In Swedish law, likewise many other Nordic countries’ laws, the term interest is not defined. Due to the absence of a definition, numerous issues have arisen regarding ones taxation in the Swedish taxation law, one of the greatest difficulties being the demarcation between dividends and capital gain. This issue has been debated extensively in juridical literature, and ultimately it has commonly been resolved in case law. Due to the fact that the taxation of interest varies from the taxation of dividend or capital gains, it is of great importance how a cash flow is classified. The purpose of this essay is to study the term interest in the Swedish taxation law by illustrating the issues that the lack of a definition has led to and how it may have affected the taxation of income. By investigating this, we have analyzed whether or not a legal definition would be beneficial and desirable. Interest is originally derived from economics, thereby is this aspect essential and interesting to considerate even when studying the legal aspect of it. The economical standpoint may vary from the legal approach. It is therefore of importance to reflect on how the economical term of interest relates to the juridical one. When trying to define interest one ought to consider the relationship between taxation and accounting. When studying this correlation, we could conclude that an unequivocal definition of the term interest would be neither beneficial nor desirable. However, when classifying a cash flow as interest, a number of prerequisites could be formulated on the basis of court law and juridical literature. Among these criterions, one of the most essential seems to be the one regarding foreseeability: a rate of return that a creditor receives from a debtor must be predictable to be considered interest. It can be established that the question regarding which cash flows may be defined as interest is far more intricate and extensive than this study can show. During the course of this essay, we also came to the conclusion that the question regarding the classification of a cash flow ought to be divided into three different questions: Is it interest? Is it treated as interest? Should the cash flow as a whole or just partly be treated as interest? In this essay, we have approached the two first questions, whereas the third is yet to be discussed.