Sweden hits Private Equity Buyout firm EQT and employees with $100 mln tax bill

LONDON/STOCKHOLM | Wed Aug 21, 2013

Aug 21  – Sweden is demanding that private equity firm EQT Partners and some of its employees pay 647 million Swedish crowns ($100 million) in tax on past profits as it cracks down on buyout firms.

Sweden has been trawling through tax returns and earnings declarations going back to 2005 of private equity firms that were paying tax at low rates or, in some cases, not at all.

It wants to tax the majority of private equity carried interest, a share of profit on deals, at the highest income tax rate of 55 percent, not at the capital gains rate of up to 30 percent.

The prominent and powerful Wallenberg family’s EQT, said the Swedish tax authorities would retroactively tax about 20 current and former employees of EQT as well as the company itself for income between 2007 and 2009.

The tax authority said it had asked EQT to pay 334 million crowns and the employees 313 million for that period. It has already demanded 100 million crowns more for 2006.

EQT said it would challenge the demand.

“The parties concerned have followed all rules and regulations in Sweden, fully declared income and provided all relevant information to the tax authorities. Our view is that nothing new has been found in the investigations that warrant a retroactive change,” chief operating officer Johan Bygge said.

EQT said income declarations from the individuals concerned had been approved by the tax authorities for the last 18 years.

“The behaviour of the tax authorities creates a high level of uncertainty for EQT Partners AB and its employees,” the company said in a statement.

Among other buyout firms facing retrospective tax charges, Nordic Capital was asked for $118 million and nearly $32 million of penalties in 2010. It is also contesting the tax demand and is yet to pay anything. ($1 = 6.4788 Swedish crowns)