Background
The so-called 3:12 rules for owners of closely held companies contain a rule that results in a higher tax when an owner transfers their company to a relative than if they had transferred it to an unrelated party.
Earlier this year, the government submitted a proposal with suggestions to amend the rules. In addition, a couple of other adjustments to the 3:12 rules were proposed. Now, the Riksdag has approved the government's proposal.
The rules in brief
The new rules mean the following, in brief:
A share in a closely held company shall not be considered qualified solely because a related person, other than the shareholder's spouse, has been significantly involved in another closely held company or partnership engaged in the same or similar business, provided that certain conditions are met.
– Shares in a closely held company are qualified even when the shareholder or any related person has been engaged to a significant extent in a company conducting the same or similar business as the company in which the shareholder indirectly owns shares, during the tax year or any of the five preceding tax years.
– When applying the outsider rule, the exemption from the provisions on the same or similar business shall be disregarded.
Entry into force
The rules come into force on 1 July 2019. The new provisions for ownership changes between related parties in closely held companies are applied for the first time to a share, a business or a business branch that has been transferred after 30 June 2019.
The new provision on same or similar activities in an indirectly owned company is applied for the first time for tax years beginning after 31 December 2019.
Source: Wolters Kluwer – Tax Information
