Nordic Capital employees to appeal the Swedish Administrative Court of Appeal’s tax rulings | Nordic Capital

Nordic Capital employees to appeal the Swedish Administrative Court of Appeal’s tax rulings

JUNE 22 2017

The tax rulings announced by the Swedish Administrative Court of Appeals on April 27, 2017, regarding former and current employees of NC Advisory AB will be appealed. The first step involves seeking leave to appeal for the rulings, under which individuals have been taxed as if the return on their investments in private equity funds were employment income. The rulings are based on misunderstandings of factual matters and deviate from all other rulings.  

"These specific rulings deviate from the previous rulings, are based on sheer inaccuracies, contradict past rulings and will have major implications. It is difficult to secure a leave to appeal to be heard before the Supreme Administrative Court, but if it has ever been warranted, it is now", says Klas Tikkanen, CFO, NC Advisory AB, advisor to the Nordic Capital Funds.

In the rulings concerned, the Administrative Court of Appeals has used inaccurate facts as grounds in its decision to impose employment income tax on several partners at NC Advisory AB. These individuals have made investments using debt instruments whose interest is contingent on the performance of the fund and thus entails profit-sharing. It appears as though the Administrative Court of Appeals is under the impression that the profits made by portfolio companies during the ownership period are what determine the interest, which is not the case. The aforementioned scenario is not being claimed by either the Swedish Tax Agency or the individuals concerned. Given an accurate description of the reality of the matter, a different conclusion would have been reached.

NC Advisory AB believes that the income is to be regarded as investment income. Furthermore, in a ruling as early as 2013, the Administrative Court of Appeals established that NC Advisory AB, where the individuals were employed, was not obligated to pay social security contributions on this income as if it were employment income.

"Everything has been accounted for in the approved tax statements of the individuals concerned and the process has been under way for nearly a decade. To state, as the Administrative Court of Appeals did, that these are not complicated matters and impose tax surcharges is unreasonable", says Klas Tikkanen.

Most of the other rulings have resulted in taxation pursuant to what are known as the 3:12 rules (rules differentiating taxation). These rulings will probably also be appealed at a later date since the individuals do not believe this basis for taxation to be accurate either.

Press contact:
Nordic Capital
Katarina Janerud, Communication Manager
NC Advisory AB, advisor to Nordic Capital Funds
tel. +46 8 440 50 69

About Nordic Capital:

Nordic Capital private equity funds have invested in mid-market companies primarily in the Nordic region since 1989. Through committed ownership and by targeting strategic development and operational improvements, Nordic Capital enables value creation in its investments. The Nordic Capital Funds invest in companies in northern Europe and in selected investment opportunities internationally. The most recent fund is Nordic Capital Fund VIII with EUR 3.5 billion in committed capital, principally provided by international institutional investors such as pension funds. The Nordic Capital Funds are based in Jersey, Channel Islands, and are advised by the NC Advisory entities in Sweden, Denmark, Finland, Norway, Germany and the UK. For further information about Nordic Capital please see