Back to EU Member states Sweden Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs on property acquisitions 5.Issues during Ownership 6.Disposal of property 7.Non resident owners of property 8.Sundry issues

Back to EU Member states 1. Introduction - Sweden There exists very different reasons for a decision to buy or rent a commercial real estate or a private real estate. Most business or commercial related acquisitions has a ground in an investment, for a long or a short period. The possibility to use an efficient legal tax planning where disposal of the real estate ends in close to a non- taxation situation has increased the interest of investment in real estates. Many of the companies who conduct business in Sweden has often an interest of lease a part of a commercial real estate, an opportunity to the owner to receive rental income of the business owner occupier. Other owner of private real estates, have their ground in an interest in owning the property as a residential estate for resident living or holiday.

Back to EU Member states 2. Contact Details Name: Lotta Abrahamsson Firm: Synneby Revisionsbyrå Phone: address:

Back to EU Member states 3. Form of property ownership The following forms of owner ships exits: outright freehold for business and private persons leasehold rental for business and private persons owner-occupied flat or house for business and private persons the ownership of the site can be combined with one of the three first mentioned forms.

Back to EU Member states 4. Taxes and other costs on property acquisition The fee for stamp duty depends on if the buyer is a natural person or a legal entity. Purchase made by natural persons, the standard rate is 1.5% of the purchase price. Purchase made by legal entities, the standard rate is 3.0% of the purchase price. Additional to this is the fee for application of registration of land of 825 SEK (approx 83 Euro). The fee related to real estate mortgage is 2% of the mortgage debt. Additional to this is the fee for application of 825 SEK (approx 83 Euro). The fees are equal for natural persons as well as legal entities. The transaction and acquisition of real estate is exempted from VAT. To avoid stamp duty, it is possible to buy a limited liability company, with assets of real estate.

Back to EU Member states 5. Issues during ownership Sweden’s tax system is based on taxation of the owner. Profit / Losses The profit based on rental income of the commercial real estate, or apartment building will be included in the taxable income. If the legal entity is a limited liability company the taxable income, i.e. the net after the costs are deducted, be subject to a flat tax rate of 28 per cent. The tax rate will probably be lower during 2009, and changed to 26.3 per cent. No additional local taxes. If the commercial real estate is directly own by a natural person the profit based on rental income of the commercial real estate, or apartment building will be subject to a progressive tax rate between 33 % up to 57%, including local community taxes. Annual depreciation of building will be done by the owner, which will be a deductable cost which will cut the profit. If the deductable costs has been higher then the income, the net will be a loss, which will be carried forward. There is no time-limit for carrying the forward, and these accumulated losses can be set off against profits in the future.

Back to EU Member states 5. Issues during ownership (cont’d..) The profit of rental income of private outright freehold or owner-occupied flat for private persons, owned by a natural person, is subject to a flat tax rate of 30 per cent. VAT The amount of rent is excluded from VAT. This can easily be changed, hence there is an option to register for VAT, at the Swedish Tax Agency, and are often used in the purpose to set off the taxpayers input VAT. Property-tax If the property is a outright freehold for private persons, it is subject to an annual property tax of maximum SEK (approx 600 Euro) (level 2008). If the property is apartment building, with either a owner-occupied flats, or leasehold rental, the annual property tax is maximum SEK per flat (approx 120 Euro) (level 2008). If the property is a commercial real estate, the annual property tax is based on an assessment value.

Back to EU Member states 6. Disposal of property Most business or commercial related acquisitions has a ground in an investment, for a long or a short period. As mentioned earlier there is a possibility to use an efficient legal tax planning where disposal of the real estate ends close to a non-taxation situation has increased the interest of investment in real estates. When dispose a commercial real estate, 90 per cent of the profit (net amount between purchase-prise and the amount for disposal) will be subject to tax (28 per cent). An efficient way is to dispose a real estate, is by using holding companies subsidiaries. It’s possible to dispose the real estate to a new subsidiary and the purchase pricing is matching the taxable value, i.e. no capital gain in this stage. Stamp duty will be trigged. The real estate then will be disposed wrapped in a subsidiary – a shell company – to market value. The capital gain of the business related shares are exempted from taxation in Sweden. When dispose an outright freehold or owner-occupied flat for private persons, the profit (net amount between purchase-prise and the amount for disposal) will be subject to capital gain tax of 22 percent. Sweden has no inheritance taxes.

Back to EU Member states 7. Non resident owners of property All income related from real estates located in Sweden will be subject to taxation in Sweden. DDT will be applicable in the most cases, since Sweden has DDT with more the 90 countries over the world. A commercial real estate can render a taxable permanent establishment in Sweden. This situation will trigger: section 4: Stamp duty, section 5: Profit / Losses – if it is a Ltd, VAT, Property tax section 6: Disposal of the property Depending on the owner, if it is a natural person, who owns the commercial real estate, the tax on profit will be a flat tax rate of 25 per cent. An outright freehold or owner-occupied flat for private persons will trigger: section 4: Stamp duty, section 6: Disposal of the property

Back to EU Member states 8. Sundry issues The estate agent Most properties are on the market at estate agents. The seller pays the estate agent´s fee based on the purchase-price. The agreement To purchase a real estate, legal assistance is often required. The buyer has an obligation to investigate the property, considering the building construction and legal obstacle. There exists a construction standard, of course changed during the time, how building must be constructed to fulfil this standard. The purchase-agreement has to fulfil several requirements to be a legally binding agreement. Inter alia, it has to be written and contain detailed information. The signed agreement has to be registered at a Registry Office, (Sw. Inskrivningsmyndighet).

Back to EU Member states 8. Sundry issues (cont’d…) Building company Construction of new buildings is exempted from property tax, and will be taxed first when the construction of the building is finished. Construction services can be object to a VAT system of reverse charge. A real estate company, who builds a commercial real estate, can register for VAT during the construction. A building company, with employed e g constructions-workers, shall be aware of the situation that the company and the constructions-workers are often bound, or will be bound by collective agreement, where the level of salary and other benefits, working-hours are expressed.

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