Tax as a key driver in motivating company investments: The case of debt push down

Abstract: The aim of this thesis is to examine the legal situation with regard to debt push down structures in Sweden. Debt push down structures aims at collecting return on capital in the form of interest and that this will be deductible for tax purposes as a result. Structuring an investment in a Swedish company as a debt push down transaction commonly results in the Swedish company becoming thinly capitalised. It is of crucial importance that the there are no tax rules that limit the right to deduct the resulting tex expense. The Swedish correction rule, the rules governing profit sharing notes and the tax avoidance act is investgated and discussed using modern theory of corporate finance as a tool of analysis. It is concluded that Sweden does not have specific rules governing thin capitalisation as such and the investigated rules seems limited in their application to this phenomena. Therefore, it is concluded that the Swedish tax rules can be a key driver in motivating debt push down transactions involving acquisitions of Swedish companies.