The Decisive Moment(s or periods) in the Application of Income Tax Rules and the Importance of Events Thereafter – a Swedish, Norwegian and Finnish Perspective and Comparison

In many cases, the question of where the decisive moment lies has a more or less obvious answer. Sometimes, however, difficulties arise. Further, in some cases, the obvious answer de lege lata may not be the most materially appropriate de lege ferenda, for example, from the perspective of foreseeability. If, due to uncertainties regarding the decisive moment, it is not clear when something should or should not be the case, several significant problems arise. For example, changes over time – in the individual case or in legal rules – can cause changes in the conditions for, for example, the deduction for a certain kind of expense, and if the decisive moment is not clarified, taxation will be neither intellectually focused, nor foreseeable. But by clarity regarding this question, in each rule and case, the judicial review may focus on correct factors, in a manner that is more predictable than if the decisive moment is unclear. Such clarity is, of course, also central when it comes to evidence. Awareness of these issues also improves the prerequisites for the legislature to make rational choices, when decisive moments are to be determined and, perhaps, expressed in legal texts.

The problem of determining the decisive moment has been formulated well (from a Swedish perspective) by Bull & Sterzel. In connection with the discussion of the Swedish prohibition of retroactive taxation (retroactivity is not in focus in this article, but this discourse can shed light on the location of the decisive moment), Bull & Sterzel say that the decisive factor for the applicability of the provision is the question of when a tax or tax liability occurs. They also claim this is usually harder to determine than in penal law. They further note that tax liability can rely on a number of factors, such as when an agreement was made, when payment occurred or when a registration was taken or due to a combination of several such factors, and that the answers may look different in different areas of taxation.

Bull & Sterzel, Regeringsformen –en kommentar, Studentlitteratur 2015 s. 78.

With regard to Norway, the principle of prohibition of retroactive taxation is given a restrictive interpretation when it comes to taxation. It is, however, important to notice that the income tax is calculated on a net income through an income period. In most situations, the income period is the calendar year. Thus, the question arises whether changes in tax legislation during an income period may be given effect for the whole period, or just for the remaining time of the income period.According to Prof. emeritus Frederik Zimmer, the new/amended tax rules may be applied on the net income from the present year.

In Norwegian: «Inntektsskatten blir sett på som en skatt som utskrives på årets nettoinntekt, ikke på den enkelte inntektsskapende begivenhet. Og årets nettoinntekt kan ikke fastslås før ved årets utløp. [Skatte] Regelene antas derfor å kunne endres i løpet av inntektsåret, også med virkning for tidligere inntektsskapende begivenheter, uten at det anses som tilbakevirkende i strid med Grl. § 97 [som stadfester prinsippet om forbudet mot retroaktiv lovgivning].» Zimmer, Frederik. Lærebok i Skatterett, 2018, p. 35.

However, in the situations where the change in legislation is to the taxpayer’s disadvantage, the new/amended legislation is normally only given effect from the time when the legislation is adopted (and not for the whole fiscal year). In the authors’ view, the way of applying changes in tax legislation in Norway, and in some situation give new/amended rules retroactively, does not change the main principle about the decisive moment.

We lack statistical information, but it can be clearly said, regarding all our countries, that the question of the decisive moment is rarely directly regulated in the law or even commented on in the legislative process. In case of law, it is only commented on rarely. The doctrine is also brief on these questions, in all our countries (the question must not be mixed with the question of accrual, as the latter is depending on the former). This may seem strange, considering that this is one of the most fundamental principles of tax law! Perhaps the explanation is that in many cases, the de lege lata is obvious. However, as this article shows, this is not always the case.

There is some case law in Sweden and Norway regarding the retroactivity of tax laws. These decisions, however, primarily concern rather trivial interpretations in terms of where the decisive moment lies, according to the tax rules in question. Said case law has hardly touched upon the decisive moment in, for example, different more complex corporate taxation issues. Further, as far as we have been able to find, the question in these cases has only concerned the decisive moment of the right to tax an income,which is just one of the many questions for which it is relevant to determine a decisive moment. Otherwise, the questions about the decisive moment of income taxation are thus sparsely highlighted (but, nota bene, always principally fundamental, albeit most often not hard) in case law. However, the issue has been highlighted recently with Kellgren’s book ‘Time Issues in Tax Law Application’, from 2016.

