Taxes in Sweden, Taxation in Sweden, Taxes system in Sweden
Sweden personal Income Tax
Individuals pay both national income tax and municipal income tax. In 2010, individual income tax rates in Sweden change between 54% and 61%, 57.77% being the average tax rate.
Average municipal tax rate by 2010 is 31,56% (was 31.52% previous year)
Average contribution to the Swedish Church excluding funeral fee is 0.99%
Average funeral fee is 0.22%
National Income Tax: 25%
AVERAGE TAX RATE: 57.77%
(was 57.73% previous year)
Maximum municipal tax rate by 2010, including contribution to the Swedish Church and funeral fee is: 36% (in SOLLEFTEA)
National Income Tax: 25%
MAXIMUM TAX RATE: 61.00%
Maximum municipal tax rate by 2010, including the funeral fee but NOT the contribution to the Swedish Church is: 34.75% (in RAGUNDA)
National Income Tax: 25%
MAXIMUM TAX RATE WITHOUT CHURCH TAX: 59.75%
Minimum municipal tax rate by 2010, including contribution to the Swedish Church and funeral fee is: 29.73% (in KΔVLINGE)
National Income Tax: 25%
MINIMUM TAX RATE: 54.73%
Minimum municipal tax rate by 2010, including the funeral fee but NOT the contribution to the Swedish Church is: 29.00% (in VELLINGE)
National Income Tax: 25%
MINIMUM TAX RATE WITHOUT CHURCH TAX: 54.00%
An individual's income is divided into 3 categories: business income, employment income and capital income. The average municipal tax rate is approximately 31.56% and is levied on total taxable employment income less a personal allowance. A basic national income tax of 20% is levied on taxable income exceeding SEK 372,100 (for 2010). A higher national tax of 25% is levied on taxable income in excess of SEK 532,700 (for 2010). In total, a maximum rate of approximately 57.77% is levied on average. Business income is taxed at the same rate as employment income. Dividend and interest income are taxed at a flat rate of 30%.
Individuals who are liable to Swedish tax have to pay tax on their worldwide income and capital gains. Taxable income includes all remuneration received from employers, whether in cash or in kind, such as free food, free accommodation, company cars etc. Pensions, unemployment benefits etc are also included in the taxable income. It is permissible to deduct certain costs from the income, e.g. travelling costs between work and home.
A foreign national will be liable to tax if he is regarded as resident in Sweden, if he has an essential connection to Sweden or if the individual is present in Sweden for a period of more than 183 days during the tax year.
Non-residents are subject to tax only on income from sources in Sweden. Employment income is taxed at a flat rate of 25%.
Capital income is taxed separately from income from employment at a rate of 30% and is not subject to municipal income tax. Capital income is comprised of interest, gains from the sale of capital assets, gains from the sale of real estate, dividends etc. Interest expenses and capital losses can be set off against capital income. 30% (or 21% when the total net capital loss exceeds SEK 100,000) of a net capital loss can be set off against tax on income from employment.
Tax Deductions and allowances Personal allowances adjusted in relation to the total amount of income are available. Expenses incurred for the purpose of acquiring or maintaining income are deductible against the same source of income. Other deductions from employment income include workrelated travel expenses and increases in living expenses resulting from work-related travel or maintenance of more than 1 dwelling, premiums paid for private pension insurance and alimony. A tax reduction of 50% of costs relating to housekeeping is available since housekeeping is considered a cost for repair, maintenance and rebuilding of a private dwelling. The tax reduction is limited to SEK 50,000 per year.
Residence An individual living or regularly residing in Sweden is considered resident for tax purposes. An individual that has been living in Sweden previously is considered resident even after departure from Sweden if he/she retains essential ties with Sweden, such as a permanent home or family.
Tax Filing status Spouses and children are taxed separately for income tax purposes.
Other taxes on individuals:
Capital duty No
Capital acquisitions tax No
Inheritance/estate tax No
Net wealth/net worth tax No
Stamp duty A stamp duty is levied on the transfer of real estate and is payable by the purchaser. The standard rate is 1.5% of the market/transfer value of the property if the purchaser is an individual. A stamp duty of 2% is levied on the value of a real estate mortgage.
Real property tax Individuals are liable for a municipal fee at a maximum of SEK 6,387 (for 2010) on real property owned in Sweden.
Social security contributions Contributions by the selfemployed amount to 29.71% (for 2010), plus a pension insurance fee of 7% (on employment income up to SEK 412,377 (for 2010).The 29.71% rate is reduced for individuals between 18 and 25 and for individuals born between 1938 and 1944. Social security contributions for employed individuals are paid by the employer except for the pension insurance fee of 7% on employment income up to SEK 412,377 (for 2010). The maximum charge is SEK 28,900 (for 2010) and is fully credited against other income taxes.
Sweden Tax year Swedish tax year is the calendar year Filing and payment Individuals with taxable employment income of at least SEK 18,000 during the tax year must file a tax return and submit it to the tax office by 2 May of the year after the tax year (3 May for 2010).
Penalties An initial late fee of SEK 1,000 is levied for late returns by individuals, subject to additional penalties if the failure continues. A surcharge of 40% of the tax due on hidden income applies if false information is provided (which may be reduced to 10% if the tax authorities have information available to correct the fault). If filing is incomplete or the taxpayer fails to file a return, the tax authorities may estimate the tax payable. Interest penalties are levied on outstanding taxes.
Sweden Corporate Tax
Sweeden corporate tax rate is 26.3%.
Residence A corporation is resident in Sweden if it is registered with the Swedish Companies Registration Office.
