious Income Covered by Tax Treaties?

Martin Berglund

26.1. Introduction

Sweden has recently introduced a special box regime for taxing individuals' investment income (investeringssparkonto). If the taxpayer chooses to be covered by this regime, dividends and gains from shares are not taxed upon payment or realization; instead, a fictitious income is computed yearly based on the total value of the individual's assets. This income is included in the regular tax assessment. The question arises whether this income is covered by tax treaties. Taxpayers who invest in certain investment funds (investeringsfonder) are subject to a similar tax treatment as the mentioned box regime.

In 2012, the Swedish Supreme Administrative Court (Högsta förvaltningsdomstolen, HFD) decided on a similar case regarding other fictitious income. That case concerned fictitious income that was calculated when a person had been granted a deferral for the sale of a home. Such deferral is given when the taxpayer is immediately buying a new home. The capital gains on the realization are deferred until the new home is la...