In 2015, after returning from a 40 years-long Swiss tax exile, IKEA’s founder and the 11th richest person in the world, Ingvar Kamprad, paid Swedish tax for the first time. In 2014, Kamprad declared income of €1.9 million in Sweden. As a result, he was subject to Swedish personal income tax amounting to €640.000.
Taking into account the amount of the taxable income, Kamprad paid a relatively low amount of Swedish personal income tax. This is because of two circumstances regarding Kamprad’s tax declaration, namely, (1) the abolishment of Kamprad’s wealth tax by Stockholm tax authorities and (2) the transfer of his stake in IKEA to charitable foundations outside Sweden.
The billionaire whose wealth is worth more than €35 billion (according to Bloomberg Billionaires Index)began using a number of complex yet legal tax optimization schemes as soon as IKEA started rapidly growing after the Second World War. At that time, IKEA’s financial profits were significantly limited by the high income tax rates in Sweden. Kamprad states that such “optimized tax structure gives us the possibility of flexibility in using our assets that have already been taxed in one market. They can be used in new markets for further business development without the additional burden of double taxation.”
Kamprad’s tax optimization scheme consisted of three elements, namely, (1) moving from Sweden to Switzerland, (2) giving up the direct official control over the IKEA Group, and (3) establishing foundations in tax havens. Below, these three elements are discussed in more detail.
Moving from Sweden to Switzerland
In order to avoid wealth taxes in Sweden, Kamprad moved from Sweden to Switzerland in 1973, where he spent more than 40 years building the IKEA-empire. The high tax burden in Sweden, which in 1970’s could reach 85%of the income of wealthy individuals, caused not only Kamprad’s tax exile, but also the tax exiles of other high-net-worth individuals, including the tennis ace Bjorn Borg. Switzerland, which was chosen by IKEA’s founder, is a well-known European tax haven, where federal income tax does not exceed 11.5% and the wealth tax varies around 1%, depending on the Swiss canton. Consequently, Kamprad was obliged to pay significantly lower taxes than he would have paid in Sweden.
Giving up the direct official control over the IKEA Group
IKEA’s founder gave up the direct official control over the IKEA Group. He has not been officially declared as an owner of the IKEA Group since 1988. Moreover, Kamprad left a chairman position in the Supervisory Board in 2006. Currently, his official occupation in the corporation is Senior Advisor of INGKA Holding, which, together with its controlled entities, forms the IKEA Group.
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