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Cross-border taxation of employee stock options - Is the Swedish Supreme Administrative Court’s ruling in case 1480-15 and 1483-15 regarding taxation of employee stock options supported by the case law provided by the European Court of Justice?

Olofsson, Ida LU (2016) HARN60 20161
Department of Business Law
Abstract
The aim of this thesis is to present issues related to cross-border taxation of employee stock options and critically inquiring whether the Swedish Supreme Administrative Court’s reasoning about comparable situations in the two rulings concerning taxation of stock options is supported by ECJ case law.
On 4th of November 2015, the Supreme Administrative Court in Sweden issued two rulings concerning taxation of foreign earned income from employee stock option and share programs that was earned before the employee moved to Sweden and became a Swedish tax resident, but was actually paid to the employee after that point. The Supreme Administrative Court found that taxation in Sweden of the foreign earned compensation was discriminatory and... (More)
The aim of this thesis is to present issues related to cross-border taxation of employee stock options and critically inquiring whether the Swedish Supreme Administrative Court’s reasoning about comparable situations in the two rulings concerning taxation of stock options is supported by ECJ case law.
On 4th of November 2015, the Supreme Administrative Court in Sweden issued two rulings concerning taxation of foreign earned income from employee stock option and share programs that was earned before the employee moved to Sweden and became a Swedish tax resident, but was actually paid to the employee after that point. The Supreme Administrative Court found that taxation in Sweden of the foreign earned compensation was discriminatory and contrary to EU law, although the Swedish law granted a credit for foreign taxes levied abroad. The court ruled that the Swedish tax exemption rules were contrary to the free movement of workers in article 45 TFEU since the rules only granted exemption to individuals who were subject to unlimited tax liability in Sweden, which led to that non-resident taxpayers were treated worse than resident taxpayers. Hence, different rules were applied to comparable situations. Although the rulings were very welcomed and clarified that foreign earned employment income may be exempted under the Swedish domestic law, the rulings also created new legal questions with regards to equal taxation of residents and non-residents in the application of the Swedish exemption rules.
In the rulings the Swedish Tax Agency expressed concern about the comparability and stated that it is questionable whether the comparison that the court made is the most relevant for assessing whether the Swedish measure restricts the free movements of workers. Clearly, the Swedish tax agency and the Supreme Administrative court had different option with regards to what situations should be compared. However, neither the court nor the Swedish Tax Agency referred to a source of law to support their respectively comparison or explained why such comparison should be the most relevant comparison. It is therefore interesting to analyse in detail what situations the Swedish court compared, what reasons the court found to conclude that the situations are comparable and if EU law supports this comparability. Also, whether the difference in treatment can be neutralized by granting a credit for foreign taxes levied abroad and whether the courts rulings actually solved the issues related to the Swedish employee stock option rules and the timing mismatch in taxing employments benefits. Finally, whether the Swedish Supreme Administrative court interpretation of EU law is covered by the acte éclairé and acte clair doctrine, or whether the court should have asked for a preliminary ruling in the ECJ in order to ensure a uniform interpretation of EU law. (Less)
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author
Olofsson, Ida LU
supervisor
organization
course
HARN60 20161
year
type
H1 - Master's Degree (One Year)
subject
keywords
Employee stock options, Cross-border taxation, OECD, Fundamental freedoms, Comparable situations
language
English
id
8900585
date added to LUP
2017-07-19 15:49:39
date last changed
2017-07-19 15:49:39
@misc{8900585,
  abstract     = {The aim of this thesis is to present issues related to cross-border taxation of employee stock options and critically inquiring whether the Swedish Supreme Administrative Court’s reasoning about comparable situations in the two rulings concerning taxation of stock options is supported by ECJ case law.
On 4th of November 2015, the Supreme Administrative Court in Sweden issued two rulings concerning taxation of foreign earned income from employee stock option and share programs that was earned before the employee moved to Sweden and became a Swedish tax resident, but was actually paid to the employee after that point. The Supreme Administrative Court found that taxation in Sweden of the foreign earned compensation was discriminatory and contrary to EU law, although the Swedish law granted a credit for foreign taxes levied abroad. The court ruled that the Swedish tax exemption rules were contrary to the free movement of workers in article 45 TFEU since the rules only granted exemption to individuals who were subject to unlimited tax liability in Sweden, which led to that non-resident taxpayers were treated worse than resident taxpayers. Hence, different rules were applied to comparable situations. Although the rulings were very welcomed and clarified that foreign earned employment income may be exempted under the Swedish domestic law, the rulings also created new legal questions with regards to equal taxation of residents and non-residents in the application of the Swedish exemption rules. 
In the rulings the Swedish Tax Agency expressed concern about the comparability and stated that it is questionable whether the comparison that the court made is the most relevant for assessing whether the Swedish measure restricts the free movements of workers. Clearly, the Swedish tax agency and the Supreme Administrative court had different option with regards to what situations should be compared. However, neither the court nor the Swedish Tax Agency referred to a source of law to support their respectively comparison or explained why such comparison should be the most relevant comparison. It is therefore interesting to analyse in detail what situations the Swedish court compared, what reasons the court found to conclude that the situations are comparable and if EU law supports this comparability. Also, whether the difference in treatment can be neutralized by granting a credit for foreign taxes levied abroad and whether the courts rulings actually solved the issues related to the Swedish employee stock option rules and the timing mismatch in taxing employments benefits. Finally, whether the Swedish Supreme Administrative court interpretation of EU law is covered by the acte éclairé and acte clair doctrine, or whether the court should have asked for a preliminary ruling in the ECJ in order to ensure a uniform interpretation of EU law.},
  author       = {Olofsson, Ida},
  keyword      = {Employee stock options,Cross-border taxation,OECD,Fundamental freedoms,Comparable situations},
  language     = {eng},
  note         = {Student Paper},
  title        = {Cross-border taxation of employee stock options - Is the Swedish Supreme Administrative Court’s ruling in case 1480-15 and 1483-15 regarding taxation of employee stock options supported by the case law provided by the European Court of Justice?},
  year         = {2016},
}