Year in Review - Swedish Law in 2016
Proposed increased taxation for closely held companies: In November 2016 an investigating committee, appointed by the government in 2014, presented its extensive report with proposals for new rules for owners of closely held companies. In short, the proposal aims to prevent income conversion from highly-taxed labour income to low-taxed capital income and is expected to increase the tax revenue by approximately SEK 4.8 billion per year. The proposal has been sent for consultation to different stakeholders and must be approved by the parliament before any change in legislation can enter into force. The committee proposes that the changes enter into force on 1 January 2018. Read more…
New bank tax proposal: In November 2016 the government proposed a new bank tax to be charged on companies that are exempt from VAT on sales of financial services (i.e. not just banks). One of the reasons for this tax is that the government would like to eliminate the “deemed tax benefit” of financial services being exempt from VAT. The tax is proposed to be levied (very generally) at 15% of the company's wage costs, or the portion of wage costs that is attributable to the VAT exempt sales. The government expects the proposal to increase tax revenues by SEK 3.7 to 7.0 billion and the rules are proposed to enter into force on 1 January 2018. Read more…
Anti-Tax Avoidance Directive: In July 2016 the EU adopted the so-called Anti-Tax Avoidance Directive, with the aim of countering tax avoidance by multinational companies within the EU and globally. The directive is based largely on the OECD's framework to combat base erosion and profit shifting (“BEPS”). The directive is to be implemented no later than 1 January 2019 and is likely to lead to changes in Swedish tax law. Read more…
10-point programme to counter tax evasion as a consequence of BEPS: The government has presented a 10-point programme with measures to counter tax evasion, tax avoidance and money laundering. Some of the key tax measures include: introducing an automatic exchange of information between countries regarding the beneficial ownership of companies; adding more countries in global standards for transparency and information exchange; and creating a global blacklist of non-cooperative countries and strengthening the efforts to counter VAT fraud.
Implementation of the EU Audit Regulation in June 2016: Changes to the EU audit framework took effect on 17 June 2016. The maximum duration of an audit engagement for listed companies, banks and insurers is now 10 years, extendable to 20 years provided a tender process is carried out at least every 10 years. There are also changes to the composition and responsibilities of audit committees and to the rules prohibiting non-audit services. This affected various Swedish laws regarding audits, associations, banking and finance, including the Annual Reports Act (Sw. Årsredovisningslag (1995:1554)) and the Auditing Act (Sw. Revisionslag (1999:1079)). Read more…
Implementation of Directive 2014/104/EU on antitrust damage action: The government proposed the adoption of a new law, the Competition Damages Act (Sw. konkurrensskadelagen), to implement the Directive (2014/104/EU) on antitrust damages actions. The aim of the proposed law is to ensure that anyone who has suffered harm from an infringement of competition laws, can effectively exercise the right to claim full compensation. The new legislation entered into force in December 2016 and includes provisions on, for example, liability, calculation of damages and procedural rules.
Restrictions on use of temporary employment arrangements: Amendments to the Swedish Employment Protection Act (Sw. lag (1982:80) om anställningsskydd) came into force in May 2016. Under the new rules, employers are restricted when it comes to combining different types of fixed-term employments in a series of separate employments. Successive fixed-term employments will be considered as one continuous period for employment purposes even if a period of up to six months has passed between the different types of fixed-term employments.
Market Abuse Regulation: The Market Abuse Regulation (EU) No 596/2014 (“MAR”) took effect in July 2016. Several amendments to Swedish legislation regarding effective combating of market abuse have been made as a result, including in the Swedish Market Abuse Act (Sw. lag (2005:377) om straff för marknadsmissbruk vid handel med finansiella instrument) and the Financial Instruments Trading Act (Sw. lag (1991:980) om handel med finansiella instrument).
