Tax

At Castellum, there are a number of areas that are taxed: income tax on current earnings, property tax, VAT, stamp duty and energy taxes. Political decisions such as changes in corporate taxation, tax legislation or interpretations thereof may lead to Castellum’s tax situation increasing or decreasing.

Average valuation yield over time

Source: Thomson Reuters

Change in value
Total average yield per year in different cycles through 2020
Changes in value, 2020

Tax policy

Castellum’s work with taxes is governed in the company’s tax policy. In managing its taxes, Castellum must comply with the company’s tax policy, which in brief entails:

  • Castellum must endeavour to pay the correct taxes in every country where it conducts operations.
  • Castellum continually monitors changes to laws and legal praxis so that taxes are managed in accordance with applicable laws and regulations.
  • Tax management will be evaluated as an integral part of the company’s business decisions and general risk management. This evaluation will also take risks to brand and reputation into consideration.
  • Castellum will acquire operations not in order to gain tax advantages, but because they are a fit with its business model. In the event of an acquisition, the laws and regulations in force will be complied with.
  • The company will operate ethically, legally and in a businesslike manner in view of its tax expenses but at the same time will not operate in grey zones or engage in aggressive tax avoidance. “Aggressive tax avoidance” pertains to transactions that have no business purpose other than reducing tax, or transactions that could risk Castellum’s reputation and standing as a responsible societal stakeholder.
  • Castellum’s contact with the tax authorities in the respective countries will be marked by openness and transparency. The company will openly describe the principles that govern its tax governance and the tax that is to be paid to its stakeholders. In cases where regulations are unclear or ambiguous, the spirit of the law will be interpreted and Castellum will be proactive and transparent through open requests, applications for preliminary decisions or alternately in dialogue with the tax authority.
  • Castellum’s tax policy will be revised on a regular basis and adopted by the Board at least once each year.
  • Castellum’s Chief Financial Officer is the document owner and responsible for the policy.
  • Any breach of this policy is to be reported to Castellum’s compliance function, also serving as the Group’s Chief Legal Officer, who will in turn inform the CEO.
Tax calculation 2020

MSEK

 

Basis current tax

 

Basis
deferred tax

Income from property management

 

3,380

 

 

Non-deductible interest

 

174

 

 

Deductions for tax purposes

 

 

 

 

depreciations

 

–1,319

 

1,319

reconstructions

 

–392

 

392

Other tax adjustments

 

–439

 

165

Taxable income from property management

 

1,404

 

1,876

Current income tax 21.4%, if tax loss carry forwards are not utilised

 

300

 

 

Sales of properties

 

3

 

–181

Change in values on properties

 

 

3,712

Taxable income before tax loss carry forwards

 

1,407

 

5,407

Tax loss carry forwards, opening balance

 

–854

 

854

Tax loss carry forwards, closing balance

 

603

 

–603

Taxable income

 

1,156

 

5,658

Tax according to the income statement for the period

 

–247

 

–1,166

Net deferred tax liability, 31 December 2020

MSEK

 

Basis

 

Nominal
tax liability

 

Actual tax liability

Tax loss carry forwards

 

603

 

129

 

129

Untaxed reserves

 

–671

 

–144

 

–144

Properties

 

–63,027

 

–12,983

 

–2,270

Total

 

–63,095

 

–12,998

 

–2,285

 

 

 

 

 

 

 

Properties, asset acquisitions

 

7,872

 

1,622

 

 

In the balance sheet

 

–55,223

 

–11,376

 

 

Deferred tax is in principle both interest-free and amortisation-free, and can therefore be considered as shareholders’ equity. Actual deferred tax is lower than nominal tax partly due to the possibility of selling properties in a tax-efficient way, and partly due to the time factor, which means that the tax will be discounted.

The net estimated real deferred tax liability has been estimated at 4% based on a discount rate of 3%. Further, assessments have been made that tax loss carry forwards are realised with a nominal tax of 21.4%, and that the properties are realised in 50 years and where the entire portfolio is sold indirectly in corporate wrappers where the buyers’ tax discount is 7%.

Income tax

Castellum’s recognised income from property management for 2020 amounted to MSEK 3,380 (3,146), while taxable income from property management totalled MSEK 1,404 (1,370). In the absence of tax loss carry forwards, current tax of MSEK 302 (293) attributable to the income from property management would arise, equivalent to 9% effective tax paid.

