His Excellency 

 Gunnar Lund, 

 Ambassador of Sweden. 

 

 September 30, 2005 

Excellency: 

 I have the honor to refer to the Protocol Amending the Convention 

between the Government of the United States of America and the Government 

of Sweden for the Avoidance of Double Taxation and the Prevention of Fiscal 

Evasion with Respect to Taxes on Income, which was signed today, and to 

confirm, on behalf of the Government of the United States of America, the 

following understandings reached between our two Governments. 

1. With reference to clause ii) of subparagraph e) of paragraph 2 of Article 17 

(Limitation on Benefits) of the Convention 

It is understood that in applying clause ii) of subparagraph e) of paragraph 2 of 

Article 17 (Limitation on Benefits) in the case of Sweden the amount of a 

person’s deductible payments and gross income for the taxable year shall be 
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reduced by the amount of group contributions paid to a Swedish resident or 

Swedish permanent establishment. 

2. With reference to paragraph 6 of Article 17 (Limitation on Benefits) of the 

Convention 

It is understood that in applying paragraph 6 of Article 17 (Limitation on 

Benefits), the legal requirements for the facilitation of the free flow of capital 

and persons within the European Union, together with the differing internal 

income tax systems, tax incentive regimes, and existing tax treaty policies 

among member states of the European Union, will be considered. Under that 

paragraph, the competent authority is instructed to consider as its guideline 

whether the establishment, acquisition or maintenance of a company or the 

conduct of its operations has or had as one of its principal purposes the obtaining 

of benefits under this Convention. The competent authority may, therefore, 

determine, under a given set of facts, that a change in circumstances that would 

cause a company to cease to qualify for treaty benefits under paragraphs 2 and 3 

of Article 17 need not necessarily result in a denial of benefits. Such changed 

circumstances may include a change in the state of residence of a major 

shareholder of a company, the sale of part of the stock of a Swedish company to 

a person resident in another member state of the European Union, or an 

expansion of a company's activities in other member states of the European 

Union, all under ordinary business conditions. The competent authority will 

consider these changed circumstances (in addition to other relevant factors 
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normally considered under paragraph 6 of Article 17) in determining whether 

such a company will remain qualified for treaty benefits with respect to income 

received from United States sources. If these changed circumstances are not 

attributable to tax avoidance motives, this also will be considered by the 

competent authority to be a factor weighing in favor of continued qualification 

under paragraph 6 of Article 17. 

3. With reference to Article 26 (Exchange of Information) of the Convention 

It is understood that the powers of each Contracting State's competent authorities 

to obtain information include powers to obtain information held by financial 

institutions, nominees, or persons acting in an agency or fiduciary capacity (not 

including information that would reveal confidential communications between a 

client and an attorney, solicitor or other legal representative, where the client 

seeks legal advice), and information relating to the ownership of legal persons, 

and that each Contracting State's competent authority is able to exchange such 

information in accordance with the Article. 

 If this is in accordance with your understanding, I would appreciate an 

acknowledgment from you to that effect. 

 Accept, Excellency, the renewed assurances of my highest consideration. 

 For the Secretary of State: