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Government to Change Rules on Forbidden Loans

August 2009 - Finance. Legal Developments by Wistrand.

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The government has proposed changes to the taxation of certain loans granted by legal entities equivalent to Swedish aktiebolag (limited companies) to related parties, and plans stop the deduction of interest paid on such loans.

Background

According to the Companies Act, a limited liability company may not lend moneys to related parties, except for inter-group transactions. Such loans are deemed to be 'forbidden loans'. According to tax legislation, a received forbidden loan must be taxed as income. However, the right to deduct interest paid on account of a forbidden loan is unlimited.

 

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First published for International Law Office (June 19 2009). www.internationallawoffice.com

 

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