Improper Use of Tax Treaties and Source Taxation: Policy, Practice and Beyond : Sweden
(2025) 109. p.997-1018- Abstract
- As international cross-border tax planning increasingly tests domestic legal frameworks,Sweden has relied on a patchwork of different provisions to combat treaty abuse. Throughthe dynamic interplay between its domestic anti-avoidance rules and international treatyprovisions, Sweden has occasionally deployed its targeted Specific Anti-Avoidance Rules(SAARs) and even discussed the possibility of applying the General Anti-Avoidance Rule(GAAR) to tackle tax avoidance in those cases its double tax treaties (DDTs) do not effectivelycounter the abuse of its international tax treaties. Whilst the GAAR targets arrangementswith a predominant tax avoidance purpose, employing purposive interpretation to align taxoutcomes with the intent of the law,... (More)
- As international cross-border tax planning increasingly tests domestic legal frameworks,Sweden has relied on a patchwork of different provisions to combat treaty abuse. Throughthe dynamic interplay between its domestic anti-avoidance rules and international treatyprovisions, Sweden has occasionally deployed its targeted Specific Anti-Avoidance Rules(SAARs) and even discussed the possibility of applying the General Anti-Avoidance Rule(GAAR) to tackle tax avoidance in those cases its double tax treaties (DDTs) do not effectivelycounter the abuse of its international tax treaties. Whilst the GAAR targets arrangementswith a predominant tax avoidance purpose, employing purposive interpretation to align taxoutcomes with the intent of the law, the SAARs address specific challenges such as hybridmismatches, interest deduction abuse, and withholding tax avoidance. These rules arecomplemented by provisions in Sweden’s extensive network of DDTs, including Limitationon Benefits (LOB) clauses and, following the introduction of the OECD Principal PurposeTests (PPT), occasionally a treaty GAAR.However, the implementation of treaty-based anti-abuse measures, like the MultilateralInstrument (MLI), remains incomplete due to Sweden’s dualist legal approach, whichrequires treaty-specific legislative amendments. This layered framework reflects Sweden’sattempt to balance the need for robust anti-abuse mechanisms with legal predictability.While Sweden’s somewhat delayed implementation of the MLI might suggest a lack ofurgency, the country has demonstrated a strong commitment to aligning its anti-abuseframework with OECD and EU initiatives, particularly those stemming from the OECD’sBEPS project. Recent reforms include enhanced hybrid mismatch rules and tightenedinterest deduction limitations. That being said, tensions have arisen between domestic andEU-level rules, with recent court decisions revealing instances where Swedish provisionshave been considered excessively far-reaching and potentially incompatible with EU law.Beyond the hard law anti-avoidance measures, Sweden has established a robust MutualAgreement Procedure (MAP) under its extensive tax treaty network, largely based on theOECD Model Tax Convention and the EU Arbitration Convention. While the MAP primarilyaddresses allocation and attribution disputes, limited public information is availableregarding its use in cases involving anti-abuse provisions. Arbitration, however, remains less prominent, as Sweden does not generally include arbitration clauses in its treaties.Instead, Sweden has opted for the independent opinion approach under the MultilateralInstrument (MLI) to ensure consistency with international law, though other disputeresolution mechanisms, such as mediation, are notably absent.Looking ahead, Sweden has primarily relied on coordinated international efforts ratherthan unilateral actions to strengthen its international tax framework. However, Sweden’sdualist legal approach continues to delay the full application of the MLI, and its commitmentto treaty-based measures like the Subject-To-Tax Rule (STTR) remains uncertain. Theintroduction of the Qualified Domestic Minimum Tax (QDMT), reflects Sweden’s effortto align with EU Pillar Two initiatives in order to grind the race-to-the-bottom to a halt.With the global security environment and changing attitudes toward free trade posingchallenges to Sweden’s open economy, the country must in the future find a way to balancethe protection of source-based taxation with its commitment to international standards ina tax landscape that is likely to transform in the coming years. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/820cdc6e-bf29-4c10-b58f-4b5d4ff28820
- author
- Croneberg, Richard LU
- organization
- publishing date
- 2025-08-01
- type
- Chapter in Book/Report/Conference proceeding
- publication status
- published
- subject
- keywords
- Tax law, Skatterätt
- host publication
- Cahiers de Droit Fiscal International : Improper Use of Tax Treaties and Source Taxation: Policy, Practice and Beyond - Improper Use of Tax Treaties and Source Taxation: Policy, Practice and Beyond
- editor
- Furuseth, Eivind and Li, Jinyan
- volume
- 109
- edition
- B
- pages
- 22 pages
- publisher
- International Fiscal Assoication
- ISBN
- 9789083468211
- language
- English
- LU publication?
