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Court strikes down Swedish attempt to hike private equity exec tax rate

19 Dec 2013

news_gavel_lrgSwedish private equity executives can breathe a sigh of relief after an attempt to hike their tax rate was struck down by the courts.

Nordic Capital had previously lost a case arguing carried interest should be classed as capital gains rather than income tax, but that ruling was overturned in a follow-up hearing at the Administrative Court of Appeal in Stockholm today.

Sweden’s tax agency had attempted to sting the country’s buyout houses for SEK4bn ($600m) in back-tax, claiming executive should pay the higher income tax rate for money made through carried interest on their funds.

Reuters reported that Joakim Karlsson, managing partner at Nordic Capital’s fund management body NC Advisory, said, “This issue has caused a lot of uncertainty and drained a lot of resources from the entire industry and the tax agency.

“It is good that this issue has now been thoroughly scrutinized in court.”

Losing the case might have had wider implications for the Nordic buyout industry, as other Scandinavian governments could have looked to recoup more tax from private equity houses in the same manner.

NC Advisory CFO Klas Tikkanen earlier said he would consider moving to London if NC lost the case, which would have seen it cough up about €67m in back-tax.

He added that Nordic Capital was confident it would win following discussions with more than 20 tax experts.

Fellow buyout houses Altor, EQT Partners, IK, Segulah and Triton and their partners were also slammed with tax claims as part of the case.

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