Dated 22 January 2024
The case of A AB, a company within an international group, involved a reorganization plan to acquire shares in B from a related company C, financed by a loan from another group entity D located in an EU Member State. The issue concerned the deductibility of interest expenses associated with the loan. A AB sought guidance on whether the interest deduction might be disallowed if deemed aimed solely at obtaining a tax advantage or lacking a genuine commercial purpose, potentially infringing on the freedom of establishment under the EC Treaty.
The Board of Advance Tax Rulings initially ruled in favor of allowing the interest deductions. However, the tax authority appealed this decision to the Supreme Administrative Court. The Court upheld the ruling, stating that denying the interest deductions would indeed violate the freedom of establishment under Article 49 TFEU. It reasoned that the provisions of the Tax Code related to interest deductions could not be applied to payments made to entities in other Member States that would have been eligible for group contributions if they were based in Sweden.
The Court further concluded that prohibiting interest deductions for intra-group acquisitions without a commercial purpose constituted an impermissible restriction on the freedom of establishment. It affirmed that denying the deduction based on Chapter 24, Section 19 of the Tax Code conflicted with TFEU provisions on freedom of establishment.
This decision highlights the importance of aligning tax planning strategies with EU principles to ensure compliance and safeguard against potential challenges from tax authorities.
A copy of the full translated English language judgment can be found at: https://tpcases.com/wp-content/uploads/Sweden-HFD-4068-23-ENG.htm
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