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Sweden - Income Tax

Sweden - Income Tax

Taxation of international executives

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Related content

Tax returns and compliance
Tax rates
Residence rules
Termination of residence
Economic employer approach
Types of taxable compensation
Tax-exempt income
Expatriate concessions
Salary earned from working abroad
Taxation of investment income and capital gains
Additional capital gains tax (CGT) issues and exceptions
General deductions from income
Tax reimbursement methods
Calculation of estimates/prepayments/withholding
Relief for foreign taxes
General tax credits
Sample tax calculation

All information contained in this document is summarized by KPMG AB, the Swedish member firm of KPMG International, based on Inkomstskattelagen (1999:1229), Lag (1998:674) om inkomstgrundad ålderspension, Socialförsäkringslagen (1999:799), Socialavgiftslagen (2000:980), Lag (1984:1052) om statlig fastighetsskatt, Lag (2007:1398) om kommunal fastighetsavgift, Skattebetalningslagen (1997:483), Lag (2007:346) om skattereduktion för hushållsarbete, Taxeringslagen (1990:324), Folkbokföringslagen (1991:481), Lag (2001:1227) om självdeklarationer och kontrolluppgifter.

Tax Returns and Compliance

When are tax returns due? That is, what is the tax return due date? 

Individual tax returns are due by 2 May of the year following the income year (calendar year).

What is the tax year end?

The tax year ends 31 December.

What are the compliance requirements for tax returns in Sweden? 

Residents and Non-Residents

Full-year and part-year residents in Sweden file general tax returns. Tax return forms may be partly pre-printed on the basis of income statements issued by employers, banks, etc. If a spouse or child has income, they must file their own return (joint returns do not exist).

The tax agency issues final notices of tax assessments from June through December in the year following the income year. Where tax withheld exceeds the final tax liability, any excess is refunded when the final assessment is issued. Otherwise, if the tax withheld falls short of the final tax liability, the residue must be paid within three months after the final assessment has been issued.

Interest is payable on unpaid taxes as from 13 February in the year following the income year for unpaid taxes exceeding SEK 30,000 and, from early May, for all unpaid taxes.

Non-residents with only Sweden-sourced employment income are normally not required to file a tax return.

Tax rates

What are the current income tax rates for residents and non-residents in Sweden?

Employment income for non-residents is taxed at a flat rate of 25 percent. Investment income is subject to tax ata flat rate of 30 percent.

Employment income for residents and business income is subject to municipal income tax and national income tax. Municipal income tax is levied at a that varies from one municipality to another and may be adjusted annually. The present average rate is 32.12 percent. National tax on employment income is levied at a rate of 20 percent on the portion of earned income between SEK 455,300 and SEK 662,300. The rate is 25 percent on the portion of earned income exceeding SEK 662,300.

Residents Income Tax Table for 2018 – Employment Income and Business income

Municipal Income Tax on Earned Income and Business Income

Levied with 32.12 % (average rate) on total of taxable income.

National Income Tax on Earned Income and Business Income

Taxable income (SEK ) Tax on lower amount Tax within bracket
455,300 – 662,300
SEK 0 20%
Over 662,300
SEK 41,400
25%

The maximum marginal rate on earned income is approximately 61% in practice.

Personal Earned Income Allowance

Full Year Residents

Total Income (SEK) Allowance (SEK )
19,300 – 45,300
19,300
45,400– 123,700
19,400 – 35,000
123,800 – 141,800
35,100
141,900 – 357,800
34,400 – 13,500
357,900 and above
13,400


Part Year Residents receive a prorated portion of the minimum SEK 13,400 full year allowance.     

Personla tax credit for People in Work (Work Allowance)

Total Income (SEK ) Credit (SEK )
100,000
9,935
300,000
22,481
500,000
26,682
700,000
24,164
900,000 18,164
1,100,000 12,164
1,300,000 6,164
1,500,000 164

The example calculation above is assuming a municipal tax rate of 32.12% (average rate for 2018) and that the tax payer is tax resident in Sweden during the whole year of 2018.

Income tax table for 2018 – Investment income

Taxable income bracket    Tax on lower amount Tax rate on income in bracket
From SEK  To SEK  SEK  Percent
0 Over Flat rate 30

Non-residents

Income tax table for 2018 – Employment income

Taxable income bracket    Tax on lower amount Tax rate on income in bracket
From SEK  To SEK  SEK  Percent
0 Over Flat rate 25

 

Income tax table for 2018 – Business income

Municipal Income Tax on Business income on total of taxable income.Levied with 25 percent on total of taxable income.

