TAX IN SWEDEN
Swedish tax liability applies to every person who is employed or runs their own business in the country. Running a business in Sweden involves a number of formalities that the entrepreneur must comply with – from meeting deadlines for settlements with the tax authorities through the payment of applicable taxes. It is advisable to know which regulations and deadlines set by the authorities a Swedish entrepreneur must comply with in order to avoid the consequences associated with late payments or undelivered documents. The exact extent of the taxes and their amount depend on the legal form and type of activity, the company’s turnover and whether the company in Sweden has employees.
TAX LIABILITY
If you run your own business in Sweden and live in the country, you are obliged to pay the relevant taxes in accordance with the current tax regulations. Failure to comply with the tax obligation within the deadlines set by the Swedish tax authorities may result in financial consequences – in addition to penal interest, an administrative fine may be imposed on the entrepreneur.
The Convention between the Government of the Republic of Poland and the Government of the Kingdom of Sweden on Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income of 19 November 2004 regulates the tax liability for both countries. As a result, income earned is not subject to double taxation and the tax obligation in Sweden is met in accordance with the applicable legislation.
Swedish taxes are a basic cost for a company. They must be paid periodically at the specified rates and on the dates set by the Swedish tax authority, the Skatteverket. The type and amount of taxes depend on the legal form and nature of the business, the turnover for the tax year, and whether the Swedish entrepreneur has employees.
Income tax in Sweden for individuals, among other things, for sole proprietorships is calculated on a general basis – based on the income earned by the company during the year. Swedish income tax for corporations, including companies, in 2020 is 28% on the company’s profit. The tax must be paid in the form of monthly advance payments, the amount of which is calculated by the authority on the basis of a declaration of the expected profit for the tax year. The profit declaration is submitted when registering the business with the tax office and at the beginning of each subsequent tax year.
VAT in Sweden (Mervärdesskatt), or so-called moms, is paid by companies offering to sell taxable goods and services. Swedish VAT must be charged on all transactions carried out at each stage of production and distribution. It is worth remembering that a transaction is understood to be the sale of goods, the provision of services, an exchange or an own payment from the company. VAT is settled by means of a tax return, which must be submitted to the tax office – Skatteverket – once a year, once every three months or once a month.
Companies in Sweden that employ workers are required to pay employer tax in addition to income tax and VAT. The Swedish employment tax (Arbeidsgiveravgift) and the employee’s advance income tax (Forskuddstrekk) are calculated on the basis of the employee’s gross salary including other employee benefits.
TAX RESIDENCE
A Swedish tax resident is a person who has resided in the country continuously for at least six months and has a permanent place of residence. Tax residency also entails significant ties to Sweden – a tax resident should have a centre of personal and economic interest, the so-called centre of life interests, within the country. This means that residents permanently live and work in Sweden.
A Swedish tax resident who either has citizenship of the country or has resided there for a minimum of ten years after leaving Sweden retains his or her residency for a period of five years after leaving the country. It is worth knowing that tax legislation in Sweden allows imposing income tax on gains from the sale of shares in a Swedish company for up to ten years from the date of loss of tax residence.
Persons who stay in Sweden for less than 183 days in a consecutive twelve-month period are considered non-residents and are entitled to a lump-sum income tax SINK of 25 per cent on the gross salary amount. The SINK tax does not require the filing of an annual tax return, but precludes deductions and thus tax refunds in Sweden.
TAX DISCOUNTS
The Swedish tax return filed once a year by employees and entrepreneurs should contain all information related to income earned and expenses incurred during the tax year. The annual return to the Skatteverket is also an opportunity to deduct certain costs incurred in connection with your own business or work.
The Swedish tax refund is calculated on the basis of the information the tax office has, and the documents attached to the tax return. Any costs incurred that qualify for a deduction must be properly documented – only then will the tax office take the allowances into account.
The Swedish general tax return entitles the taxpayer to deduct certain allowances related to working and living in Sweden. The costs of commuting to work must be documented by presenting fuel receipts or parking tickets. However, it is important to note that the distance between the place of work and the place of residence should be at least 5 kilometres or the commute by car should save a minimum of two hours of time compared to commuting by other means of transport. If a Swedish employee wants to deduct costs related to commuting by public transport, the distance between the workplace and the place of residence must be at least 2 kilometres.
