Tax in Sweden

Residents are subject to Swedish taxes on their worldwide income. Non-residents are taxed on salary earned from work done in Sweden, on certain pensions and on other income sourced in Sweden.

People who are present in Sweden for six months or more and regularly stay overnight are generally considered resident for tax purposes.

Employment income - Income from employment includes wage and salary income, directors’ fees, pensions, fringe benefits and most allowances. Special valuation rules apply to housing and car benefits. Education allowances provided by employers to their employees’ children are taxable for income tax and social security purposes, unless they're exempt under the foreign key personnel rules.

Other benefits received by residents from employment abroad (except for employment on Swedish ships or on Swedish, Danish or Norwegian airplanes) may be exempt if either of the following conditions applies:

• the employment abroad lasts for at least 6 months, and the income is taxed in the country of employment
• the employment abroad lasts for 12 months or longer in 1 country and no tax has been paid under the legislation or administrative practice of that country

An additional condition for both of the above alternatives are that visits to Sweden are restricted to an average of 6 days per month of the assignment period (for example, 42 days for 7 months), up to a maximum of 72 days during an employment year.

Employment income is taxed on a cash basis when the income is available to the employee. As a result, taxation occurs when the income becomes available and not when it is actually received or earned.

Salary income and other comparable benefits received by a non-resident for employment or received as commission for activities performed in Sweden from an entity other than the Swedish state or a Swedish municipality is exempt from tax if all of the following conditions apply:

• the recipient has been in Sweden for less than 183 days during a 12-month period
• the remuneration is paid by, or on behalf of, an employer not having a residence in Sweden
• the remuneration is not borne by a permanent establishment of the employer in Sweden

However, the 183-day rule does not apply if the employee’s work can be seen as the hiring of labour to a Swedish company (that is, to a Swedish economic employer). Hiring of labour means that an individual is directly or indirectly made available by a foreign employer to perform work in a company’s business in Sweden and the work is performed as an integrated part of that company’s activities and, entirely or partly, under the Swedish company’s control and management. In these situations, taxation could arise in Sweden. Several factors are considered when assessing whether the work can be regarded as hiring of labour, such as the following:

• who benefits from the work performed by the employee?
• who instructs the employee?
• who bears the cost?

In situations in which the work is regarded as hiring of labour, the 183-day rule does not apply to provide an exemption from Swedish taxation for Swedish workdays under 183 days. However, Swedish taxation may still be exempt as the economic employer concept only applies for non-residents working in Sweden for over 15 consecutive workdays, or a total of 45 workdays during a calendar year. Therefore, any work performed in Sweden under these thresholds is still exempt from taxation, provided the remaining criteria of the 183-day rule are met.

Foreign key personnel, who are experts or scientists with knowledge and skills that are scarce in Sweden, may benefit from an expat tax regime if they meet certain conditions. Expats can take advantage of it only if their applications are approved. The regime applies to people whose assignments won't exceed 5 years, and tax relief may be granted only for the first 3 years. Anyone who has resided in Sweden at any time during the 5 years preceding the calendar year when the assignment starts isn't entitled to tax relief under this regime. Furthermore, tax relief may be granted only if the person is paid by a Swedish company, branch or permanent establishment. The tax regime exempts certain remuneration from Swedish income tax and social security contributions.

To qualify for the expat tax regime, people must either receive at least SEK 94,601 (including benefits) per month for the 2020 calendar year or qualify as an expert. In addition, an application must be filed with the Expert Tax Board (Forskarskattenämnden) in Stockholm within 3 months of beginning the assignment.

Self-employment and business income - Residents' self-employment income is considered business income and is taxed at the same rates applicable to employment income. Taxable business income is calculated under the rules of sound accounting practices. Accounting profit and taxable income are the same, in principle, although tax law prescribes several adjustments to arrive at taxable income.

Losses resulting from business activities or earned income may be carried forward indefinitely, and offset against the same categories of income in future years.

Directors’ fees - Directors’ fees are considered employment income, regardless of where the services are performed. Directors’ fees and similar remuneration paid to non-resident members or deputy members of Swedish boards or similar bodies are treated as salary income and are subject to 25% tax, with no deductions allowed.

Investment income - Dividend income from Swedish and foreign shares, net interest income and income from rental activities are taxed as income from capital at a flat 30% rate. However, if such income is earned in connection with the operation of a business, it's taxed at the rates applicable to business income. Royalties are in general taxed as business income.