- yes
- id
- 820cdc6e-bf29-4c10-b58f-4b5d4ff28820
- date added to LUP
- 2025-09-25 11:09:50
- date last changed
- 2025-09-25 13:38:15
@inbook{820cdc6e-bf29-4c10-b58f-4b5d4ff28820,
abstract = {{As international cross-border tax planning increasingly tests domestic legal frameworks,Sweden has relied on a patchwork of different provisions to combat treaty abuse. Throughthe dynamic interplay between its domestic anti-avoidance rules and international treatyprovisions, Sweden has occasionally deployed its targeted Specific Anti-Avoidance Rules(SAARs) and even discussed the possibility of applying the General Anti-Avoidance Rule(GAAR) to tackle tax avoidance in those cases its double tax treaties (DDTs) do not effectivelycounter the abuse of its international tax treaties. Whilst the GAAR targets arrangementswith a predominant tax avoidance purpose, employing purposive interpretation to align taxoutcomes with the intent of the law, the SAARs address specific challenges such as hybridmismatches, interest deduction abuse, and withholding tax avoidance. These rules arecomplemented by provisions in Sweden’s extensive network of DDTs, including Limitationon Benefits (LOB) clauses and, following the introduction of the OECD Principal PurposeTests (PPT), occasionally a treaty GAAR.However, the implementation of treaty-based anti-abuse measures, like the MultilateralInstrument (MLI), remains incomplete due to Sweden’s dualist legal approach, whichrequires treaty-specific legislative amendments. This layered framework reflects Sweden’sattempt to balance the need for robust anti-abuse mechanisms with legal predictability.While Sweden’s somewhat delayed implementation of the MLI might suggest a lack ofurgency, the country has demonstrated a strong commitment to aligning its anti-abuseframework with OECD and EU initiatives, particularly those stemming from the OECD’sBEPS project. Recent reforms include enhanced hybrid mismatch rules and tightenedinterest deduction limitations. That being said, tensions have arisen between domestic andEU-level rules, with recent court decisions revealing instances where Swedish provisionshave been considered excessively far-reaching and potentially incompatible with EU law.Beyond the hard law anti-avoidance measures, Sweden has established a robust MutualAgreement Procedure (MAP) under its extensive tax treaty network, largely based on theOECD Model Tax Convention and the EU Arbitration Convention. While the MAP primarilyaddresses allocation and attribution disputes, limited public information is availableregarding its use in cases involving anti-abuse provisions. Arbitration, however, remains less prominent, as Sweden does not generally include arbitration clauses in its treaties.Instead, Sweden has opted for the independent opinion approach under the MultilateralInstrument (MLI) to ensure consistency with international law, though other disputeresolution mechanisms, such as mediation, are notably absent.Looking ahead, Sweden has primarily relied on coordinated international efforts ratherthan unilateral actions to strengthen its international tax framework. However, Sweden’sdualist legal approach continues to delay the full application of the MLI, and its commitmentto treaty-based measures like the Subject-To-Tax Rule (STTR) remains uncertain. Theintroduction of the Qualified Domestic Minimum Tax (QDMT), reflects Sweden’s effortto align with EU Pillar Two initiatives in order to grind the race-to-the-bottom to a halt.With the global security environment and changing attitudes toward free trade posingchallenges to Sweden’s open economy, the country must in the future find a way to balancethe protection of source-based taxation with its commitment to international standards ina tax landscape that is likely to transform in the coming years.}},
author = {{Croneberg, Richard}},
booktitle = {{Cahiers de Droit Fiscal International : Improper Use of Tax Treaties and Source Taxation: Policy, Practice and Beyond}},
editor = {{Furuseth, Eivind and Li, Jinyan}},
isbn = {{9789083468211}},
keywords = {{Tax law; Skatterätt}},
language = {{eng}},
month = {{08}},
pages = {{997--1018}},
publisher = {{International Fiscal Assoication}},
title = {{Improper Use of Tax Treaties and Source Taxation: Policy, Practice and Beyond : Sweden}},
volume = {{109}},
year = {{2025}},
}