Kellgren 2016 (supra footnote 5).

In Norwegian literature, the term ‘innvinning’, which is the Norwegian translation of the ‘decisive moment’,was introduced by Magnus Aarbakke in his book ‘Skatt på Inntekt’ from 1968. Although the term was introduced by Aarbakke in 1968, the concept existed long before that. Although it is more than 50 years since the Aarbakke introduced the term ‘innvinning’ and the concept is one of the most fundamental principles in tax law, the decisive moment as a concept is only modestly discussed in Norway. The most comprehensive discussion in Norway is an article from 2013 by Anders Nordli.

Anders Nordli. Det skatterettslige innvinningsbegrep – grunnleggende betraktninger, Skatterett 2013 s. 252-271.

In the authors’ view, the reason why the concept of the ‘decisive moment’ is only modestly analyzed in Norway is the fact that in most cases, the question of the decisive moment does not create a separate problem.

In many cases, the decisive moment and accrual of the income are congruent. It is, however, important to be aware that these are two different concepts, and in some situations, it is of great importance to distinguish between them. The Norwegian Supreme Court decision from 2009 (Rt. 2009 p. 1208, as mentioned above) illustrates this.

In the case of Finland, it should generally be noted that there is a lack of in-depth analysis regarding any problems on the decisive moment of taxation. The issues of taxability and deductibility have been analyzed most in the tax literature. There are some general legal provisions and instructions regarding the timing of taxation in the Finnish tax acts and the tax authorities’ instructions, which are nowadays reflecting the practical interpretation of tax law. A current detailed tax guidance document regarding accrual issues within personal taxation states the following (our translation):

‘An established procedure for the accrual of income and expenses, as well as the main exceptions from this, have been entered in the IV department of the income tax act. The rules are not exhaustive, and therefore, the decisions in previous legal practices and taxation practices still have an impact on a decision concerning an individual accrual problem.’

‘Verohallinnon ohje’, 4.3.2016, Diary No. A40 / 200/2014.

But what does an established procedure in the law mean? There are some special paragraphs regarding these issues, but otherwise, accrual is governed by the two following sections (ISL 110 §, 113 §, our translations):

The Finnish Business Income Tax Act (BITA) is based on the performance principle and includes several more detailed rules regarding business income.

In the Finnish tax literature, the problem of the decisive moment is usually discussed either under the heading of accrual problems (capital gain realization problems) or ‘which is the correct tax year’. There are, of course, some clear rules in accounting law that are utilized within taxation, and some rules in the tax act. The basic terminology here includes the performance principle (taxation linked to the transfer date) and the cash principle (taxation linked to payment). There are different case laws that mostly concern profit distributions as well as transfer of income (tax revenue) or late accrual of certain realized or unrealized expenses. However, no general clear and explicit principle for the decisive moment is to be found.

In none of our three countries is there a general rule that clarifies the decisive moment or period or on what principles the courts are to use when interpreting tax laws regarding this question. Nor would it be easy to formulate such a rule, inter alia, because it looks different in different cases. Thus, in legal practice, if the decisive moment has not been expressed in the very tax rule, which one is about to apply, it must instead be determined by interpretation, in principle by the respective individual rule. Typically, however, the decisive moment seems to be one of the six reported below. Here, we give examples of each sort of decisive moment, but the reasoning on these examples is developed later in this chapter (Section 2.6 et sec).

