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HMRC internal manual

Double Taxation Relief Manual

Sweden: Notes

The treaty that entered into force in 2015 replaced that which had been in effect since 1985. Apart from a general updating to reflect changes in the OECD Model Tax Convention and the domestic laws and treaty preferences of both state, notable changes include:

Dividends

Property income dividends paid by UK Real Estate Investment Trusts are now taxable in the UK at a rate of 15%. UK taxing rights over such distributions were restricted to 5% under the terms of the previous agreement.

Capital gains

Under paragraph 2 of Article 13 of the previous agreement, gains from the disposal of shares or rights in a Swedish company accruing to an individual resident in the United Kingdom, who was a Swedish national but not also a United Kingdom national, could be taxed in Sweden if he or she had been a resident of Sweden at any time in the seven years preceding the disposal.

This is replaced by a broader provision at paragraph 6 of Article 13 of the 2015 agreement. This now applies to gains from the disposal of shares or rights in all companies, or interests in a partnership or trust, made by UK residents who have previously been resident in Sweden. Such individuals need not be Swedish nationals. However, Swedish taxing rights are limited to gains derived from alienations made in the 7 years after the individual in question ceased to be a resident in Sweden, and to gains accruing while the individual is or was a resident of Sweden.

Pensions

Under the terms of Article 18 of the previous agreement, Swedish source pensions received by a resident of the United Kingdom who was a Swedish national were taxable in Sweden, subject to a deduction of one-fifth. The whole pension was taxable in the United Kingdom, subject to the application of the remittance basis if the recipient was not domiciled in the United Kingdom and claimed such treatment or to the one-tenth deduction under section 575(2) of ITEPA 2003 with credit for any Swedish tax paid. If the recipient was a resident of and a national of the United Kingdom, the pensions, including Swedish Social Security pensions, are taxable only in the United Kingdom (Article 18).

Under the terms of Article 19 of the previous agreement, pensions paid by the Swedish Government or a local authority for services to the Government or local authority were taxable only in Sweden except where the recipient was a resident of the United Kingdom and a United Kingdom national, in which case such pensions were taxable only in the United Kingdom.

Under Article 17 of the 2015 agreement, the total amount of all Swedish source pensions, including government and local authority pensions is taxable in Sweden. If received by a UK resident, they will also be taxable in the UK with credit for any Swedish tax paid. However, a grandfathering provision will enable United Kingdom residents to make a revocable election for their pension to continue to be taxable under the provisions of the previous agreement described above if they were in receipt of that pension immediately before the entry into force of the 2015 agreement.

Anti-avoidance

The 2015 agreement includes anti-treaty shopping provisions in the dividend, interest, royalty and other income articles.