Following an audit, the Norwegian tax authorities had issued a tax assessment in which the interest paid by a Norwegian subsidiary on an intra-group loan provided by the Swedish company had been adjusted downwards in accordance with the arm’s length principle, resulting in additional taxable income in Norway. As the full interest payments had been taxed in the Swedish company, the Swedish company applied for a corresponding downward adjustment of the interest income under Article 9.2 of the Nordic Tax Treaty.
The Swedish tax authorities disagreed with the Norwegian tax authorities’ assessment and rejected the Swedish company’s request for a corresponding adjustment.
The Swedish company then appealed. The Administrative Court of Appeal concluded that the provisions regarding corresponding adjustments in Article 9.2 of the Nordic Tax Treaty were intended for the tax authorities and not for the courts. The Swedish tax authorities’ decision not to grant the adjustment could therefore not be reviewed by the courts.
An appeal was lodged with the Supreme Administrative Court.
Judgment
The Supreme Administrative Court overturned the decision of the Administrative Court of Appeal and held that a claim for an corresponding adjustment under Article 9.2 of the Tax Treaty could indeed be reviewed by the courts. On this basis, the case was remitted for further review, with the Administrative Court of Appeal being instructed to examine whether the foreign adjustment for which the corresponding adjustment had been requested was justified or not.
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