Thus, it is important to find clarity regarding the principle for the decisive moment, which often requires interpretation of the rule. However, this is not always enough to create full clarity regarding the decisive moment. It also has to be established what time follows from the principle in the very situation at hand – the decisive moment in the individual case. If, for example, the principle regarding the decisive moment points out the last day of the year, it is obvious that we are to look upon the situation at this day when applying the rule in the actual case. Here, things are simple. However, if the principle points out a day that is not obvious, the question of the decisive moment requires that this day is made clear – which must be carried out with regard to the individual case. A good example of this scenario is where the principle points out, as decisive, the time when a transaction, perhaps a sale, is being made or decided.Here, the principle regarding the decisive moment is clear, but it still has to be decided if and when the actual transaction was (to be seen as) finished (for tax purposes). This might be hard (for example, if the deal is entered into one step at a time) or easy to do, and the principle might give more or less precise information regarding how to establish the decisive moment in the individual case.

Thus, the decisive moment in the individual case does not automatically follow from the general principle regarding the decisive moment that is established by (the interpretation of) each tax rule. Thus, basically, the decisive moment is established in two steps: first, the general level in the individual case, and then, the decisive date or period that follows from this principle in the individual case.

This methodology is, for example, well shown in Krzymowska A, Skattepliktiga överlåtelser i inkomstslaget kapital, Jure, 2018. Here, firstly, the principle for the general decisive moment for certain capital gains is presented, and then, secondly, the decisive moment in more concrete, individual cases is analyzed.

Sometimes, the principle for the decisive moment follows, more or less directly, from the very letter of the respective tax rule, or from its close context. An example of this is the Swedish inventory valuation, where 18 Ch. 13 § 2 paragraph 2 SITA clearly speaks of ‘inventories acquired during the tax year and which, at the end of this period, still belong to business activities. By this rule, it is made clear that the application is based on the conditions at the balance sheet date.

A similar Swedish example where the decisive moment is clearly stated is the 3 § of Ch. 17 SITA, according to which the inventory’s acquisition value is determined, ‘shall the inventory assets remaining in the stock at the end of the tax year be considered as / ... /’. Thus, the valuation of companies’ inventory stocks is carried out according to the circumstances at a certain time, namely the last day of the tax year.

In these cases, the question of the principle for locating the decisive moment is made clear,which, thus, makes this question simple. Note, however, that a clear general rule may still need to be interpreted in relation to the individual case, and in practice, the application of the depreciation rules are not always simple. Also note that such explicit rules may be of importance in the context of interpreting other tax rules, in order to find their decisive moment. Often, though, as in many other cases of tax law interpretation, it is not self-evident whether a rule stating something (for example, explicitly expressing its decisive moment) is to be seen as indicative of a wider general principle (being based on, and expressing, this very principle) or if it is to be seen as an exception (deviating) from a general principle!

When, as in the cases discussed above (2.4), it is clearly expressed where the decisive moment of the current rule lies, there is no need, nor room, for considering other decisive moments (except de lege ferenda). From a predictability and legality perspective, it is certainly an appealing legislative technique to clearly express where the decisive moment of each rule lies, as the decisive moment is of great importance. However, this usually does not happen. This is not necessarily problematic, though, as long as the decisive moment can be easily established through interpretation – although it may be discussed how well such legislation is in line with the principle of legality.

Where the decisive moment is best placed might (both de lege lata and de lege ferenda) be analyzed in the light of some fundamental purposes and, needless to say, in the view of what is to be the factor triggering the respective tax effect (it might, for example, be having a certain kind of income). What are the purposes at stake in the choice between different possible decisive moments? And, how are such purposes to be weighted and seen in relation to the purposes upon which each tax rule might be based?

On the one hand, there is much to be said for choosing a decisive moment that provides the highest degree of predictability for the taxpayers Certainty about a tax liability or a tax deduction may be a decisive factor for whether the taxpayer enters into a transaction or not – in this sense, it works as a transaction cost. When it comes to periodicity, predictability may not be quite as important, but is still highly desirable. Thus, from a predictability perspective, the decisive moment should be placed at the time of the transaction. Taking aim at the circumstances on another date than at the time of the transaction could also lead to companies having advantages or disadvantages in taxation that management has not been able to predict. If the taxpayer (or its management) can foresee the tax consequences before a transaction, taxation can also work as an efficient social instrument.

