The Grey Area of Taxation - An essay on Low Value-Adding Services in Swedish Tax Law

Sammanfattning: This essay critically examines the legal aspects of low value-adding services within multinational corporations, focusing on their treatment in Swedish tax law and the OECD Transfer Pricing Guidelines (OECD TPG). It explores the challenges and complexities involved in defining and taxing intragroup services, emphasizing their impact on profit shifting strategies. The essay provides an analysis of Swedish tax provisions, court rulings, and their alignment with the OECD TPG, highlighting areas of potential divergence and the need for clearer legal definitions and practices. The discussion gives an overview on some of the grey areas in current Swedish tax law and international soft law. Swedish tax legislation on transfer pricing is sparse and the main governing rule is found in Chapter 14, Section 19, Income Tax Act (1999:1229). It gives no further clarification other than that a price on an intragroup service must abide to the Arm’s Length Principle, meaning it must be charged with a price mirroring the price that an independent company would pay for the service. The lack of specific provisions on methods and categorizations is guided by international frameworks, more precisely in Sweden the Supreme Administrative Court predominantly refers to the OECD TPG. The OECD TPG is a comprehensive document on most of the relevant transfer pricing topics. Notably, it is not binding but still upheld by the Supreme Administrative Court as a guiding tool, giving it a quite special and frankly unclear legal status.