Transparency of the Regulatory System
As an EU member, Sweden has altered its legislation to comply with the EU’s stringent rules on competition. The country has made extensive changes in its laws and regulations to harmonize with EU practices, all to avoid distortions in, or impediments to the efficient mobilization and allocation of investment. The institutions of the European Union are publicly committed to transparent regulatory processes. The European Commission has the sole right of initiative for EU regulations and publishes extensive, descriptive information on many of its activities. More information can be found at: http://ec.europa.eu/atwork/decision-making/index_en.htm ;http://ec.europa.eu/smart-regulation/index_en.htm .
http://ec.europa.eu/atwork/decision-making/index_en.htm ;http://ec.europa.eu/smart-regulation/index_en.htm .
There are no informal regulatory processes managed by nongovernmental organizations or private sector associations. Nongovernmental organizations and private sector associations may submit comments to government draft bills. The submitted comments are made public in the public consultation process.
Rule-making and regulatory authority on a national level exists formally in the legislative branch, the Riksdag. As a member of the EU, a growing proportion of legislation and regulation stem from the EU. These laws apply in some case directly as national law, or are put before the Riksdag to be enacted as national law. The executive branch, the Government of Sweden, and its various agencies draft laws and regulations that are put before the Riksdag and are adopted on a national level when they enter into force. Municipalities may draft regulations that are within their spheres of competence. These regulations apply at the respective municipality only and may vary between municipalities.
Draft bills and regulations, which include investment laws, are made available for public comment through a public consultation process, along the lines of U.S. federal notice and comment procedures. Current and newly adopted legislation can be found at the Swedish Parliament’s homepage and in the various government agencies dealing with the relevant regulation: http://www.riksdagen.se/sv/dokument-lagar/ . Key regulatory actions are published at Lagrummet: https://lagrummet.se/ . Lagrummet serves as the official site for information on Swedish legislation and provides information on legislation in the public domain, all statutes currently in force, and information on impending legislation. “Post och Inrikes Tidningar” serves in certain aspects a similar role as the Federal Register in the U.S., through which public notifications are published. The proclamations of “Post och Inrikes Tidningar” can be found at the Swedish Companies Registration Office (Bolagsverket): https://poit.bolagsverket.se/poit/PublikPoitIn.do .
The judicial branch and various agencies are tasked with regulation oversight and/or regulation enforcement. The Swedish Parliamentary Ombudsmen, known as the Justitieombuds-männen (JO), are tasked to make sure that public authority complies with the law and follows administrative processes. They also investigate complaints from the general public.
Regulations are reviewed on the basis of scientific and/or data-driven assessments. The principle of public access to official documents, offentlighetsprincipen, governs the availability of the results of studies that are conducted by government entities and furthermore to comments made by government entities. The principle provides the Swedish public with the right to study public documents as specified in the Freedom of the Press Act.
The status of Sweden’s public finances is available at Statistics Sweden, Sweden official statistics agency: https://www.scb.se/en/finding-statistics/statistics-by-subject-area/public-finances/ .
The status of Sweden’s national debt is available at the Swedish National Debt Office: https://www.riksgalden.se/en/aboutsndo/Central-government-debt-and-finances/Debt_facts/ .
International Regulatory Considerations
As an EU-member, Sweden complies with EU-legislation in shaping its national regulations.
If a national law, norm, or standard is found to be in conflict with EU-law, then the national law is altered to be in compliance with EU-law. Sweden adheres to the practices of WTO and coordinates its actions in regard to WTO with other EU-member countries as the EU-countries have a common trade policy.
Legal System and Judicial Independence
Sweden’s legal system is based on the civil law tradition, common to Europe, and founded on classical Roman law, but has been further influenced by the German interpretation of this tradition. Swedish legislation and Swedish agencies provide guidance on whether regulations or enforcement actions are appealable and adjudicated in the national court system. Swedish courts are independent and free of influence from other branches of government, including the executive. Sweden has a written commercial law and contractual law and there are specialized courts, such as commercial and civil courts. The Swedish courts are divided into:
- Courts of general jurisdiction (the District Courts, the Courts of Appeal, and the Supreme Court) which has jurisdiction with respect to civil and criminal cases;
- Administrative courts (County Administrative Courts, Administrative Courts of Appeal, and the Supreme Administrative Court) with jurisdiction with respect to issues of public law, including taxation;
- Specialist courts for disputes within certain legal areas such as labor law, environmental law and market regulation.
Sweden is a signatory to the New York Convention on Recognition and Enforcement of Foreign Arbitral Law; foreign awards may be enforced in Sweden regardless of which foreign country the arbitral proceedings took place. The main source of arbitration law in Sweden is the Swedish Arbitration Act, which contains both procedural and substantive regulations. Sweden is a party to the Lugano and the Brussels Conventions, and, by its membership of the EU, Sweden is also bound by the Brussels Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters. An arbitral award is considered final and is not subject to substantive review by Swedish courts. However, arbitral awards may be challenged for reasons set out in the Arbitration Act. An award may, for example, be set aside after a challenge because of procedural errors, which are likely to have influenced the outcome.
Laws and Regulations on Foreign Direct Investment
During the 1990s, Sweden undertook significant deregulation of its markets. In a number of areas, including the electricity and telecommunication markets, Sweden has been on the leading edge of reform, resulting in more efficient sectors and lower prices. Nevertheless, a number of practical impediments to direct investments remain. These include a fairly extensive, though non-discriminatory, system of permits and authorizations needed to engage in many activities and the dominance of a few very large players in certain sectors, such as construction and food wholesaling. Foreign banks, insurance companies, brokerage firms, and cooperative mortgage institutions are permitted to establish branches in Sweden on equal terms with domestic firms, although a permit is required. Swedes and foreigners alike may acquire shares in any company listed on NASDAQ OMX.