Fuller, The Morality of Law, 1969 s. 60.

In some cases, however, it may be considered to be sufficient that the taxpayer is able to know in advance (prior to the complete transaction) which requirements must subsequently be met for a certain tax effect to be achieved – even if requirements are not met already at the transaction, and so on. This can be said about many accrual issues: The decisive moment is here mostly placed long after the transaction day, which contradicts predictability, but it is often possible to either predict the accrual period or even, to some extent, affect it by arranging one’s business for it to be as expected (for example, through careful property management in order to minimize the risk of need for write-downs).

Certain holdings, and so on, are also of such a long-lasting character that, in many cases, full predictability regarding every aspect of the business’s income tax effects already at the first transaction (let us say when buying the asset) would lead to highly inexact taxation, compared to the actual economic situation over time in the company. Having decisive moments ‘along the way’ (the judgments are distributed over time, for example, at the end of each year) or simply taxing ex post (for example, when an asset is finally sold or eliminated), simply makes more sense in some cases.

The proper placement of the decisive moment can also depend on practical considerations. Thus, for example, the Swedish church fee and the municipal tax rate are governed by the taxpayer’s choice regarding membership and residence as per 1/11 the year before the tax year. This is a practical and predictable solution, although it accommodates no adaptation to the individual’s situation on the respective day on which the tax is due.

It is also of relevance to take into account the specific purpose of each tax rule when it is to be determined where its decisive moment is. Some rules may work best (so that their purposes are realized) when interpreted so that the decisive moment is the balance sheet date, while other rules have a relevant effect if their decisive moment is the transaction date.

It should be noted that the decisive moment (thus, in the light of the purposes of the rule chosen), in its turn, will contribute to forming part of this very purpose of the rule – there is a partially circular relationship here.

Tax rules can also relate to conditions over a period of time. That is the case, for example, in all our countries regarding the questions of whether an activity is to be classified as a business activity and, in international taxation, whether a person is fully taxable and whether a permanent establishment exists. Such classifications are, of course, often needed in order to correctly treat different transactions, and so on, which are of a momentary nature (e.g, fees, dividends) and which themselves often have a momentary decisive moment (they are thus partly answered, but partly in the light of estimates of conditions over a period of time).

One example that may illustrate this is the principle of worldwide taxation. To be liable for a worldwide income (WWI) taxation in Norway, for example, the taxpayer may be a tax resident in Norway and the consideration of whether the taxpayer is a tax resident in Norway under the current rules (which is based on the principle of effective place of management) must be determined based on a period of time (typically the fiscal year). Hence, if a company receives a royalty payment from abroad in January, the tax liability of the royalty income may be uncertain until it is determined whether the company is a tax resident in Norway or not. Similarly, to determine whether a company is a tax resident in a country under the permanent establishment rules in a tax treaty also requires that the consideration of the tax liability is evaluated over a period of time.

In looking closer at this question, one principally fundamental distinction must be made. It is fundamental whether the legal classification follows a division principle or an overall principle. In cases where the division principle applies, the classification is principally divided and basically answered each day (which may be very easy to do, if nothing of importance has changed). Thus, a certain tax status applies per day (e.g, until a business ceases or a taxpayer moves), and basically, the decisive moment is every day when a change on legal status could take place. A tax status – let us say that an activity is to be classified as a business activity – can thus, practically, apply for a whole year, but actually, theoretically, it is rather answered the same way all day, all year.

However, if instead a ‘true’ overall assessment is to be done, following the overall principle, the assessment should refer to the relative importance of relevant circumstances over a period of time. While such overall assessments, for logical reasons, often have to be done ex post, the predictability is limited. The relevant circumstances cannot be fully assessed until the decisive period is over – and by then all transactions and the like are already carried out. However, these problems can sometimes be reduced through advance rulings or a Mutual Arrangement Procedure (MAP) under a tax treaty. The central method, however, is that the taxpayer tries to ensure that the requirements for the legal requirements he wishes to achieve are also actually achieved (for example, by not staying too long in a country, in order to avoid becoming an unlimited taxable person there).

