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Recent changes in the rules of capital tax on shares traded on the Stockholm Stock Exchange created considerable turmoil. In particular, they affected foreign shareholders because companies have changed the listing of their shares to avoid tax increases.

Shares registered on the exchange are quoted on the A-list whereas shares listed but not registered are quoted on the O-list or OTC-list. Following a series of changes in the rules on capital tax on publicly-traded shares, new legislation on capital tax was enacted earlier this year. Under the new rules, the base for calculation of capital tax on A-list shares is 100%, whereas the O-list and OTC-list shares are tax-exempt. However, shares quoted on the A-list and held by major holders (at least 25% of the share capital) are also tax-exempt provided the shares were not quoted on the A-list at the end of 1991.

When the government decided to move ahead with the new legislation in spite of considerable criticism, a number of companies had their shares moved from the A-list to the less prestigious O-list. So far, 20 companies have moved their listing or announced their intention of doing so. On September 10 1997 the government announced a countermove, stating that shares of companies moving their listing from the A-list would still be taxed as shares on the A-list. However, the tax base for shares on this list is to be reduced to 80% of their market value. This new proposal has not met with approval in business circles, and representatives of the Stockholm Stock Exchange have hinted that the whole listing system may have to be revised.

Foreign legal entities are now exempt from Swedish capital tax altogether, and other foreign holders of shares in Swedish companies are subject to Swedish capital tax on the shares only if these are linked to a permanent establishment in Sweden. Although the heated debate on capital taxation of publicly-traded shares is therefore of no immediate concern to foreign investors, it may still be of interest to know why shares are being moved from one list to another.

Lars Fredborg

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