A capital loss which arises when a person disposes of an asset may be deducted in the capital income category. The main rule is that disposal means sale, exchange and similar transfers of assets. Furthermore, a security is deemed to have been disposed of also when the company which issued it is placed into liquidation. The security is then deemed to have been disposed of notwithstanding that the company has not yet been dissolved.
The basic features of a liquidation, which i.a. can be initiated on a voluntary basis, is that a company's debts and assets are settled, any surplus is distributed to the shareholders, after which the procedure ends with the company's dissolution.
The case in the Supreme Administrative Court concerned a person who had decided to wind up his foreign company through a voluntary strike off in the Cayman Islands. In 2014, the company decided to initiate such a procedure and subsequently paid its net assets to that person during the same year. The company was then deleted from the company register in the Cayman Islands and was thus dissolved. The main question in the case was whether the shares in the company, through that procedure, could be considered to be deemed disposed of through liquidation.
The company in question was a legal person which, from a corporate-law perspective, most closely resembled a Swedish limited company. The court therefore found that in the examination of whether the strike off procedure in the Cayman Islands may be deemed comparable to a liquidation, a comparison should accordingly be conducted with the rules of the Companies Act (2005:551).
In particular, there were two differences between the procedures that were taken into account in the assessment in the case. The strike-off procedure does not imply such restrictions on the corporate bodies' ability to represent and act for the company as those who follows from a liquidator being appointed. Furthermore, the strike-off rules allow a re-registration of the dissolved company. i.e. such a possibility that does not exist for a company that was dissolved after a liquidation in accordance with the Companies Act.
The Supreme Administrative Court found that these differences are sufficiently significant so that the relevant strike off procedure cannot be deemed to correspond to a liquidation procedure in accordance with Swedish law. The shares in the company shall thus not be deemed disposed of by liquidation.
Furthermore, the Supreme Administrative Court found that the strike off procedure cannot be deemed to entail a disposal on any other ground. Hence, the funds distributed by the company are to be reported as dividends.
Read the judgment here: