Sweden: Bill to limit interest deduction and reduce corporate income tax rate submitted to parliament

The main aspects of the proposal, which should enter into force on 1 January 2019, include the following:

• Corporate income tax will be reduced in two steps to 20.6% by 2021;
• The introduction of a general limitation of interest deductions for companies according to an Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) rule with a deduction of 30% and a safe-harbour which is set at SEK 5 million;
• The introduction of hybrid rules under which interest is no longer deductible in certain cross-border situations; a narrowing of the existing rules limiting interest deductions for certain internal loans that counteract aggressive tax planning, as a result the rules should no longer apply to cases for which they are not intended;
• And the introduction of tax rules for financial leasing.