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Brussels, 24 July 2007

Direct Taxation: Commission sues Sweden for not having fully complied with a Court judgement regarding the rules on capital gains tax relief on dwelling sales ("Bostadsrätt")

By a letter of formal notice under Article 228 of the EC Treaty, the European Commission has decided to open a new infringement procedure against Sweden. Despite some modifications in the law and the recent European Court of Justice judgement, the Swedish capital gain tax legislation still continue to favour in practice the acquisition/ sale of apartments located in Sweden, therefore discriminating persons wishing to buy/sell an apartment elsewhere in Europe. If Sweden fails to comply with the letter of formal notice, the Commission may address further a reasoned opinion to Sweden before bringing the matter to the Court of Justice a second time, seeking the imposition of a penalty payment.

"The rules of the Internal Market forbid any restriction of the free movement of persons between Member States" said EU Taxation and Customs Commissioner László Kovács. "A person who sells his house or apartment in any Member State should not be discriminated because he has made use of his right to free movement and bought an apartment in a State other than Sweden".

According to Swedish law, a deferral of tax is not allowed on capital gains made by a person on the sale of his private dwelling, if the dwelling which is bought or sold is situated abroad and is not owned through a similar legal form as "privatbostadsföretag". The overwhelming majority of Swedish apartments are owned through that legal form, and there are few legal forms of ownership which are similar to the Swedish form "privatbostadsföretag" in other Member States. This means that, in practice, it appears very difficult to satisfy the criteria of the Swedish law when buying or selling an apartment in another Member State, and thus to benefit from the same treatment as in a purely internal situation.

Persons wishing to make use of their right to free movement, selling their apartment abroad and buying a house or an apartment in Sweden, or selling their house or apartment in Sweden and buying an apartment abroad, will therefore risk being dissuaded from this due to the significant increase in tax burden that would occur for them in relation to a purely internal situation.

The Swedish law on taxation of income (inkomstskattelagen) was changed in December 2006 after the Commission had brought the case to the Court (see IP/05/1621). However, the amended rules do not fully eliminate the restriction on the free movement of persons as stated by the Court in its judgement Commission/Sweden (C-104/06 of 18 January 2007).

The Commission's case reference number is 2003/4314 (Sweden).
For the press releases issued on infringement procedures in the taxation or customs area see:
For the latest general information on infringement measures against Member States see:

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