National Income Tax on Business income

Taxable income
(SEK )
Tax on lower amount Tax within bracket
455,300 – 662,300
SEK 0 20%
Over 662,300
SEK 41,400 25%


Income tax table for 2018 – Investment income

Taxable income bracket  Tax on lower amount Tax rate on income in bracket
From SEK  To SEK  SEK  Percent
0 Over Flat rate 30

Residence Rules

For the purposes of taxation, how is an individual defined as a resident of Sweden? 

An individual is considered a resident in Sweden for tax purposes if one of the following three conditions is met:

  • The individual has his/her real home and dwelling in Sweden.
  • The individual stays in Sweden during a lengthy period of time (permanent stay) and with only occasional interruptions.

To be considered to stay in Sweden during a lengthy period of time, the individual must have stayed in Sweden continuously during six months. Tax Agency practice based on case law suggest that two days per week on average with overnight stays during a six months period could trigger Swedish tax residency. The employee is unlimited tax liable from day one in Sweden, if he has stayed in Sweden during a lengthy period of time.

  • has essential connections with Sweden (and has been a prior resident in Sweden).

A prior resident in Sweden are considered to have essential ties with Sweden during five years after departure, if he doesn’t prove that he does not have any connections with Sweden. To keep a home in Sweden is a strong factor to still be considered to have essential connections with Sweden.

When deciding whether an individual is a resident or non-resident all days count as a day in Sweden; workdays, non-work days and travel days as long as they stay in Sweden during any part of that day.

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.

There is no de minimus number of days rule.

What if the assignee enters the country before their assignment begins?

The residency status will be based upon the arrival date. 

Termination of residence

Are there any tax compliance requirements when leaving Sweden? 

The individual must file a Moving abroad application with the Swedish Tax Agency upon departure.

There is not exit taxation. However, for any remuneration received after departure but for work performed in Sweden Swedish taxes are due, either under normal progressive tax rates (for tax residents) or flat rate of 25 percent (for non-tax residents).

Please also note that Sweden will source stock awards from the date of grant to the date of vesting. However, the applicable tax treaty must be analyzed from a sourcing perspective.
Moreover, it should be observed that taxation is triggered if an individual has postponed capital gains taxation on stocks when a buying company or cooperative society offers stocks in exchange for the sold stocks instead of cash.

An individual who is considered non-resident in Sweden after departure can be subject to taxation on capital gains on shares and other securities. Should the disposal be made during ten years following the departure from Sweden, provided that the shares/securities were acquired while the individual was tax resident in Sweden, the capital gain will be subject to tax, provided the tax treaty between the countries doesn’t say otherwise.

What if the assignee comes back for a trip after residency has terminated?

Normally, the residency will not be extended. However, it shall be noted that the residency may still be valid if it can be concluded from the circumstances that the assignee still resides in Sweden. The tax agency may decide the above on a case-by-case study. 

Communication between immigration and taxation authorities

Do the immigration authorities in Sweden provide information to the local taxation authorities regarding when a person enters or leaves Sweden?  

No.

Filing requirements

Will an assignee have a filing requirement in the host country after they leave the country and repatriate? 

An assignee is obliged to file a Swedish tax return the year after repatriating on income derived from Sweden while resident here. Payments made after the repatriation but attributable to work performed in Sweden are taxed under the special income tax for non-residents at a flat rate of 25 percent instead of the progressive rate (assuming non-residency after repatriation).

The assignee should, when repatriating, deregister from the national registration.

Economic Employer Approach

Do the taxation authorities in Sweden adopt the economic employer approach to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Sweden considering the adoption of this interpretation of economic employer in the future? 

No. Please note, as of January 2018 a proposal to introduce the economic employer concept from January 2019 is under discussion, but has not yet been presented in its final form.

De minimus number of days

Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days? 

Not applicable.

Types of taxable compensation

What categories are subject to income tax in general situations? 

The general rule is that all remuneration and benefits, whether in-cash or in-kind, in respect of an employment or temporary assignment constitute taxable income. Typical items of an expatriate compensation package are treated as taxable as follows:

  • base salary
  • reimbursement of taxes

Remuneration received free of tax will be grossed up for income tax purposes to a pre-tax gross salary.

  • school tuition reimbursements
  • cost-of-living and home leave allowances
  • expatriation premiums for working in Sweden
  • the benefit of free accommodation in employer-owned premises would be valued at market value

In the case of employer-rented accommodation, the value of the benefit would probably be equal to the rent paid by the employer. Where the employer reimburses rent paid by the employee to him/her the whole amount of the rent constitutes taxable employment income for the employee. The two latter cases also apply where (higher) rents are paid for furnished accommodation.

