The future of the Swedish CFC legislation applied to third countries

Abstract: The purpose of the paper is to investigate both the Swedish position and the position of ECJ regarding Swedish CFC-legislation towards third countries. It will be investigated if the Swedish position is compatible with ECJ's interpretation of the fundamental freedoms and Sweden's international obligations regarding tax treaties. The CAT has delivered a decision in a case where it tackled the issue whether the Swedish CFC rules are applicable to Switzerland, which is a third country. The issue is today not settled when the Swedish Tax Agency has asked the Swedish Supreme Administrative Court (SAC) to confirm the decision number 6/05. On 12 September 2006, it was established in the Cadbury Schweppes case that the UK´s CFC legislation violates articles 43 EC and 48 EC when it occurs between Member States and it does not target only ''wholly artificial arrangements intended to escape the national tax normally payable''. The CFC legislation of UK and of Sweden CFC have many similarities. One difference which may be significant though, is that the Swedish rules do not take into consideration any reason for the establishment and may be applicable irrespective of reasons. Mattias Dahlberg, 2005, p. 143. The absence of a ''motive test'' in the Swedish CFC legislation indicates, in my opinion, that the ECJ may find that the Swedish regulation to a larger extent than the rules of the UK, ''goes beyond what is necessary to achieve the objective''. It is therefore, I feel, more likely that the Swedish CFC rules are contrary to the EC Law in a situation involving a third country than it is that the UK rules are. The main objective of the EC Treaty constitutes an internal market with an economic and monetary union, and not a certain treatment of third countries. Due to that is it, I feel, unlikely that third countries will receive a larger protection than Ireland was given in the Cadbury Schweppes case. Because the countries Sweden has concluded a tax treaty with have not had the opportunity to approve Swedish CFC rules, can it be argued that it is contrary to the obligations deriving from the tax treaty to apply CFC rules on companies located in those States.