Tax aspects of a Special Purpose Vehicle (SPV)
1. Structure
It is proposed to establish a Limited Liability Company (SPV) in Sweden with the objective of investing in emerging entities (startups) in Sweden.
The goal is to maintain investments in startups, transfer them, and distribute the capital gains from the sale to the SPV’s shareholders in the form of dividends.
2. Tax regime of the SPV
Every SPV will be subject to the Corporate Tax (CT) at 23% (general CT rate), without prejudice to the fact that it may apply the reduced tax rate of 15% in the first two tax periods when the SPV’s taxable base is positive and as long as it is not a holding company.
To benefit from the reduced 15% rate, the SPV must invest in startups holding at least 5% of the participation.
2.1. Application of the dividend exemption:
Dividends received by an SPV will be exempt at 95% of the amount, provided that the direct or indirect shareholding in the company distributing the dividends is at least 5%, and that the shareholding has been held, or continues to be held, for at least one year.
Therefore, the SPV will integrate 5% of the dividend received into its taxable base, resulting in an effective tax rate on the CT of 1.25%.
2.2. Application of the exemption for income derived from the sale of shares in other companies:
Positive income that the SPV receives from the sale of its holdings in startups will be exempt from CT if it holds at least 5% of the participation in the startup and has held the participation for at least one year before the sale.
3. Tax implications for individual investors of the SPV who are tax residents in Sweden
3.1. Dividends received from the SPV:
Dividends received by investors who are tax residents in Sweden must be declared in the Personal Income Tax (PIT) at 19% for dividends up to 6,000 euros, with the rate increasing up to 28% for dividends over 300,000 euros.
3.2. Sale of SPV shares:
At the time of selling shares or liquidating the SPV, shareholders must declare a capital gain, corresponding to the difference between the purchase value and the amount received from the SPV or the sale of the shares, which will be taxed at rates ranging from 19% to 28%.
4. Tax implications for corporate investors of the SPV who are tax residents in Sweden
4.1. Distribution of dividends by the SPV:
The distribution of dividends by the SPV will be 95% exempt from CT if the investor holds an indirect participation in the SPV’s investments of at least 5%.
4.2. Sale of SPV shares:
At the time of selling shares or liquidating the SPV, the capital gain obtained will be exempt from CT if the investor holds at least 5% of participation in the SPV.
Otherwise, the income obtained will be integrated into the taxable base of the corporate investor’s CT.
5. Tax implications for non-tax resident investors in Sweden
5.1. Distribution of dividends by the SPV:
Non-tax resident investors in Sweden will be subject to the Non-Resident Income Tax (NRIT) at a withholding rate of 19%, unless they provide a certificate of tax residency, in which case the applicable rate according to the Double Taxation Agreement (DTA) will apply.
If the investor is a legal entity resident in a member state of the European Union, the dividends received from the SPV will be exempt if the investor holds at least 5% of participation in the SPV and has held this participation for more than one year or continues to hold it for one year.
5.2. Sale of SPV shares:
At the time of selling shares or liquidating the SPV, it must be analyzed whether, according to the DTA of the investor’s country of residence, the sale should be declared in Sweden, applying the NRIT rate of 19%.
5.3. Special mention for pass-through entities:
If the investing entity is considered a pass-through or disregarded entity in its country of tax residence, such as a “partnership,” a U.S. LLC, or an SCSp, the tax implications should be analyzed in relation to the partners of those entities, whether they are individuals or legal entities, and applying the applicable DTA to them.