  • the provision of a company car

The provisions on assessing the taxable benefit of a company car are complex. Company cars are taxed at standard values, based on a given list price. Benefit of free fuel is taxed separately from the company car.

  • the provision of rest and relaxation facilities, or the contributions paid to the employee and/or his/her family for such purposes, constitutes taxable income
  • low-interest loans to employees and employer-financed stock options acquired below market value are generally taxable as employment income

Employer’s contributions to a foreign pension plan may under certain conditions constitute taxable income, unless corresponding approval is granted or the plan is deemed to be tax qualified in Sweden or a tax exemption follows from tax treaty provisions.

  • employee stock options as defined for Swedish tax purposes are generally taxed at exercise

The taxable value is determined as the fair market value of the underlying stocks at the time of exercise less the strike price of the options and any premiums paid by the employee.

  • under Swedish tax laws, compensation is taxable when available to the employee (at the employee’s disposal), even if paid later

Where remuneration becomes available to the employee after his/her departure from Sweden (when he/she has become a non-resident of Sweden), such remuneration would be taxable if it refers to services previously performed in Sweden. However, the income will in this case be taxed at the non-resident rate of 25 percent.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Sweden? If so, please provide a general definition of these areas. 

Typical tax-free benefits include the following items.

Reimbursed moving expenses

  • Moving expenses, including transportation of the employee and his/her family, when the move is induced by a change in the place of employment.

Private medical care

Free private medical care is currently tax-free. However patients’ fees for care within the government financed medical system will be taxed if reimbursed by the employer.

The ceiling for the sickness benefit qualifying income will be increased from seven and a half times to eight times the price base amount from 1 July 2018.

Group life assurance plan

  • Normal contributions to a group life assurance plan. 

Expatriate concessions

Are there any concessions made for expatriates in Sweden?

The content of the rules, the conditions for them to apply, and the categories of personnel that may qualify are summarized below.

Contents

  • 25 percent of gross remuneration is exempt from income tax.
  • Exemption will also cover reimbursement of moving expenses, home leave (twice a year for the employee and family members), and certain school fees for nine-year compulsory school and for upper secondary school.
  • Social security is not levied on tax-exempt amounts.
  • Rules to apply for the first three years of the temporary stay in Sweden.

Conditions

  • The employee must not be a Swedish citizen.
  • The employee must not have been resident nor had his/her habitual abode in Sweden at any time during the five calendar years preceding the year when the temporary assignment started.
  • It is required that the temporary assignment is intended not to last longer than five years.
  • The employer must be resident in Sweden or be a foreign enterprise with a permanent establishment in Sweden.
  • The authority granting exemption, Forskarskattenämnden, will decide if the employee meets the necessary requirements. The decision may be appealed. An application must be filed within three months after the beginning of the assignment. 

Categories of personnel

Qualification based on Employment Income Level

Provided that the above conditions are met, an expatriate with an employment income level exceeding SEK 89,400 (2017) automatically qualifies for the relief. However, an application will still have to be filed within three months after the beginning of the assignment.

Should not the employment income level requirement be met, the relief can still be applicable for the following categories of personnel:

  • Specialists and experts with an expertise not available or difficult to find in Sweden (such as technical experts).
  • Scientists employed in industry as well as any research institute with an expertise not available or difficult to find in Sweden.
  • Executives and other key personnel (such as directors, senior management, and top-level specialists in different fields such as administration, logistics, marketing, and IT).

Salary earned from working abroad

Is salary earned from working abroad taxed in Sweden? If so, how? 

Under internal law income earned worldwide by a tax resident person is taxable in Sweden.

Where a resident of Sweden performs work abroad as an employee, any remuneration received in respect of such work may be exempt from Swedish income tax under one of the following conditions:

  • The employment and the stay abroad last for six months or more and the income has been taxed in the country where the work is performed. 
  • The employment and the stay last for one year or more in one country. In this case, the income need not be taxed in the country where the work is performed, but there must be a bona fide reason for non-taxation, other than that the income is exempt under a tax treaty.

Furthermore, exemption will only be granted where visits to Sweden do not exceed in average of six days per calendar month or in aggregate 72 days during a 12-month period. The rules may, nevertheless, apply if the stay abroad has to be interrupted because of war, earthquake and similar circumstances or due to illness of the employee or a member of his/her family. The rules imply full exemption, that is, the exempt income is not taken into account for progressing the individual’s tax rates.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Sweden? If so, how?

Investment income includes dividends, interest, capital gains, and rental income from private residences. This type of income is subject to tax at a flat rate of 30 percent.

