Optimal normal rates of return in selected special cases_
| ρ | s | i | Tax rates | s | Optimal normal rate of return, i | Note | |
|---|---|---|---|---|---|---|---|
| Risk-Free Interest Rate, r = 4 % | |||||||
| Simple Case | 0,037 | 0 | 0,026 | τd = τc = τf = τ | s=0 | i = (1–τ)ρ | |
| Case 2A | 0,037 | 0,417 | 0,029 | τd = τc > τf | s>0 | i = (1 – τf)ρ | |
| Case 3A | 0,037 | 0,417 | 0,015 | τd > τc > τf | s>0 | ||
| Risky Interest Rate, r = 9.4 % | |||||||
| Simple Case | 0,080 | 0 | 0,056 | τd = τc = τf = τ | s=0 | i = (1 – τ)ρ | |
| Case 2A | 0,080 | 0,417 | 0,064 | τd = τc > τf | s>0 | i = (1 – τf)ρ | |
| Case 3A | 0,080 | 0,417 | 0,033 | τd > τc > τf | s>0 | ||
Splitting of income from closely held companies under DIT in 2021_
| Norway | Sweden | Finland | |
|---|---|---|---|
| Which dividends are subject to split/imputed income method? | Dividends (and realized gains) received by individuals from all companies | Dividends received by active owners of CHCs (1) | Dividends of all owners of non-listed companies |
| What income is subject to split/imputed income method | Dividends and capital gains | Dividends | Dividends |
| How is the imputed rate of return determined? | After-tax interest on 3-month gov. bonds; 2021 | Government bond rate plus 9 percentage points; 2021 | Fixed, 8% |
| What is the asset base? | Adjusted purchase price of shares | Adjusted purchase price of shares | Net assets of the non-listed company |
| Other elements | - | The imputed income includes a “wage addendum”. The owner may choose a “simplification rule” instead of dividend split. (2) | - |
| Tax treatment of the imputed normal return on shares (normal dividend) | Tax-exempt | Taxed as capital income at reduced rate of 20% | Up to 150,000 euros, 25% of normal dividend is included in taxable capital income and of the amount exceeding this threshold 85% is included in taxable capital income |
| Tax treatment of dividend that exceeds the normal return (excess dividend) | Excess dividend factored by 1.44 and the amount is included in taxable capital income (alminnelig inntekt). The effective marginal tax rate is 31.68% | Full inclusion as labor income (progressive schedule) | 75% included in taxable labor income (progressive schedule) |
| Highest tax rate on excess dividend | 31.68% (flat rate) | 52% (progressive schedule) | 42% (progressive schedule) |
| Carry-forward rules | Yes | Yes | No |
Optimal imputed rates of return in selected special cases_
| Tax Rates | Parameter s | Optimal Normal Rate of Return | |
|---|---|---|---|
| Simple Case: τd = τc = τf = τ | s=0 | i = (1–τ)ρ | Finland 1993-2004 (original) |
| Case 2A: τd = τc>τf | i = (1–τf)ρ | Ministry of Finance Proposal in 2010 | |
| Case 2B: τd = τc>τf | s=0 | ||
| Case 3A: τd>τc>τf | Current Finnish System (applied from 2005 on) | ||
| Case 3B: τd>τc>τf | s=0 |
Main aspects of the dual income tax systems of Norway, Sweden, and Finland in 2021_
| Norway | Sweden | Finland | |
|---|---|---|---|
| Corporate tax rate (τf) | 22% | 20.6% | 20% |
| Personal tax rate on capital income (τc) | 22% | 30% | 30% up to 30,000 euros, 34% above that |
| Highest MTR on earned income (τe) | 53% (includes ssc) | 66% (employer’ ssc included) | 55% |
| Does net capital income form a separate tax base? | No, capital income from all sources is included in “alminnelig inntekt”, which also includes labor income. It is subject to the flat tax rate of 22%. | Yes, net capital income from all sources forms a separate tax base | Yes, net capital income from nearly all sources is a separate tax base (interest income excluded) |
| Taxation of interest income | Included in taxable capital income | Included in taxable capital income | Final withholding tax, 30% |
| Integration of corporation and personal income tax, main rule | Partial double taxation: dividends and capital gains in excess of imputed normal return included in taxable capital income | Double taxation: dividends are included in taxable capital income | Partial double taxation: 85% of dividends (from listed corporations) are included in taxable capital income |