The employee’s business trip allows for the deduction of transport, accommodation and food costs. For this purpose, it is necessary to present copies of air, ferry or coach tickets, fuel receipts and invoices or receipts documenting food and accommodation expenses for the seconded employee’s travel.
Tax benefits in Sweden also extend to persons who run two households – in Poland and in Sweden. A dual household entitles you to deduct travel expenses to your home country, but not more than once a week. The costs incurred are documented by airline tickets or fuel receipts. Swedish deductions also apply to a flat that is rented in Sweden – part of the costs related to rent, electricity, gas, heating and Internet and telephone bills can be deducted.
INCOME TAX
Swedish income tax is a progressive tax depending on the income earned in a given tax year. For individuals, i.e. employees and sole proprietors, income tax rates in Sweden range from 30% to over 50%.
National income tax in Sweden ranges from 0% to 20% depending on the amount of income earned. Kommun and Landsting, or Swedish local income taxes, depend on the municipality or region to which the taxpayer is assigned – their rates range from 30-35%. Proceeds from local taxes are used to finance the local health care or education system.
[INFOGRAPHIC:
Income tax rates for individuals in Sweden for 2020:
taxable income national tax local tax
from 0 to 490 700 SEK 0% 30-35%
more than 509 300 SEK 20% 30-35%]
Legal entities, including Swedish companies, pay income tax 2020 at a fixed rate of 28% on the company’s profit. A non-Swedish tax resident who works for a Swedish or foreign employer is taxed at a flat rate. In such situations, the rate of income tax paid (SINK – statlig inkomstskatt för utomlands bosatta) is 25%.
Swedish income tax in 2020 is:
- for foreign employees (non-residents tax) – 25%;
- for individuals – 0-20% (national tax) + 30-35% (local tax);
- for legal entities – 28%.
Non-Swedish tax residents working for a company without a permanent establishment in the country are not subject to income tax in Sweden. This only applies to employees who have spent less than 183 days in Sweden during the year.
If the actual income earned during the year differs from the income declared to the office, the company has the possibility to correct the preliminary declaration during the tax year. The final tax return is submitted at the end of the tax year – it is the basis for calculating the amount of tax to be refunded or paid. The Swedish tax return is sent by the Skatteverket to a digital mailbox or traditionally in the form of a printout delivered to the address indicated.
VAT
Swedish VAT (moms), or value added tax, is determined on the basis of the transaction carried out – the type of goods or services provided. It applies to all transactions carried out by the entrepreneur at each stage of production and distribution. Companies whose customers are all listed in the VAT register are exempt from registering for Swedish VAT.
The obligation to pay VAT means that a company in Sweden is entitled to make the relevant deductions. The entrepreneur should only pay the difference between output tax and input tax. Swedish output tax is the tax charged on sales, while Swedish input tax is the tax paid on purchases. An entrepreneur may deduct input tax if the transaction relates to purchases that are necessary for the operation of the business. For example, cars are excluded from deductibility.
There are three moms rates in Sweden: a basic rate of 25%, a reduced rate of 12% and a low rate of 6%. The reduced rate applies to groceries, hotel services, camping or handicrafts. The low rate applies to the press, cultural events, passenger transport services and copyright on certain works of art.
Swedish VAT is not charged in industries such as financial services, banking services, medical care and education, among others. VAT is also not charged when goods are exported to a country outside the European Union. If a company sells goods to a buyer doing business in the European Union who is registered for VAT, VAT in Sweden is not charged, and the tax liability is with the buyer. Moms tax must be charged when the purchaser is not registered for VAT.
ENTRY IN THE VAT REGISTER
The Swedish VAT register brings together entrepreneurs who are obliged to charge and pay a certain amount of VAT. Registration in the Swedish VAT register is possible via the Swedish Tax Agency’s electronic platform skatteverket.se or in paper form using form SKV 4620, which must be submitted directly to the local Skatteverket office.
A Swedish company that is obliged to calculate and pay VAT should be registered for VAT no later than two weeks before the start of business. If all the company’s customers are listed in the Swedish VAT register, the company is not required to register for VAT.
