Taxation of Carried Interest: How is Income from Venture Capital Funds Taxed in Other Countries? (Swedish Private Equity & Venture Capital Association (SVCA))

Summary

• Productivity in Swedish companies receiving venture capital increased by 22% over a seven-year period.p.5
• Employment in venture capital-backed companies in Sweden grew by 39% over a seven-year period.p.5
• Fund management fees typically equal around 2% of fund capital to cover salaries and operational costs.p.7
• A common carried interest structure allocates 20% of fund returns above a hurdle rate to managers.p.7
• In 7 of 8 benchmarked countries, carried interest meeting statutory conditions is taxed as capital income at average rates below 30%.p.9
• In France, collective fund manager co-investment must equal at least 1% of fund capital, or 0.5% for funds over €1 billion.p.10

Key insights

1. Sweden lacks statutory tax rules for carried interest, relying on uncertain legal precedents and administrative decisions.p.3
2. All eight surveyed comparison countries have established explicit legal definitions to govern the taxation of carried interest.p.9
3. Germany taxes qualifying carried interest as income at approximately 28.5% with no social security contributions required.p.9
4. Italy taxes eligible carried interest as capital return at 26% without applying social security charges.p.10
5. Spain taxes only 50% of eligible carried interest under AIFMD rules, yielding an effective tax rate of approximately 27%.p.10
6. The United Kingdom plans to increase its capital gains tax rate on carried interest from 28% to 32% in April 2025.p.11
7. In the United States, carried interest on assets held for more than three years is taxed as long-term capital gains at 23.8%.p.11
8. Uncertain tax treatment in Sweden creates market risk and threatens the country's competitiveness in attracting venture funds.p.12