Since 2013, even if the interest income from a loan to an affiliated company in Sweden was taxed at a rate of at least 10% in the lender’s country of residence, the interest deduction was often disallowed on the ground that the principal reason for the debt having arisen was for the group to receive a substantial tax benefit. Last Wednesday, 20 January 2021, the ECJ ruled that it is contrary to EU law to deny interest deduction on cross-border loans on this ground if the interest would have been considered deductible if the lender had been a Swedish entity. This landmark ruling provides companies the possibility to reassess non-deductible interest costs in Sweden.
Alice Kuzmina is a member of Baker McKenzie’s Tax Practice Group in Stockholm. Prior to joining the Firm in 2019, she worked as a Tax Manager at one of big four accounting firms, focusing on Swedish and international corporate income tax, global information reporting, tax technology and tax strategy. Alice has also served as a Court Clerk at the Administrative Court of Gothenburg, as a trainee in a full-service corporate law firm in Berlin and interned at the Swedish embassy in Germany.