Entry in the Swedish VAT register also implies the need to keep records showing the amount of tax charged. A Swedish VAT payer should issue sales invoices that include the percentage of tax that is included in the sale price of the goods or services. Only invoices that include the VAT amount allow the deduction of input tax.
RULES FOR SUBMITTING VAT RETURNS
Mervärdesskatt is the applicable VAT in Sweden, i.e. the tax on goods and services. It is charged on each taxable transaction regardless of the stage of production or distribution, and is settled by means of a tax return. The Swedish VAT tax return submitted by the entrepreneur should contain all information concerning the transactions to which the moms tax relates.
The frequency of accounting to the tax authorities depends on the size of the company and the annual turnover of the business. This is determined when registering the company with the Skatteverket on the registration application.
VAT payers in Sweden should pay their tax by the 12 day of each month at the latest. An exception is made for medium-sized companies, which have the option to pay tax by the 26 day of each consecutive month.
TAXES ON EMPLOYMENT
A company that hire employees is required to pay a special employer tax in addition to standard taxes such as Swedish income tax or moms. The employer’s tax in Sweden is Arbetsgivaravgifter, which comprises, among other things, employment tax, employee pension contribution or insurance premiums.
A Swedish employer is obliged to pay taxes and contributions related to the employment of employees. The Arbetsgivaravgifter calculated on the tax base, i.e. the gross salary amount and other employee benefits, is 31.42%.
The Swedish employer’s tax is 31.42% on the amount of gross salary and other benefits. It consists of, among other things:
- employment tax – 11.62%,
- pension contribution – 10.21%,
- insurance premiums – 3.55%.
The employment of employees in Sweden must be reported to the Skatteverket, which will provide the employer with the PAYE forms necessary to calculate and pay employment tax. On the form received, the employer’s contributions and the tax for the employees are detailed – the employee’s salary, other employee benefits, the amount of calculated tax and contributions must be shown.
OTHER TAXES
In Sweden, there are also taxes referred to as corporate taxes. Swedish corporate taxes include corporate tax, property tax, mortgage stamp duty or environmental taxes (energy tax, carbon tax, sulphur tax).
Taxable capital gains from the sale of a company are treated as business income, with a tax rate of 22%. The tax exemption applies to capital gains derived from the sale of shares in a Swedish resident company. The condition is that the funds are used for business purposes. If the company is resident within the European Union, business purposes are recognized when the company holds a minimum of 10% of the shares in the subsidiary. If the company operates outside the European Union, its size should be comparable to forms such as a Swedish limited liability company or a Swedish business association.
Companies also pay an annual property tax in Sweden. All real estate is taxed, except for dwellings and semi-detached houses. The Swedish real estate tax ranges from 0.2% to 2.8% and is deductible from the corporate tax base. The transfer or granting of a mortgage with an interest rate of 2% on real estate and land use rights is subject to a stamp duty of 1.5% (for individuals) or 4.25% (for corporations).
Sweden also has a dividend tax. Kupongskatten, or Swedish dividend tax, is levied at source at a rate of 30%.
IMPORTS AND EXPORTS
The exchange of goods between Poland and Sweden is possible due to both countries’ membership in the European Union (EU). Swedish imports and exports require compliance with current regulations relating to customs duties and VAT. Individual goods are segregated into categories according to the established customs rates and tariffs. The amount of customs duties is set by the Swedish Customs Authority – Tullverket.
VAT charged on the importation of goods must be reported in the tax return to the tax authority – Skatteverket. For companies that are not liable for Swedish VAT, the import must be reported directly to the customs office (Tullverket). The customs value of the goods should be stated in Swedish kronor (SEK). Most goods are subject to a standard VAT rate of 25% on their value. A reduced rate of 12% mainly applies to foodstuffs excluding tobacco and alcohol, while a low rate of 6% covers books and magazines.
The Swedish tariff ranges from 0% to 20% and the amount payable depends on the declared value of the goods, including the cost of transport to the European Union border.
Restrictions related to entry into Sweden apply to animals, alcohol, tobacco, weapons and ammunition, dangerous instruments and medical syringes with needles. No drugs, doping substances or pornography may be imported into Sweden. When it comes to the export of goods, restrictions apply to, inter alia, combustible materials, products of strategic importance and items of special cultural value.