Sweden’s taxation structure is straightforward and corporate tax levels are low. In 2013, Sweden lowered its corporate tax from 26.3 percent to 22 percent in nominal terms and lowered it again to 21.4 percent in 2019. The effective rate can be even lower as companies have the option of making deductible annual appropriations to a tax allocation reserve of up to 25 percent of their pretax profit for the year. Companies can make pre-tax allocations to untaxed reserves, which are subject to tax only when utilized. Certain amounts of untaxed reserves may be used to cover losses. Due to tax exemptions on capital gains and dividends, as well as other competitive tax rules such as low effective corporate tax rates, deductible interest costs for tax purposes, no withholding tax on interest, no stamp duty or capital duties on share capital, and an extensive double tax treaty network, Sweden is among Europe’s most favorable jurisdictions for holding companies. Unlisted shares are always tax-exempt, meaning there is no qualification time or minimum holding of votes or capital. Listed shares are exempt if the holding represents at least 10 percent of the voting rights (or is contingent on the holder’s business) and the shares are held for at least one year.
Personal income taxes are among the highest in the world. Since public finances have improved due to extensive consolidation packages to reduce deficits, the government has been able to reduce the tax pressure as a percentage of GDP: currently it is below 50 percent, for the first time in decades. One particular focus has been tax reductions to encourage employers to hire the long-term unemployed.
Dividends paid by foreign subsidiaries in Sweden to their parent company are not subject to Swedish taxation. Dividends distributed to other foreign shareholders are subject to a 30 percent withholding tax under domestic law, unless dividends are exempt or taxed at a lower rate under a tax treaty. Tax liability may also be eliminated under the EU Parent Subsidiary Directive. Profits of a Swedish branch of a foreign company may be remitted abroad without being subject to any other tax than the regular corporate income tax. There is no exit taxation and no specific rules regarding taxation of stock options received before a move to Sweden. Instead, cases of double taxation are solved by applying tax treaties and cover not only moves within the EU but all countries, including the United States.
For detailed tax guidance, see the Swedish Tax Administration’s website: http://www.skatteverket.se/servicelankar/otherlanguages/inenglish.4.12815e4f14a62bc048f4edc.html
There is no primary or “one-stop-shop” website that provides relevant laws, rules, procedures, and reporting requirements for investors. Business Sweden, Sweden’s official trade and investment organization, is the investment promotion agency tasked with developing business in Sweden. The services of the agency are available to all investors.
Competition and Anti-Trust Laws
As an EU member, Sweden has altered its legislation to comply with the EU’s stringent rules on competition. The competition law rules are contained in the Swedish Competition Act (2008:579), which entered into force in November 2008. The fundamental antitrust provisions have been the same since 1993. The Swedish Competition Authority (SCA) is the main enforcement authority of the Swedish Competition Act.
Expropriation and Compensation
Private property is only expropriated for public purposes, in a non-discriminatory manner, with fair compensation, and in accordance with established principles of international law.
ICSID Convention and New York Convention
Sweden is a member of the World Bank-based International Center for the Settlement of Investment Disputes (ICSID) and includes ICSID arbitration of investment disputes in many of its bilateral investment treaties (BITs). Sweden is a signatory to the New York Convention on Recognition and Enforcement of Foreign Arbitral Law.
Investor-State Dispute Settlement
There have been no major disputes over investment in Sweden in recent years. There is no history of extrajudicial action against foreign investors.
International Commercial Arbitration and Foreign Courts
Swedish arbitration law is advanced and in line with current best practice of international arbitration. The main source of arbitration law in Sweden is the Swedish Arbitration Act, which contains both procedural and substantive regulations.
Sweden is a party to the Lugano and the Brussels Conventions and by its membership of the EU Sweden is bound by the Brussels Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters. An arbitral award is considered final and is not subject to substantive review by Swedish courts. However, arbitral awards may be challenged for reasons set out in the Arbitration Act. An award may, for example, be set aside after challenge because of procedural errors, which are likely to have influenced the outcome. The Arbitration Institute of the Stockholm Chamber of Commerce (SCC) has administered arbitrations under the UNCITRAL Arbitration Rules for many years, usually acting as the Appointing Authority. Parties to a dispute may adopt the Procedures by agreement before or after the dispute has arisen.
The SCC maintains different versions of the Procedures depending on which version of the UNCITRAL Arbitration Rules applies to the arbitration agreement in question (1976 or 2010 versions).
The Swedish legislation on bankruptcy is found in a number of laws that came into force in different periods of time and to serve different purposes. The main laws on insolvency are the Bankruptcy Act (1987:672) and the Company Reorganization Act (1996:764), but the Preferential Rights of Creditors Act (1970:979), the Salary Guarantee Act (1992:497), and the Companies Act (1975:1385) are equally important. In 2010, Sweden strengthened its secured transactions system through changes to the Rights of Priority Act that give secured creditors’ claims priority in cases of debtor default outside bankruptcy. According to data collected by the World Bank’s 2020 Doing Business Report, resolving insolvency takes two years on average and costs nine percent of the debtor’s estate, with the most likely outcome being that the company will be sold as a going concern. The average recovery rate is 78 cents on the dollar. Globally, Sweden ranked 17 of 190 economies on the ease of resolving insolvency in the Doing Business 2020 report.