Rules that require a true overall assessment of conditions over a longer period seem to be relatively rare. In Swedish tax law, the best example of such a rule may seem to be the rules for qualified shares in the so-called 3:12 system, regarding the tax rate for dividends from certain smaller companies.

See Ch. 57 SITA.

Some rules might be seen as being of a hybrid character, in the sense that their application requires looking at the situation at more than one moment or period.We will here exemplify and briefly comment upon such rules.

One such example from Norway is, as mentioned in Section 2.3, the group contribution rules

Norwegian Tax Act § 10-4.

A second example from Norway is the 3% clawback rule under the participation exemption rule. As a starting point, a dividend received is taxable under the ordinary corporate income tax regime.

Norwegian Tax Act § 10-11.

Also, in Finland, payments (legal term is here in Finnish ‘konserniavustus’, in Swedish ‘koncernbidrag’) can be paid between groups of companies, and the tax effect can therefore be effectively transferred between companies (according to Laki Konserniavustuksesta, Lag om koncernbidrag). There are many requirements for this possibility, which are partly based on different moments in time. There is also a very interesting case (HFD 2016/2915), which reflects the possibility of cancelling the payment decision. In this case, the cancellation of the group payment was considered valid even after the end of the relevant accounting period (tax year) because the actual tax decision considering the firm was not yet final. The company argued that they had misinterpreted the requirements in taxation. The tax authorities had inspected their requirements and informed the company (after the tax year’s end) that the requirements of the tax law were not met. During that time, the final tax decision (and the tax documentation from the company) had to be finished (for companies) seven months after the end of the accounting period (tax year, if the accounting period is a normal year 1.1-31.12). Now, this system is in reform (see the later chapter about real-time taxation).

Note, however, that parts of a rule might also be seen as separate (single) rules, with a specific, single, decisive moment or period. It is therefore not given, that these examples are actually to be seen as examples of rules having a hybrid decisive moment. It would be possible, though, to imagine a single tax rule, stating more than one decisive moment (without being a rule relating to a time span).

Obviously, it is common that new information (the term is, thus far, deliberately used in a general, slightly unprecise manner) is found after the decisive moment, that throws retroactive light on the situation at the decisive moment. The significance of such information is, in principle, dependent on the extent to which the tax rules (should be interpreted so that they) are open to take account of them.We want to – normatively and also claiming it is probably de lege lata – suggest a principle that new information, in order to be relevant (for example, as evidence), must highlight the situation at the respective decisive moment – the principle of ‘the primacy of the decisive moment’. If new information shows events or the state of affairs at a later date, this may instead be considered as new tax events. This principle is here to be further discussed with a focus on information emerging in between the decisive moment and the taxpayers’ submission of the income declaration.

There are no explicit tax rules in any of our three Nordic countries that indicate what significance is to be attached to events after the decisive moment – at least there is no general such rule. We want to argue that basically, only the conditions at the decisive moment matter, but that information emerging after this can be used as evidence regarding the situation at the decisive moment. The reasons for this (suggested) principle are basically the same aims and purposes that were given above (2.5) as reasons for ‘choosing’ a relevant decisive moment.

Where the decisive moment is to be placed and to what degree information after this date should be considered are, in our view, two sides of the same coin: The determination of a decisive moment, simply expressed, makes information thereafter irrelevant, other than as the basis for the assessment of the situation at the decisive moment – or as a new separate tax event. Accordingly, those two positions should in principle be answered in the light of the same arguments.

What significance events after the decisive moment have for the assessment of the situation at the decisive moment, and what events that are to be taken into account, may vary depending on what, according to the respective tax rules, should have been the case (the necessary conditions). Therefore, in order to win full precision in handling the temporal issues regarding tax law assessments discussed in this article, it is fundamental to clarify what the current rule aims at and refers to. In this section, we highlight a specific distinction between different kinds of (tax) rules, which have particular significance for the relevance of events after the decisive moment, namely the difference between subjective and objective necessary conditions.