Dividends, interest, and rental income

Dividends

Dividends are generally taxable as investment income at a flat rate of 30 percent. However, part of the dividends from closely held companies may be taxed as employment income in the hands of a shareholder who actively works or who has actively worked for the company to a significant degree during the last five years.

Interest

Interest is taxed as investment income at a flat rate of 30 percent.

Rental income

Rental income from immovable property such as a private dwelling is taxable as investment income at a flat rate of 30 percent. A standard deduction of SEK 40,000, plus 20 percent of the gross rental income, is allowed. If the rental object is a flat, the 20 percent deduction does not apply. Instead, other deductions are available. Other rental income from immovable property, that is, not from private dwellings, is taxed as business income and hence at ordinary progressive tax rate.

If the property or flat is let out to the owner’s employer, or to his/her own company, deductions above do not apply. Instead, a reasonable deduction is allowed which is normally considerably lower than deductions above

Gains from stock option exercises

Please note that this only refers to employee stock options.

Residency status Taxable at:
  Grant Vest Exercise
Resident N N Y
Non-resident N N Y
Other (if applicable) N/A N/A N/A

Foreign exchange gains and losses

Regardless if the gain accrues by a business activity or not, exchange gains are considered a taxable income in Sweden. An exchange gain is taxable as investment income at a flat rate of 30 percent.

If payments are received due to a sale of assets in a foreign currency and the money is exchanged within 30 days, the exchange rate on the day of exchange shall be applied when calculating the gain/loss. 

Principal residence gains and losses

22/30 of principal residence gains are taxed at a flat rate of 30 percent. Taxation may be deferred if a substitute home is bought within the EU and if certain criteria are met. Tax of 0.5 percent of the deferred gain is levied annually.

Moreover, under general rules for capital losses, for net capital losses not exceeding SEK 100,000 the taxpayer is entitled to a tax relief equal to 30 percent of the loss. Any portion of the loss exceeding SEK 100,000 will entitle the taxpayer to a tax relief of 21 percent. The tax credit can be used to set-off national and municipal income tax and the municipal real property fee.

Please note that Sweden also taxes gains on properties located outside of Sweden if the individual is a tax resident in Sweden at the time of signing the sales contract.

Capital losses

Capital losses may be set-off against capital gains. Depending on type of gain/loss, the gain/loss may be pro-rated. Please also see above regarding deductible amounts.

Personal use items

On property used by the taxpayer himself/herself for private purposes, gains are included in taxable investment income only to the extent that the gain exceeds SEK 50,000 per year. Losses on such assets are not deductible.

Gifts

There is no gift tax.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Sweden? If so, please discuss. 

Not applicable.

Are there capital gains tax exceptions in Sweden? If so, please discuss. 

Pre-CGT assets

Not applicable. Please see above under Personal Use Items. 

Deemed disposal and acquisition

Not applicable.

General deductions from income

What are the general deductions from income allowed in Sweden?

In regard to employment income, the tax allowable items include expenses for travel between home and office to the extent that such expenses exceed SEK 11,000 and certain criteria are met. Increased cost-of-living during business trips, temporary assignments away from home and other necessary expenses related to the employment are allowable to deductions subject to certain restrictions.

For 2017, a resident taxpayer is granted an income-related personal allowance ranging from SEK 13,400 to SEK 35,100. For part-year residents, an allowance of SEK 13,400 is granted on a pro rata basis.

Alimony paid to a divorced spouse is deductible if the liability is established through a written agreement or by a court order. Alimony payments received constitute taxable income. Maintenance paid to children is not deductible.
Interest not attributable to a business activity is fully deductible against investment income. Where investment income totals a loss not exceeding SEK 100,000 the taxpayer is entitled to tax relief equal to 30 percent of the loss. Any portion of the loss exceeding SEK 100,000 will entitle the taxpayer to a tax relief of 21 percent. The tax credit can be used to set-off national and municipal income tax and the municipal real property fee. Any excess/loss cannot be carried forward.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Sweden? 

The following is the normal method of recognizing tax reimbursements paid by the employer:

  • current year gross-up 
  • one year roll over may be used under certain conditions.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in Sweden? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on? 

International double taxation is avoided or relieved in three different ways:

  • deduction from income of foreign income taxes paid 
  • credit of foreign income tax against Swedish income tax 
  • tax exemption (applicable only in respect of income from employment abroad).

The rules apply only to residents of Sweden. 

