Tax Disputes Guide in Sweden

In our experience, actions have been primarily either re-reviews of submitted tax returns or the result of focused interventions on specific sector groups, e.g. venture capitalists. Tax investigations in the form of tax audits cannot in themselves be challenged, although the tax decisions may of course be appealed; neither is it possible to enter into a settlement with the Swedish Tax Agency (STA) in respect of the assessment of taxes.

According to the main rule, the STA has the opportunity to reconsider its decisions on taxes before the end of the sixth year after the financial year. This applies regardless of whether or not any relevant new information has come to light. However, after the end of the second year following the financial year, the STA must normally substantiate that the taxpayer has provided incorrect information of importance for the tax assessment in order for the STA to decide on its own initiative that is to the detriment of the taxpayer.

The STA has broad powers to investigate. A taxpayer must provide the STA – upon request – with all information, books and documents that may be relevant. The STA also has the option of ordering third parties, e.g. banks, suppliers and customers who have been in contact with the taxpayer, to submit documents and other information to the STA. The tax authority may also, by order of the court, search premises and seize relevant documents required for the audit. All information provided to the STA is subject to confidentiality.

A taxpayer has the right to access information provided to the STA by anyone else, and also has the right to comment on the STA’s intended decision. The taxpayer has the right to appoint a representative. Under certain conditions, e.g. if the taxpayer is successful, the taxpayer may also be entitled to reimbursement of some legal costs. Certain information that is of a significant protective interest, e.g. information between the taxpayer and their lawyer, may not be audited by the STA. If the STA and the taxpayer do not agree in this regard, the taxpayer can request the Administrative Courts to determine that certain documents should be exempted from the review.

Tax surcharges can be levied by the STA if the tax return contains incorrect/false information or if no tax return has been filed. The tax surcharge is calculated on tax that has been incorrectly withheld from the STA, at a rate of 40% for income tax and 20% for most other taxes (e.g. VAT). If the withheld tax is significant, a criminal investigation may be initiated.

A typical tax investigation is initiated by a formal request for information by the STA. After the audit the STA will write a report with any findings and suggested tax assessments. The taxpayer will have the opportunity to react to the report. An audit may not last longer than necessary, but there are no fixed deadlines – anywhere from a few months to a year or more.

The STA’s tax decision may be appealed by the taxpayer to the Administrative Courts. 

In connection with an appeal, a taxpayer can apply to the STA for a deferral of the payment of tax. Such an application must be approved, e.g. if it is doubtful that the STA’s decision will be upheld by the court. A negative decision on such a deferral matter by the STA may be appealed to the Administrative Courts. If the decision by the STA contains tax surcharges, it is mandatory that an application of the deferral of payment of said surcharges is approved.

There are no alternative dispute resolution mechanisms.

The courts are not specialised in tax matters. The administrative courts are structured in three instances:

• first instance – regional courts
• second instance – courts of appeal 
• Supreme Administrative Court.

No leave to appeal is required (in tax cases) before the first two instances. The Supreme Administrative Court is, however, a court of precedent and leave to appeal is required. It takes about 1 year for each instance to handle tax cases.

Recently, there has been a strong focus on investigations concerning persons active in, for example, venture capital. There has also been a debate on legal certainty in the tax procedure and on the objectivity of the tax authorities.

We strongly recommend that a taxpayer engages expert counsel at an early stage to assist with a tax investigation.