To the extent that a rule relates to (mainly) objective conditions – such as ownership, a market value of an asset or some form of (more objectively-assessed) rationality – of course, such are the circumstances which the evidence should support (or not). If so, for example, the taxpayer’s intentions and notions at the time of the decision are not what is to be determined – as what is to be proved here is something more objective (regardless of the taxpayer’s intentions and notions). To the extent that a rule instead relies on subjective circumstances (for example, the taxpayer’s intentions or assessments at the time of the transaction), the evidence should demonstrate the taxpayer’s ideas, knowledge, intentions or similar at the decisive moment. In that case, the objective conditions, such as the actual value of an asset, are of little or no importance.

See more about subjective conditions in taxation; Påhlsson, Skattebetalarens avsikter – Subjektiva rekvisit i skatterätten, Skattenytt 2017 s. 3 ff.

Information obtained after the decisive moment can be used as evidence regarding both objective and subjective conditions, but of course, there can be a significant difference between evidence illustrating the fulfillment of objective or subjective conditions, respectively – although in both cases, evidence must be based in an external reality. In our opinion, it often does not follow clearly from the wording of tax rules whether they take aim at subjective or objective conditions. This does not necessarily imply that the legislation has failed, but it may complicate law enforcement (not least when it comes to evidence).

It goes beyond the purpose of this article to discuss what conditions tax rules ought to have. However, there often seems to be good reasons for giving (objectively) well-founded subjective perceptions of the taxpayers a significant role in such tax issues where the decisive moment is the transaction date. Here, predictability and management’s need to be able to plan proactively are of great importance for the market economy. However, when assessments are made as per the end of the fiscal year, it seems more rational to let these be oriented mainly towards objective factors. In these cases, so to speak, the debt or the asset already exists, leaving less room for proactivity,

However, it should be noted that there may be reason for management to act proactively also before the final day of the tax year, for example, so that an asset is divested during the tax year because management believes that it provides a more favorable accrual effect than retaining the asset. Such a proactive approach is counteracted if business management does not know, and can compare, both the option of retaining the asset and the option to sell it. Against this background, it is not clear how strong the argument that ‘assets and debts already exist’ should be considered.

It should be mentioned that there is no conflict in relation to the principle of the decisive moment in letting a necessary condition be a (well-grounded) prognosis, carried out at the decisive moment (for example, regarding future cash flows or synergy effects). However, if the principle of the primacy of the decisive moment is to be upheld, it is important that what is subsequently examined is whether the prognosis was satisfactory at the decisive moment, not what the outcome turns out to be. However, the outcome may in some cases say something regarding how reasonable a prognosis made at the decisive moment actually was.

A situation can often be more precisely estimated in retrospect, not least because that makes it possible to take into account subsequent information (that has come to existence or merely has been found after the decisive moment). The principles of free production and evaluation of evidence do not preclude using subsequent information as evidence – given that it clarifies whether necessary conditions were fulfilled at the decisive period or moment. This may, for example, be the situation where it is necessary to make a valuation of an asset (e.g, in an exit tax situation). Events after the date of recognition may be useful to perform a correct valuation or to make adjustments to a valuation. However, it is crucial that what is thus proved not only should have been the case at the right period or time but also that the evidence concerns the correct operative fact. This may seem obvious, but note, for example, the discussion above on objective and subjective conditions, where it is important to (through interpretation) initially determine whether what is to be clarified is a subjective or an objective condition. Subsequent information that clearly throws light on the situation at the decisive moment must not be used without sufficient attention being devoted to clarifying what is actually the necessary conditions of a rule.