ESMA guidelines: According to MAR, the European Securities and Markets Authority (“ESMA”) will issue guidelines on the interpretation of certain MAR provisions regarding, among other things, market soundings and legitimate interests of issuers in the delayed disclosure of inside information. ESMA published its final report on MAR in July 2016. Read more…
Digital Single Market: The Digital Single Market strategy, set up by the European Commission, includes 16 initiatives to be delivered by the end of 2016. The strategy is based on three pillars: access, environment and economy & society. According to the Digital Economy and Society Index 2016 country profile (a composite index that summarises relevant indicators on Europe’s digital performance and tracks the evolution of EU member states in digital competitiveness), Sweden ranks third of the 28 EU member states.
Solvency II: The Solvency II Directive (2009/138/EC) became fully applicable in January 2016. As a result, amendments were made to the Insurance Business Act (Sw. Försäkringsrörelselag (2010:2043)) and the regulatory codes from the Swedish Financial Supervisory Authority (Sw. Finansinspektionen).
LEI codes: Securities issuers listed or admitted to trading on a regulated market, which therefore are required to provide information in accordance with the Transparency Directive, must obtain a unique Legal Entity Identifier (“LEI”) code from the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) before 1 January 2017. LEI codes are used for reporting and regulatory purposes and uniquely identify legally distinct entities that engage in financial transactions.
Good practice in new share issues: The Swedish Securities Council (Sw. Aktiemarknadsnämnden) concluded in its statement AMN 2016:01 that it is not good practice for a company to offer different subscribers different subscription prices prior to the subscription period, as well as after the end of it, when issuing new shares with preferential rights.
Interpretation of and exemption from the takeover rules: The Swedish Securities Council (Sw. Aktiemarknadsnämnden) concluded in its statement AMN 2015:42 that when protected interests such as minority interests are not threatened, the fact that an offer is non-compliant with the principle of equal treatment does not per se mean that it cannot be allowed. The Swedish Securities Council also concluded, that not to disclose the conditions and considerations in an offer with commercially sensitive content only concerning the majority shareholders, is neither contrary to the requirement for clarity and simplicity, nor to the rules of good practice on the securities market.
Implementation of UCITS V: The legislator has changed several key statutes regulating the financial markets in order to implement the Directive (2016/91/EU) on undertakings for the collective investment in transferable securities. Key changes consist of new remuneration rules for fund managers, requirements for depositories (Sw. förvaringsinstitut) and administrative sanctions. The new rules entered into force in November 2016.
Implementation of the Bank Recovery and Resolution Directive (2014/59/EU) (“BRRD”): In February 2016, the new act (Sw. lag (2015:1016) om resolution) entered into force. A central idea with the new legislation is to transfer the responsibility for potential losses in financial institutions from the state to the owners and creditors by enabling institutions to fail in an orderly manner instead of being saved by governmental bail-outs when in crisis. The bill also suggests that a new fund to cover costs of crisis management measures will be established.
Banking Union Reform Package - CRR2/CRD5/TLAC/Creditor hierarchy/SRM: On 23 November, the European Commission published the Banking Union Reform Package, amending the Capital Requirements Directive (“CRD IV”), the Capital Requirements Regulation (“CRR”), the Bank Recovery and Resolution Directive (“BRRD”), and the Single Resolution Mechanism Regulation (“SRMR”). The proposals aim to address any remaining post-crisis challenges to financial stability, including the implementation of agreed global standards. The proposals will enter into force in 2019 at the earliest.
Year to come - Swedish Law in 2017
Government budget bill: In September 2016, the government proposed a new budget bill for 2017. As expected, the key tax measures included: increased taxation for banks and other companies within the financial sector; reduced energy tax for large data centres; the introduction of minimum levels for the government borrowing rate (Sw. statslåneränta) of 0% and 0.5% for tax purposes; and the introduction of an excise duty on chemicals in certain types of consumer electronics. The rules and amendments in the bill are proposed to take effect on 1 January 2017. Read more…
Country-by-Country reporting and automatic exchange of information: The government has proposed new rules regarding Country-by-Country reporting for multinational corporations with a turnover exceeding SEK 7 billion and foreign companies with permanent establishments in Sweden. In addition, the proposal includes rules regarding the mandatory automatic exchange of information in the field of taxation. The new rules are proposed to enter into force in April 2017.
