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Title: Dormant companies – Taxation of closely held companies

Problem: Many companies are facing a business transfer and fall within a smaller company with a few owners and therefore that tax jurisdiction is current. They risk facing high taxes but it can be avoid by setting the company in an inactive status for five years.

Purpose: The purpose is to describe the inactive company rules and the verdict from the Swedish Supreme Administrative Court. Also to investigate how this verdict will affect company sellers.

Method: Based on a case study and by analyzing the Swedish Law conclusions has been determinate.

Result: A dormant company must be inactive for five years, and then the company can benefit from a different taxation. The owner and it´s relatives can´t be active in the company during this five year period. The tax benefit, in percentage, is at its highest level when lower transaction cost takes place. The higher transaction cost the lower percentage difference occurs. Even if the percentage difference is at its lowest for high transaction costs the difference in currency is higher the higher the transaction cost is. It’s up to every individual to decide if the five year inactivity time is worth the beneficial taxation.