Subsequent information can also be used as evidence concerning what the taxpayer should have done with regard to searching for, and later, in the declaration take into account of, information. Assume, for example, that it appears that it, before the declaration was finished, was relatively easy to find reliable information which, had it been found, would have given rise to changes in the company’s declaration, compared to what was actually stated – but that the taxpayers did not find or use this information. This may lead to the declaration being considered defective and that sanctions may be brought into effect as a result of this.

We see no clear distinction between our respective countries in these issues, but want to note that these issues have not been subject to any focused and unified treatment, for example, in the doctrine.

Sometimes, all conditions for the application of a tax rule are not already met during the period for which the taxpayer wishes the rule to be applied. If so, the application of the rules might be open for, and for its’ application indeed require, that those conditions are met later on, perhaps through a transaction at the beginning of the year after the year under which the rule is to be applied. In this section, we will discuss this phenomenon, here referred to as conditions regarding future measures.

The phenomenon conditions regarding future measures give cause to reflect on the correct understanding of the principle of the primacy of the decisive moment. How can the prevalence of conditions regarding future measures be justified? First of all, if it is easy for the taxpayer first to understand that there are conditions regarding future measures and what those conditions are, and then, to control the realization of these, it may be considered perfectly acceptable that such conditions sometimes exist. Second, in some cases, a possible justification ground for such conditions might be that they are part of the rules offering tax benefits of a special character. In any case, it is crucial that the assessment is not changed in any other respect into an ex-post assessment based on future terms, so that transactions are reviewed in other respects.

It is common ground in all our countries that compound transactions are assessed as a whole, which is referred to as transaction chain judgments.

See also the Swedish RÅ 2004 ref. 27.

It would seem that transaction chain assessments in principle would presuppose a departure from the principle of the primacy of the decisive moment, as this is an assessment that takes into account circumstances, including certain subsequent transactions, from after the first transaction. At the same time, the result of such a review seems to be a finding of something that the court would normally have thought to be the case already in the first transaction. It might actually be argued that the first transaction should be considered to be the first in a planned series of concerted transactions that have such strong mutual ties that it seems far-fetched to assess them individually. In general, this could be considered as anticipating an ambition of the taxpayer to circumvent the tax rules through the procedure, thereby reducing his tax burden. In this way,the review would be a result of something that, it might be argued, was already the case at the time of the first transaction. Possibly, in line with this, the later transactions in the chain could be seen as a form of evidence of an intention, and that would actually be deemed to have been preceded and planned, already when the first transaction was carried out. In that case, it is far from obvious that the assessment should be aimed solely at the circumstances visible at the time of the first transaction. Thus, the principle seems to need a level of modification when it comes to transaction chain assessments: An assessment of the real meaning of transactions may require that several compound transactions are seen as a whole.

It is neither a common and thoroughly discussed, nor an entirely unknown, phenomenon within taxation to subsequently investigate the outcome, how something actually went, thus letting such an investigation guide the decision – rather than what was actually (or seemed to be) the case at the time of, for example, a transaction or the last day of the tax year. We call this subsequent verification. Here, we do not refer to the method that, for example, a court in the manner discussed above (3.3) takes into account additional information as evidence in relation to the situation as to what is usually perceived as the decisive moment (for example, the time for entering into an agreement). That is a ‘common use of evidence’, based on a traditional decisive moment. In practice, however, it is not always easy to distinguish between subsequent verification (3.6) and common use of evidence (3.3). It may not always be important to do so either, but, in our view, it is important to be aware of the difference on a principal level.

If a subsequent verification is carried out, it could thus mean that an investment (for example, in a research and development project) subsequently fell well and that the outcome, the final result, may control the assessment regarding the right to deduction of the costs for the investment. At least from a practical point of view, subsequent verification, in our opinion, means a departure from the above (3.1) suggested principle of the primacy of the decisive moment. Consequently, subsequent verification does not benefit predictability in taxation but may be justified in certain cases.

Subsequent verification has only been discussed sparingly in Sweden, but there are some notifications about the phenomenon.

See, for example, Påhlsson R, Sponsring, Jure 2008 s. 36, 81, 89 och 125.