Proposed new tax rules for stock options: In December 2016, the government proposed new tax rules for stock options granted by start-ups, aiming to encourage start-up businesses. Employees will be subject to capital income tax when the underlying shares are sold rather than employment income tax when the stock options are exercised. For the employing entity, no social security charges shall be payable. A range of requirements are set out in order for the rules to apply. Provided that the European Commission approves the proposal, it may enter into force on 1 January 2018 and the new rules are proposed to apply to stock options issued after 31 December 2017. Read more …
Mandatory registration of ultimate beneficial owner: To transpose the fourth Anti-Money Laundering Directive (EU) 2015/849 into Swedish law, the government has proposed to introduce a registration of ownership of legal entities. According to the proposal, legal persons will be required to know their ultimate beneficial owner and provide the information to the Swedish Companies Registration Office (Sw. Bolagsverket) in order to help prevent money laundering and financing of terrorism. An individual controlling more than 25% of the voting rights in a legal entity shall be presumed to be the legal person's ultimate beneficial owner. All legal entities incorporated under Swedish law are covered with the exception of legal entities whose shares are traded on a regulated market. The new rules are proposed to enter into force in June 2017.
Enhanced protection for whistle-blowers: A new law regarding protection for whistle-blowers (Sw. lag (2016:749) om särskilt skydd mot repressalier för arbetstagare som slår larm om allvarliga missförhållanden) has been approved and will enter into force in January 2017. According to this law, an employer that penalises an employee for having revealed serious misconduct at the workplace will be liable to pay damages to the employee.
Revised SCC Arbitration Rules: The Arbitration Institute of the Stockholm Chamber of Commerce (“SCC”) continues to innovate in arbitration by introducing a number of changes to its Arbitration Rules and Rules for Expedited Arbitrations. The changes, which generally aim to further foster efficient, expeditious and flexible proceedings, include, among other things, the introduction of a summary procedure and provisions dealing with joinder and consolidation in multi-party and multi-contract disputes. The revised rules entered into force on 1 January 2017, with the rules applying to SCC arbitration proceedings which are commenced as from this date unless otherwise agreed by the parties.
New legislation following the introduction of the Market Abuse Regulation (“MAR”): Following MAR’s entry into force in July 2016, two new Swedish laws have been proposed to take effect in February 2017. One contains provisions in order to complement MAR and ensure its enforcement; the other contains provisions on penalties for market abuse on the securities market.
Application date of MiFID II package postponed: The European Commission has proposed to postpone the application date of the revised markets in the Financial Instruments Directive (EU) 2014/65 (“MiFID II”) to January 2018. However, the deadline for the member states to implement MiFID II with their national legislation is still 3 July 2017. Together with the Insurance Distribution Directive (EU) 2016/97 and proposed new Swedish legislation, MiFID II will strengthen consumer protection regarding financial advising in Sweden.
Unitary patent system within the EU: A unitary patent system, where one application will be sufficient for obtaining a patent registration valid in almost the whole EU (except for in Croatia and Spain), will become reality in early 2017. The Swedish government has proposed to amend relevant legislation in order for Sweden to adapt to the new system.
New EU data protection regulation: In May 2018, the General Data Protection Regulation (EU) 2016/679 will replace the Swedish Personal Data Act (Sw. Personuppgiftslag (1998:204)). The regulation entails increased requirements regarding consent for processing of personal data, as well as an obligation to inform data subjects and the Swedish Data Protection Authority (Sw. Datainspektionen) in the event of hacking. An investigation appointed by the Swedish government will be presented in May 2017 at the latest.
Swedish board gender quota proposal: The government has proposed a bill in which a gender equality requirement is suggested to come into force in June 2017. The bill aims to improve gender equality in boards of listed companies. Before 2019, such companies must have boards consisting of at least 40% female members, to avoid being subject to fines of between SEK 250,000 and SEK 5,000,000.