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Sweden-United Kingdom

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Amending Protocol to Tax Treaty between Sweden and the UK Signed

On 23 February 2021, officials from Sweden and the UK signed an amending protocol to the 2015 income and capital tax treaty between the two countries. The protocol is the first to amend the treaty and includes the following main changes:

  • The title and preamble are replaced in line with OECD BEPS standards;
  • The specific main purpose tests limiting benefits of Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and 20 (Other Income) are removed;
  • Article 23 (Mutual Agreement Procedure) is updated with a new paragraph 1, which provides that where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, they may, irrespective of the remedies provided by the domestic law of those States, present their case to the competent authority of either Contracting State; and
  • Article 27A (Entitlement to Benefits) is added, which provides that a benefit under the treaty shall not be granted in respect of an item of income or capital gains if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.

The protocol will enter into force 30 days after the ratification instruments are exchanged. It will apply in Sweden from 1 January of the year following its entry into force. It will apply in the UK in respect of withholding taxes from 1 January in the calendar year next following its entry into force, in respect of corporation tax from 6 April next following its entry into force, and in respect of income tax and capital gains tax from 1 April next following its entry into force.

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