TÍTULO TERCERO

Taxation

Corporate tax

There are no corporate tax regulations in Sweden that apply specifically to biotech companies, either in the start-up phase or for existing businesses. A limited company established in Sweden pays business tax of 26.3% on the profit the business had during the year.

Tax losses are carried forward and can be offset toward future taxable income without time limitations. The unlimited carryforward period of tax losses is an advantage compared with other countries, as it is common for time limitations to apply to the utilization of losses carried forward. Moreover, current year tax losses can generally be offset against group profits through group contributions from Swedish group companies (limitations can apply after change of control). Group contributions are tax deductible for the paying company and taxable income for the receiving company.

Unlike several other jurisdictions, there are no thin capitalization rules in Sweden. However, certain restrictions apply on interest deductions on intercompany loans as a result of an internal restructuring. General restrictions on the deduction of interest are expected for 2013.

Incentives

Costs for R&D are deductable for tax purposes according to a specific regulation in the Swedish Tax Act. This includes research performed in the taxpayer’s own business, as well as contributions paid to another company that performs research activities, on the condition that the research performed by the latter company is of reasonable interest for the contributor’s business. The term “reasonable” was added to the wording of this section from 1 January 2012 in order to broaden the scope of the rule.

There are currently no tax incentives specifically aimed at biotech companies in Sweden.

There is no established monetary limit on contributions from one company to another company performing the R&D activity. Moreover, in 2011, the Government appointed a committee to examine Swedish corporate taxation. The corporate tax investigation aims to among other things present suggestions for tax incentives regarding R&D costs.

Tax incentives in the form of expert tax relief is generally granted in Sweden for foreign experts, researchers and key personnel under certain prerequisites (such as that the individual intends to work in Sweden for no longer than five years and that the individual

is a non-resident and non-citizen of Sweden). An application must be filed within three months of the employee’s arrival in Sweden. If approved, 25% of the compensation is exempt from Swedish employer social security contributions as well as personal income tax. Moreover, the following benefits can be provided tax free: moving expenses to Sweden and back home; two home trips for the whole family per year; and school fees for children. The actual tax relief is granted for the first three years of the employment period. Employees with a monthly salary of SEK88,000 or more are always eligible for expert tax. If the salary is lower, the employee must meet one of the following requirements:

► Work with special tasks with a high degree of competence which is highly difficult to find in Sweden

► Undertake qualified research or development projects with a specific competence or at a specific competency level which is difficult to find in Sweden

► Work at the top management level or conduct similar tasks that ensure a key position in the company

Under Swedish law, compensation should normally be paid by a Swedish payer. Compensation paid from a foreign payer can, under certain circumstances, be subject to expert tax.

SEK250,000

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Tax landscape for investors

Unlisted participations held by corporations are normally exempt from tax under the Swedish participation exemption, which creates an effective tax environment for holding structures. However, please also note that capital losses and write-downs on such participations are correspondingly not deductible.

Individuals are normally taxed 25% on dividends or capital gains from shares in unlisted companies. For listed shares, the tax rate is 30%. Please note, however, that very special rules apply for owners who are operative in closely held companies (see below).

In 2011, the Government announced a review of corporate taxation. Among the issues under review is how to reduce the current asymmetrical treatment of equity compared to loan financing. The Corporate Taxation Committee (Sw. Företagsskattekommittén) submitted its first progress report, “Tax incentives for venture capital,” in January. The report proposes two alternative tax incentives for venture capital related to new capital invested in a company, either at establishment or in connection with a new share issue. One proposal, venture capital deduction, is directed at individuals. The second, emission credits, is aimed at companies

(Sw. Emissionskredit). The report proposes that the provisions come into force on 1 January 2013.

Tax landscape for entrepreneurs

The taxation of individuals depends on how individuals choose to establish their business (sole proprietorship, partnership, limited liability company etc.). The owner of a limited

liability company is taxed on salary for work done or dividends on shares. A progressive tax rate between approximately 30% and 58% applies to income from employment.

However, very special taxation rules apply to owners who are operative in closely held companies in Sweden. These are taxed for dividend or capital gains on the shares in part as capital income and in part as employment income. Tax rates vary between 20% and 58%. A closely held company is defined as four or fewer people together owning at least 50% of the shares of the voting power in a company. If the owners are operative in the company’s business, these specific rules could be applicable on their shareholdings. Note that the rules are very detailed and complex, and are continuously subject to amendments. For example, family members are, in this regard, treated as one person. The same goes for operative owners.

However, if an external investor (not operative in the company) owns more than 30% of the voting powers of the company, these special rules are not applied. This means that dividend or capital gain on shares are normally taxed at 25% for an owner who is an individual. The lower tax rate of 20% on dividend or capital gain for individuals is the lowest rate in Sweden. Consequently, these rules can result in a very favorable tax treatment if sufficient tax planning – before start-up and continuously during the holding – is carried out.

Finance

In addition to those sources already outlined above, public support may be obtained from the European Union, e.g., the FP7 program. Swedish biotech companies have been successful in this respect.