Sweden has an extensive network of tax treaties covering income tax. Sweden generally applies the tax credit for foreign tax relief.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Sweden? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

Resident employers are required to withhold income tax from salaries, wages and other remuneration, normally according to tables determined by the Tax Agency. The withholding is based on a tax bill (an A tax bill) issued automatically by the tax agency stating which tax table to use when computing the withholding. An employee may apply for an adjusted tax bill based on estimated taxable income, such as, in the case of interest expenses, high deductible losses or alimony payments to a divorced spouse. Non-resident employers without a permanent establishment in Sweden are generally not subject to the withholding requirement. Instead, the employee may apply for a Special A-tax bill and make estimated tax payments on a monthly basis.

For companies with a turnover subject to VAT less than SEK 40 million the tax collection return should be submitted not later than the 12th of the month following the withholding month. Tax withheld is due to the tax agency not later than the 12th of the month following the withholding month (in January and August the 17th). For companies with a turnover subject to VAT exceeding SEK 40 million the tax collection return should be submitted not later than the 26th of the month following the withholding month (in December, the 27th). Tax withheld is due to the tax agency not later than the 12th of the month following the withholding month (in January the 17th).

As of July 1, 2018, certain categories of employers (mainly construction industry), and with more than 15 employees, have to file an income statement for each individual on a monthly basis. For all other employers, this new provision will apply as of January 1, 2019.

When are estimates/prepayments/withholding of tax due in Sweden? For example: monthly, annually, both, and so on.

Interest is payable on unpaid taxes (difference between the preliminary tax and the final taxes) as from 13 February in the year following the income year for taxes exceeding SEK 30,000 and from early May for taxes below SEK 30,000.

General tax credits

What are the general tax credits that may be claimed in Sweden? Please list below. 

The employee social security contributions are fully credited against the income tax.

A tax reduction can be claimed for costs relating to household services. There are two different service types, ROT-avdrag (tax-deduction for domestic service work in reparation, renovation and maintenance of houses) and RUT-avdrag (tax-deduction for domestic service work). The tax reduction equals 50 percent of the labor cost of the household service. The reduction is capped at SEK 50,000 per person and per year for both RUT and ROT together.

Sample tax calculation

This calculation assumes a married taxpayer resident in Sweden with two children whose three-year assignment begins 1 January 2018 and ends 31 December 2020. The taxpayer’s base salary is USD 100,000 and the calculation covers three years.

  2017USD  2018USD  2019USD 
Salary 100,000 100,000 125,000
Bonus 20,000 20,000 25,000
Cost-of-living allowance 10,000 10,000 10,000
Housing allowance 12,000 12,000 12,000
Company car 6,000 6,000 6,000
Moving expense reimbursement 20,000 0 20,000
Home leave 0 5,000 0
Education allowance 3,000 3,000 3,000
Interest income from non-local sources 6,000 6,000 6,000

Exchange rate used for calculation: USD 1.00 = SEK 8.00.

Other Assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.
  • Interest income is not remitted to Sweden.
  • Moving expenses paid by the employer, not by employee.
  • The company car is used for business and private purposes and originally cost USD 50,000. Standard taxable value based on cost: USD 7,287.50 at given exchange rate.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.
  • 2018 tax rates and tax bands used for the 2019 calculation.

Calculation of taxable income

Year-ended 2017SEK  2018SEK 2019 SEK 
Days in Sweden during year 365 365 365
Earned income subject to income tax      
Salary 800,000 800,000 1,000,000
Bonus 160,000 160,000 200,000
Cost-of-living allowance 80,000 80,000 80,000
Net housing allowance 96,000 96,000 96,000
Company car 58,300 58,300 58,300
Moving expense reimbursement 160,000 0 160,000
Home leave 0 40,000 0
Education allowance 24,000 24,000 24,000
Total earned income 1,378,300 1,258,300 1,618,300
Deductions
-13,200
-13,400
13,400
Total taxable earned income (taxed at progressive rates)
1,205,100
1,244,900
1,444,900
Other income (capital income, flat tax rate 30%)
48,000
48,000
48,000

 

Calculation of tax liability 

  2017SEK  2018SEK 2019SEK 
Taxable income 
1,205,100
1,244,900
1,444,900
Taxable capital income
48,000
48,000
48,000
Swedish tax thereon
550,849 568,792 767,255
Less: 
     
Domestic tax rebates (dependent spouse rebate)
0 0 0
Foreign tax credits
0 0 0
Total Swedish tax 550,849 568,792 684,792

Foreign Financial Assets

Is there a requirement to declare/report offshore assets (e.g., foreign financial accounts, securities) to the country’s fiscal or banking authorities?

No. However, income from offshore assets must be declared in Sweden.

© 2018 KPMG AB, a Sweden corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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