Swedish Supreme Administrative Court Dismisses Advance Tax Ruling on Substantial Ties Arising from Company Ownership

Following a relatively quiet summer in terms of cases from the Swedish Supreme Administrative Court (HFD), a decision was recently issued, more specifically on 31 August 2026, concerning an advance tax ruling from the Swedish Council for Advance Tax Rulings that had been appealed to the HFD. The case concerns the question of whether ownership of a Swedish limited liability company (AB, or Aktiebolag) gives rise to substantial ties to Sweden, and thus, continued tax residency despite having relocated from Sweden, despite the fact that the company does not carry on any business activities in Sweden.

What is 'substantial ties'?

Substantial ties, or "väsentlig anknytning" is one of the three grounds set out in the Swedish Income Tax Act under which an individual, that is, a natural person and not a company, may become a Swedish tax resident.

In brief, the rule on substantial ties means that a person may remain tax resident in Sweden even after moving from Sweden, that is, remain taxable in the same manner as when the person was living permaanently in Sweden.

The Swedish Income Tax Act contains a catalogue of so-called “connecting factors”, that is, factors to be taken into account when assessing whether a person has substantial ties to Sweden following their departure. These factors include, among other things, whether the person is a Swedish citizen, whether the person’s family is in Sweden, whether the person has a home in Sweden equipped for year-round use, and whether the person is financially engaged in Sweden by holding assets which, directly or indirectly, confer substantial influence over business activities in Sweden.

However, the extensive and highly complex body of Swedish case law concerning substantial ties makes clear that only a few of the connecting factors listed in the Act actually give rise to substantial ties. Among these, the last-mentioned factor, namely having substantial influence over business activities in Sweden, generally plays a significant role.

What does “substantial influence over business activities in Sweden” mean?

There is a very substantial body of case law from the Swedish Supreme Administrative Court (HFD), the Council for Advance Tax Rulings (Skatterättsnämnden) and other Swedish administrative courts concerning this connecting factor. In summary, however, its meaning may be described as requiring a holding of at least ten percentage points of the shares in a Swedish limited liability company (AB) for the holding to be considered to constitute substantial influence over business activities in Sweden and, consequently, substantial ties to Sweden.

There are, however, certain exceptions that have emerged in more recent case law. For example, where a person has been resident outside Sweden for a longer period, it may under certain circumstances be possible for a holding of more than ten per cent of shares in a Swedish AB not to give rise to substantial ties. In some cases, it is also possible to aggregate the holdings of several persons for the purposes of the ten-per-cent threshold.

What were the circumstances of the case?

In the case, which concerned an advance tax ruling appealed from the Swedish Council for Advance Tax Rulings, the applicant had moved from Sweden to Spain only a short time earlier. The move took place together with the applicant’s family, consisting of his wife and their minor children. The family had sold its condominium apartment (bostadsrätt) in connection with the move. The applicant owned all the shares in a Swedish limited liability company and was also a member of the company’s board of directors. The business carried on by the company consisted of the owner’s own consultancy business relating to infrastructure projects.

The applicant intended to continue carrying on the business through the company after moving to Spain. In his application, however, he stated that there would be no physical presence in Sweden, whether in the form of an office, staff or equipment. Instead, all business activities would be carried out from his home in Spain, with the exception of an occasional short business trip to Sweden.

The question was therefore whether ownership of the Swedish company would be considered to constitute substantial influence over business activities in Sweden, despite the fact that the company, although Swedish, would not carry on any business activities in Sweden.

What was the Council for Advance Tax Rulings’ assessment?

The Swedish Council for Advance Tax Rulings began its assessment by noting that there was no guidance in the statutory text or the preparatory works (förarbeten) of the provision concerning the situation at hand, namely that a person owned all the shares in a Swedish company but that the company would have no actual business activities in Sweden.

The Council therefore sought guidance in other related legal sources in an attempt to define the meaning of the term “business activities in Sweden”. Among other things, it considered other provisions of the Swedish Income Tax Act in which the term “business activities” appears. The Council also referred to two cases from the HFD, one of which concerned the meaning of the term business activities when applying the group contribution rules (koncernbidrag), while the other concerned the meaning of having a sole proprietorship in connection with moving from Sweden.

