The cost for the purchase by a company of its own (treasury) shares is to be treated as a non tax-deductible acquisition cost. Similarly, any gain or loss made from the disposal of shares out of treasury is not taxable or tax deductible. However, the acquisition costs of treasury shares that are transferred to employees under an incentive scheme may in certain circumstances qualify for a tax deduction.
Treasury shares may now also be used without any immediate income tax consequences as consideration in various corporate restructurings, such as mergers, de-mergers, transfer of assets and share exchanges. Transfer tax would, however, still be imposed when using treasury shares in such restructurings, which makes the issuance of new shares as consideration more beneficial.
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