Sweden has a well-developed and mature fund market with a high degree of consumer participation. Seven out of every ten Swedes save in funds, and many of them are self-starters, managing their investments via online services. Levels of consumer protection are high in Sweden and fund sector regulation is continuously developed to support a strong and well-functioning market.
Sustainability considerations and ethical exclusions have long been a defining feature of the Swedish fund market, and both investors and fund management companies are well accustomed to sustainability forming an integral part of their investment strategies.
Clear and predictable regulation
Sweden’s first comprehensive legislation for fund operations came into force in 1975. Since then, the regulatory framework has evolved over time, guided by principles of usability and effective consumer protection. Today’s Swedish fund operations are governed primarily by the Swedish Mutual Funds Act (2004:46) (LVF) and the Swedish Alternative Investment Fund Managers Act (2013:561) (LAIF), among other legislation.
A Government-appointed Committee is currently tasked with developing Swedish legislation and ensuring an efficient and transparent fund market with a high level of consumer protection. The Government’s ambition is for Sweden to remain at the forefront as new EU rules are introduced and the savings landscape evolves, while also enabling new types of funds, and greater flexibility in the management and structuring of fund operations.
Competitive tax regulations
UCITS and so-called “special funds” (a Swedish category of funds similar to UCITS but authorised to deviate from certain UCITS rules) pay no tax on dividends and capital gains in Sweden, and a small flat-rate tax is levied on investor’s fund holdings – both Swedish and foreign – as compensation for the advantage this entails in comparison with direct ownership of shares and other securities. In addition, Swedish investors pay tax on capital gains upon the sale of fund units. Many investors, however, hold their units in an investment savings account (ISK in Swedish), meaning they do not pay capital gain tax when selling their fund units.
Funds are covered by the double taxation treaties that Sweden has in place with many other countries. This means that, in some jurisdictions, the fund pays a reduced withholding tax on dividends and interest income. UCITS are, furthermore, tax-exempt in many EU countries, and therefore not subject to withholding tax.
There are no fund-specific tax regulations for alternative investment funds (AIFs). Their taxation depends on their legal structure. The majority of AIFs in Sweden have been established as limited liability companies and are therefore taxed accordingly. This means that, for investments such as unlisted shares (so-called business-related shares), no tax is levied at the fund level.
Mature fund market and broad investor base
The Swedish fund market is characterised by a wide diversity of fund managers. Many fund managers handle portfolio management, administration, and parts of distribution within their own organisation. Banks and insurance companies often have their own fund operations but typically also offer third-party funds.
Sweden offers well-established distribution channels, professional service providers, and a robust infrastructure for administration, custody, and advisory services. The market for outsources services is well-developed, with several international providers located here. Overall, the conditions for establishing fund operations in Sweden are therefore favourable. Many of these operators are associate members of the Swedish Investment Fund Association and contribute to maintaining a well-functioning fund market.
Fund savings in Sweden are high, partly due to the pension system (premium and occupational pensions) and a strong savings culture.
If you would like to learn more or seek guidance on establishing and operating fund activities in Sweden, we encourage you to contact one of our associate members.