With reference to these cases, the Swedish Council for Advance Tax Rulings held that the applicant should be considered to have substantial ties to Sweden, and thus, a tax resident, even though the business activities of the company were carried on exclusively from Spain.

How did the Swedish Supreme Administrative Court reason?

After the case was appealed to the Swedish Supreme Administrative Court (HFD), the matter was assessed differently from the conclusion reached by the Swedish Council for Advance Tax Rulings. Unfortunately, the majority of the HFD chose to dismiss the application for an advance tax ruling. The reason for the dismissal was that the applicant had provided contradictory information.

More specifically, the HFD stated that the application for an advance tax ruling indicated that the applicant’s consultancy business was directed towards Swedish customers, primarily the Swedish Transport Administration (Trafikverket) whereas the applicant had stated in a subsequent supplemental submission that the business was directed towards customers globally rather than solely towards Swedish customers.

In summary, the majority of the HFD held that this ambiguity meant that the applicant had not described the circumstances with sufficient clarity and precision for the questions to be answered. The majority therefore chose to dismiss the application, and thereby set aside the Swedish Council for Advance Tax Rulings’ advance tax ruling, on the basis that the Council should not have issued an advance tax ruling on the allegedly deficient factual basis.

How, then, did the minority of the HFD reason?

The minority’s reasoning

In the HFD’s decision, one of the judges issued a dissenting opinion. In other words, he did not agree with the majority that the application should be dismissed. Interestingly, the judge considered the basis for the application to be complete and held that there were no such ambiguities as would warrant dismissal.

Even more interestingly, the judge held that one of the cases to which the Swedish Council for Advance Tax Rulings had referred in its decision was not relevant to the situation at hand, as it concerned an entirely different set of circumstances. More specifically, the judge considered that the case in question concerned a completely dormant company, and not a company carrying on business from another country, which was the situation in the case at hand.

Accordingly, the judge held that it was clear that all business activities of the company would be carried out from Spain and that the company therefore could not be considered to carry on business activities from Sweden.

On that basis, the judge held that the applicant should not be considered to have substantial ties to Sweden, despite his ownership of all the shares in his Swedish limited liability company. Therefore, the applicant were not to be seen as a Swedish tax resident after his move to Spain with his family, i.e. he became a non tax resident for Swedish tax purposes.

Concluding remarks

At nomadtax, we have followed the development of case law concerning substantial ties for a long time and looked forward to the HFD clarifying whether it was in fact necessary for business activities to be carried on in Sweden in order to give rise to substantial ties, or whether it was sufficient merely to own more than 10 per cent of the shares in a Swedish company, regardless of whether business activities were carried on in Sweden or not.

Unfortunately, the question was not answered, as the majority of the HFD chose to dismiss the application on procedural grounds. The fact that the HFD dismisses applications for advance tax rulings and thereby sets aside advance tax rulings issued by the Swedish Council for Advance Tax Rulings has become something of a strong trend over the past decade. Many lawyers have identified this as a threat to the advance tax ruling system. Applying for an advance tax ruling is a complicated process that often involves considerable expense and, where the case is appealed to the HFD, frequently takes at least one year and sometimes several years.

To spend this money and wait for more than a year only to have one’s application dismissed by the HFD is not a desirable state of affairs. Against this background, the Government commissioned an inquiry in 2026 which proposals were to be presented for improvements to the advance tax ruling system, with the aim of making it more legally certain and accessible. At nomadtax, we agree that the system requires reform, particularly in light of the HFD’s reluctance to hear these applications.

Returning, however, to the substantive issue, we agree with the dissenting judge of the HFD that ownership of all the shares in a Swedish company that does not carry on any business activities in Sweden cannot be considered to entail that the person holding the shares has substantial influence over business activities in Sweden. In our view, this follows already from the wording of the provision. The requirement is that the business activities must be carried on in Sweden. If the company in question does not carry on any business activities, the requirement can hardly be considered to be satisfied, even if the company, by virtue of being Swedish, is liable to pay Swedish corporate income tax. This should be considered an entirely separate issue.

Disclaimer

This article was written by Felix Schöttle, LL.M. It does not constitute legal or tax advice, but rather a general commentary and summary of the decision issued by the HFD. When moving from Sweden, it is extremely important to obtain professional advice before taking any action.