Expatriate tax ebook - Sweden

Basis of taxation

Charge to tax
Residence
Income from employment
Source of employment
Benefits (in kind)
Expatriate concessions
Relief for foreign taxes
Deductions against income

Charge to tax
Taxation of expatriates moving to Sweden is based on the length of their stay.

A Swedish tax resident is liable to pay tax in Sweden based on worldwide income at ordinary income tax rates. A non resident individual is subject to tax in Sweden on source income only. A Special Income Tax for non resident individuals (SINK) is applicable on e.g. employment and pension income.

A double tax treaty may limit the right for Sweden to impose tax on certain items of income.

Residence
An individual will be considered a Swedish resident for tax purposes if:

• the individual is domiciled in Sweden, i.e. has his/her actual and permanent home here or
• the individual stays in Sweden continuously for more than six months (short stays abroad for holidays, etc. are disregarded). The tax liability will apply from the first day of the six month period.
  

There are no explicit rules in Swedish tax law governing what would constitute a continuous stay in Sweden. However, the Swedish Tax Agency’s opinion is that an individual who regularly stays overnight in Sweden in a consecutive six month period should be considered resident in Sweden. It should be noted that an individual could be deemed to stay in Sweden regularly even if the individual spends more nights abroad than in Sweden.

Income from employment
Generally, all earnings deriving from an activity, occasional or regular, are taxed as income from employment provided the income is not considered business income or income from capital. All earnings from an employer to an employee are reportable and taxable as income from employment, i.e. wages, fees, sickness allowances, severance pay as well as benefits in kind i.e. free meals, a company car, interest free loans, travel benefits and expense allowances, e.g. subsistence allowances and travel compensation.

Source of employment
In general, it is the place in which the services are performed.

Benefits (in kind)
In principle, all fringe benefits, i.e., any remuneration in kind received by an employee from his employer for services rendered, are taxable at their fair market value. For the most common forms of fringe benefits there are standardised valuations.

Expatriate concessions
Under certain conditions, foreign key employees working in Sweden for limited periods may qualify for a reduction of the income tax liability on their earnings. The reduction amounts to 25% and is applicable only if the employer/employee has applied for a ruling within three months after the work started in Sweden; if not the normal Swedish progressive taxation of personal income applies. The 75% tax scheme can only apply for three years and only if the stay there does not exceed five years.

The tax relief exempts the following remuneration from Swedish tax and social security contributions:

• 25% of salaries and benefits
• moving expenses (to and from Sweden)
• home travel expenses, two return tickets per year to the home country for the individual and family members
• children’s school fees.

Relief for foreign taxes
Sweden has signed agreements with a large number of countries to avoid or relieve double taxation of income. An individual may be considered as tax resident in Sweden and in another country at the same time. For Swedish tax purposes, residency in another country does not affect Swedish residency. However, if Sweden has a tax treaty with the other country that claims residency, tax reliefs are available.

In addition, Swedish internal tax laws allow reliefs to avoid double taxation on income provided certain conditions are met.

Deductions against income
Tax free basic deduction amounts to SEK 12,100 – 31,600 depending on the total taxable income. If the total taxable income exceeds SEK 322,300, the tax free basic deduction is always SEK 12,100.
Expenses, that are wholly, exclusively and necessarily incurred in the performance of duty may be deducted from employment income if paid for or reimbursed by the employer. Expenses of this kind include, for example:

• additional living expenses during business travel or temporary assignment
• travel expenses to and from work
• the costs of using one’s own car in business
• other costs which are necessary to perform the duty.

Some of these costs have to exceed a certain amount in order to be deductible. Others are only deductible up to a certain maximum limit or under special circumstances.

Employee social security contributions are, with certain limitations, also deductible. Contributions to a foreign or Swedish pension plan/insurance are generally deductible within certain limits if the contribution is subject to favorable tax treatment in the country of origin.

All taxpayers with unlimited tax liability are entitled to a basic deduction (see below). This adjustment is made automatically by the tax authorities.


Information about Sweden:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities
  

Last updated 8 May 2008

This information has been provided by Grant Thornton Sweden, a member firm within Grant Thornton International Ltd, and is for informational purposes only. Neither Grant Thornton Sweden nor Grant Thornton International Ltd can guarantee the accuracy, timeliness or completeness of the data contained herein. As such, you should not act on the information without first seeking professional tax advice.

Grant Thornton International Ltd and the member firms are not a worldwide partnership. Services are delivered independently by the member firms.
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