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Review and adjustments

Review and audit

What rules, standards and procedures govern the tax authorities’ review of companies’ compliance with transfer pricing rules? Where does the burden of proof lie in terms of compliance?

There are no separate rules, standards and procedures specifically governing the tax authorities’ review of companies’ compliance with transfer pricing. Instead, the Tax Procedures Act (2011:1244) applies to all tax audits. Only the Tax Agency may decide on an audit.

Whoever files the tax return has the burden of proof when it comes to statements made and information given in the tax return. However, the Tax Agency has the burden of proof in establishing that the requirements as stated in the Income Tax Act for a transfer pricing adjustment are fulfilled.

Do any rules or procedures govern the conduct of transfer pricing audits by the tax authorities?

There are no separate rules, standards and procedures specifically governing the tax authorities’ review of companies’ compliance with transfer pricing. Instead, the Tax Procedures Act (2011:1244) applies to all tax audits.

Additionally, the Tax Agency is an administrative authority and is as such required to adhere to the Administrative Procedure Act (1986:223), which includes rules on procedure when it comes to decision making by administrative authorities. As of July 1 2018 a new Administrative Procedure Act (2017:900) will be enacted.

Penalties

What penalties may be imposed for non-compliance with transfer pricing rules?

In general, tax penalties are levied at a 40% rate on the tax that the Tax Agency deems would have been due. There are no separate penalties concerning non-compliance with the transfer pricing rules.

Adjustments

What rules and restrictions govern transfer pricing adjustments by the tax authorities?

The Tax Procedures Act (2011:1244) applies to all tax audits.

As a rule, the Tax Agency may reassess its decision within:

  • two years following the end of the relevant income tax year when the reassessment decision is negative for the taxpayer; or
  • six years following the end of the relevant income tax year when the reassessment decision is negative for the taxpayer as a result of the taxpayer providing incorrect information or failing to provide information and the incorrect information or lack of correct information resulted in an incorrect tax decision.

Challenge

How can parties challenge adjustment decisions by the tax authorities?

A party can file an application for reassessment no later than the end of the sixth year following the relevant income tax year.

A party can generally appeal a decision made by the Tax Agency to the Swedish administrative courts. The appeals procedure is usually a written procedure.

Mutual agreement procedures

What mutual agreement procedures are available to avoid double taxation arising from transfer pricing adjustments? What rules and restrictions apply?

Mutual agreement procedures are available only to the extent that a double taxation treaty applies to the relevant transaction or taxable event. If this is the case, the company in question may apply for a mutual agreement procedure between Sweden and the other country with the competent authority in its country. In Sweden, the competent authority is the Tax Agency.

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