Non-residents are not subject to tax on interest received from Swedish bank accounts or on capital gains derived on sales of property, other than real estate and certain shares and securities described below. Unless a relevant tax treaty stipulates otherwise, dividends paid by a Swedish company to a non-resident are subject to tax at a rate of 30%.

Non-residents are subject to tax on income and capital gains derived from real property located in Sweden. The effective tax rate on such gains is 22% of the capital gain.

Interest expenses may be deducted from investment income. If the expenses exceed investment income, 30% of the expenses up to SEK 100,000 may be credited against taxes payable. For expenses exceeding SEK 100,000, the percentage of the tax credit is reduced to 21%.

Taxation of employer-provided stock options - Taxable income derived from a stock option incentive plan is generally taxed at the time the option is exercised. If double taxation occurs, the individual may be entitled to a foreign tax credit or tax exemption, depending on the applicable tax treaty or whether the individual is a citizen of a country within the European Union (EU). The value of the benefit is the spread credited to the employee on the date of exercise. The taxable benefit is treated as ordinary employment income. The benefit is also subject to social security contributions.

Income tax must be paid by the employer by the time the benefit is received by the employee. The tax must be deducted from the employee’s normal salary and forwarded to the tax authorities.

According to Swedish Supreme Administrative Court decisions in 2015 and 2018, option income can be tax-exempt if an individual earns the income outside Sweden while being a tax non-resident of Sweden but exercises the option while being tax resident of Sweden. These decisions primarily apply to EU citizens.

Capital gains are treated as investment income. Gains on listed shares are taxed at a rate of 30%. The rate is 25% for gains on unlisted shares. In addition, certain specific rules apply to companies if 50% of the voting capital is controlled by 4 or fewer shareholders.

Non-residents are taxed on capital gains on Swedish shares and foreign shares if they were tax resident in Sweden at any time during the 10 calendar years immediately before the year in which the transaction occurred. Tax treaties often shorten the 10-year period.

Taxation of non-Swedish shares is limited to shares purchased during the period the individual was tax resident in Sweden.

Residents are subject to tax on 22/30 of the capital gains on disposals of private homes located in Sweden or abroad. Consequently, gains derived from the sale of a primary residence are taxed at a rate of 22%. A substantial portion of capital losses, which varies depending on the asset generating the loss, may be deducted against capital gains and investment income and then also may generate a tax credit for tax payable on employment income.

Residents are liable to tax on capital gains on both Swedish and foreign shares.

The net wealth tax was abolished, effective from 1 January 2007.

The inheritance and gift taxes were abolished, effective from December 2004.

The real estate fee for privately owned properties is 1% of the assessed value. The maximum fee is SEK 8,349 per house. The owner should pay the real estate fee. The owner, or the owner as of 1 January, should pay the fee for the whole calendar year.

This fee also applies to non-residents owning real estate in Sweden. For business properties, other rates may apply.

Social security taxes are levied on salaries, wages and the assessed value of benefits in kind and are paid primarily by the employer. Payments are made to several programs, including general sickness insurance, basic old-age pension insurance and supplementary pension insurance. Contributions to these various programs are assessed and administered by a single authority. For 2020, the total average rate for most employers is 31.42%. In addition, the rate is 10.21% for people born between 1938 and 1954 (both years inclusive). The rate is 0% for those born in 1937 or earlier. For people born between 2002 and 2004, social security taxes are paid at a rate of 10.21% on monthly pay up to SEK25,000. The ordinary rate applies for the excess.

Social security is not payable by the employee. Although the employee pays a minor portion of social security (pension insurance contribution) through the tax return, this amount is normally fully creditable against the tax paid.

Some expats may apply to qualify for an exemption from some Swedish social security contributions.

The employee social security contributions described above are credited against income taxes in the year paid.

Self-employed individuals are subject to social security taxes on their net taxable profit. For 2020, the nominal social security rate is 28.97% for income from a business actively conducted by an individual.

In addition, the rate is 10.21% for people born between 1938 and 1954 (both years inclusive). The rate is 0% for those born in 1937 or earlier who carry on business activity. For passive business income, the rate is 24.26%, regardless of the person's age.

Tax on salaries, wages and other remuneration, including benefits in kind, is paid by employers. People who are self-employed, or who have business income as well as other non-employment income, may register as self-employed taxpayers. Their tax is calculated according to a preliminary tax return. Preliminary tax is payable monthly, beginning in February of the fiscal year and ending in January of the following year.

Expats generally receive a final tax assessment by mid-December of the year in which the tax return is filed. Any difference between the final tax due and the preliminary tax paid is either refunded immediately or must be paid by 90 days after the date of the final tax assessment.