* Swedish court rules in favour of Nordic Capital
* Verdict likely to be decisive for similar cases
* Leaves tax claims of more than 4 bln SEK in doubt
(Adds quotes, background, detail)
By Sven Nordenstam
STOCKHOLM, Dec 19 Sweden's private equity
industry won a major victory on Thursday as a court struck down
an earlier tax verdict that would have meant billions of crowns
in higher taxes and raised doubts about Stockholm's future as a
hub for the lucrative industry.
The legal battle was the first in a string of similar cases
and likely to set a decisive precedent between Sweden's tax
agency and private equity firms, which were facing more than 4
billion Swedish crowns ($612 million) in back taxes.
An administrative court of appeal said profit sharing,
called carried interest, received by partners in private equity
firm Nordic Capital should not be considered as salary paid from
Nordic's Swedish advisory firm, which the tax agency had argued.
A victory for the tax agency would have dealt a significant
blow to the Swedish private equity industry, which is one of the
world's biggest relative to the size of the country's economy.
"The verdict is a stinging rebuke of how the tax agency and
the administrative court have behaved," said Sven-Olof Lodin, a
professor of fiscal law and author of several books on taxation.
The verdict means the advisory firm, NC Advisory AB, which
was facing back taxes and fees of more than 500 million crowns,
cannot be taxed for the carried interest.
The tax agency had said carried interest was revenue for the
advisory firm which it had then paid out as salary to partners.
The court declared that carried interest was not tied to
work performance, meaning that a related case against 19 Nordic
Capital partners, still being handled by the lower court, will
The partners had been billed almost 1 billion crowns by the
tax agency, which argued they were liable to pay wage taxes at a
rate of up to 57 percent, rather than capital gains tax of up to
"We are relieved. It is good that the verdict is so clear,"
said Kristoffer Melinder, managing partner at NC Advisory AB.
The tax agency said it would analyse the verdict before
deciding whether to appeal.
An increasing number of countries, including the United
States, are trying to raise taxes from the lucrative private
The court said the agency's investigation had been "marred
by flaws" and that its arguments were in part "scantily
substantiated", while noting that the previous verdict, from the
lower court, had been sweeping in its wording.
Lodin, one of Sweden's foremost tax experts, said the
Supreme Administrative Court would not necessarily agree to hear
the case even if the agency decided to appeal as the verdict was
clear-cut and left little room to argue for a re-trial.
(Reporting by Sven Nordenstam; Editing by Niklas Pollard and