Depreciation for tax purposes

Property investments are divided into different components for which the Swedish Tax Agency specifies different depreciation rates: Buildings (2–5% depending on type of property), land improvements 5% and inventories 20% or 30%. Land is not depreciated.

Tax deductible reconstructions

Costs for building repairs and maintenance can be deducted immediately. The “extended repair concept” allows for direct deduction for certain types of reconstructions, even if they add value and are capitalised in the accounts.

Sales of properties

Properties can be divested directly or indirectly in corporate wrappers; each have different tax consequences.

Profit on sales of properties that fiscally represent fixed assets is taxable, while a loss is put in a “fold” and can only be netted against profits within the Group from direct sales of properties that represents fixed assets. Profit on sales of shares that fiscally are considered fixed assets is not taxable, while a loss is not tax deductible. For properties or shares that fiscally represent current assets, a profit is always taxable while a loss is tax deductible.

Changes in values on properties and derivatives

Swedish accounting laws do not allow recognition of properties at fair value in a legal entity, meaning that changes in value do not affect taxation. Certain financial instruments, such as interest rate swaps, might be recorded at fair value at entity level. For Castellum, changes in value resulting in a negative value on the instrument constitute a tax-deductible expense, while changes in value up to the instrument’s cost are considered taxable income.

Castellum has no ongoing tax disputes.

Deferred tax on the balance sheet

Above all, Castellum has three items that make up the basis for deferred tax: properties, tax loss carry forwards and untaxed reserves. All tax loss carry forwards are recognised since expected future taxable income may be used to net the tax loss carry forwards. Deferred tax attributable to properties arises primarily due to changes in value, tax deductions such as depreciation and deduction of certain reconstructions that are capitalised in the financial accounting. Untaxed reserves consist of transfers to the tax allocation reserve.

Property tax

Property tax is paid on almost all the Group’s properties. Special buildings such as communication buildings, educational and healthcare buildings are tax exempt. For other properties, the tax rate – as set by the Swedish Tax Agency – depends on the type of building and site. For offices, the tax is 1% of the assessed value; for logistics and warehouse buildings, it is 0.5%. In Denmark and Finland, tax rates vary depending on which municipality the properties are located in. Property taxes for 2020 amounted to MSEK 371 (374), based on an assessed value of SEK 42 billion. A large part of the property tax will be charged onward to the customer, however, with higher rental income as a result.

Value added tax (VAT)

Properties are exempt from compulsory VAT. If a premises is let to a customer who runs a permanent VAT-liable business, the property owner can voluntarily register for VAT and thus deduct input VAT on both operating costs and investments. No deductions can thus be made for input VAT attributable to operating costs and investments in premises not registered for voluntary tax liability. Non-deductible VAT on operating expenses for 2020 totalled MSEK 20 and was recognised as an operating cost. Non-deductible input VAT on investments for 2020 was MSEK 33 and was recognised as investment in property.

Stamp duty

Upon acquisition of property in Sweden there is a stamp duty (title deed) of 4.25%, calculated on either the purchase price or the assessed value, whichever is greater. In Denmark, the corresponding tax is 0.6% and in Finland it is 4.0%. In Finland, a stamp duty of 2.0% can also be paid on shares in a property company. In 2020, MSEK 10 in stamp duties was paid. There is also an additional stamp duty of 2% (1.5% in Denmark) for mortgage deeds in properties. No stamp duties were paid in 2020.

Energy taxes

Castellum purchases energy to use for heating, cooling, ventilation and lighting in its properties. Of this, approximately MSEK 26 pertains to energy taxes.

Employees

Employers in Sweden pay 31.42% in social security contributions based on salary and a payroll tax of 24.26% on pension contributions. In 2020, Castellum paid MSEK 109 in social security contributions and payroll taxes.

Summary of tax

In 2020, Castellum’s operations generated a total of MSEK 816 (806) in various taxes.

Summary of tax paid

MSEK

 

2020

Income tax

 

247

Property tax

 

371

VAT, not deductible

 

53

Stamp duty

 

10

Energy tax

 

26

Social security contributions and payroll tax

 

109

Total tax paid

 

816