Basis Residents are taxed on worldwide income. Nonresidents are taxed on business income from real estate or a permanent establishment (PE) in Sweden, income on the disposal of a Swedish housing association and dividend income from shares in Swedish economic associations. A royalty payment to a foreign recipient is deemed to constitute a PE for the foreign recipient and is taxed accordingly.
Taxable income Corporation tax is imposed on a company's profits, which consist of all types of income. All expenses incurred in obtaining or safeguarding income subject to tax are deductible in computing taxable income. However, permanent nondeductible items exist.
Taxation of dividends Dividends received by a Swedish resident company from another Swedish company are exempt provided the shareholding is business-related (see under "Participation exemption"). Dividends not tax exempt are included in business income and taxed at 26.3%.
Capital gains tax Capital gains derived from the sale of shares in a resident company are tax exempt provided the shareholding is business-related (see under "Participation exemption"). Shares in companies resident in the EU (including shares held as inventory) are also considered business related, provided the holding represents at least 10% of the capital and other criteria are fulfilled. Non-tax-exempt capital gains are included in business income and taxed at 26.3%.
Losses Losses may be carried forward indefinitely. Complex rules on the limitation of the use of losses exist upon a direct or indirect change of ownership.
Alternative minimum tax No
Foreign tax credit Foreign tax paid may be credited against the Swedish tax on the same profits, but the credit is limited to the amount of Swedish tax payable on the foreign-source income.
Participation exemption The participation exemption applies to dividends derived by a Swedish resident company from another resident company and to capital gains from the sale of shares in a resident company provided the shares qualify as business related (shares held as inventory do not qualify). Unquoted shares constituting fixed business assets are always deemed business related. Quoted shares that constitute fixed business assets are deemed business related if the holding amounts to at least 10% of the company's voting rights or is considered necessary for conducting the business of the shareholding company. In addition, quoted shares must be held for at least 1 year. The participation exemption, in certain cases, may be extended to dividends received and capital gains on the sale of shares in nonresident companies. As from 1 January 2010, an exemption also exists for partnerships or holdings in partnerships. Special rules apply to investment companies.
Holding company regime No
Tax Incentives No
Dividends A final withholding tax of 30% applies to dividends paid by a Swedish company to a foreign company. The rate may be reduced or an exemption provided under a tax treaty, the domestic participation exemption or the EC parent-subsidiary directive.
Interest There is no withholding tax on interest payments.
Royalties There is no withholding tax on royalty payments. A royalty payment to a foreign recipient, however, may be deemed to constitute a PE for the foreign recipient and be taxed at the corporate rate.
Branch remittance tax No
Other taxes on corporations:
Capital duty No
Payroll tax No (see under "Social security").
Real property tax Annual real property tax is levied at rates ranging between 0.2% and 2.2% on the tax assessed value (as determined by the tax authorities) on all types of real estate (however, see below). The tax is deductible in computing corporate tax liability. A real property fee (instead of property tax) must be paid to the municipality on dwellings and duplex dwellings. The annual fee for dwellings is the lower of SEK 6,387 (for 2010) or 0.75% of the property's assessed value. For duplex dwellings, the fee is the lower of SEK 1,277 (for 2010) or 0.4% of the real property's assessed value.
Social security contributions The general aggregate contribution by an employer on behalf of an employee is 31.42% (for 2010). Employees born 1937 or earlier are not subject to the special salary tax on business income. The rate for individuals between ages 18 to 25 is 21.31%.
Stamp duty Stamp duty is levied on the transfer of real estate and on mortgage loans. The standard rate for real estate is 3% if the transferee is a legal entity. For mortgage loans, the rate is between 0.4% and 2%.
Transfer tax No, although some transfers are subject to stamp duty.
Transfer pricing The arm's length principle applies and profits may be reallocated. Documentation requirements apply.
Thin capitalisation There are no formal thin capitalisation rules for tax purposes, but certain rules in the Swedish Company Act may result in compulsory liquidation. As from 1 January 2009, Swedish companies may not deduct interest expense on loans obtained to finance intragroup acquisitions of shares. A deduction is allowed, however, if either the recipient of the interest is taxed at a rate of at least 10% or the company can demonstrate that the transaction is motivated primarily by business reasons.
Controlled foreign companies A Swedish resident company (or individual) or a nonresident with a PE in Sweden that holds an interest in certain foreign legal entities is subject to immediate taxation on its proportionate share of the foreign legal entity's profits if the foreign entity is not taxed or if it is subject to taxation at a rate lower than 14.5% (i.e. 55% of the Swedish tax rate of 26.3%). The CFC regime stipulates a participating interest threshold and a "white list" applies. A shareholder (taxpayer) in a foreign legal person within the EEA that is treated as a CFC is exempt from CFC taxation on income derived from the CFC if the taxpayer can demonstrate that the foreign legal person is actually established in its home state and carries on genuine economic activities.
Other A transaction may be disregarded if it produces a substantial tax benefit, the tax benefit could be viewed as the predominant reason for the transaction and an assessment based on the transaction would be contrary to the purpose of the legislation.
Disclosure requirements No
Sweden Tax year Corporations use a financial year, normally consisting of a 12-month period ending on 31 December, 30 April, 30 June or 31 August, unless the tax authorities permit another date.
Consolidated tax returns Consolidated tax returns are not allowed, but contributions between Swedish group companies are allowed as a way to equalise profits and losses.
Tax Filing requirements Annual tax returns are due by 2 May (3 May for 2010) of the year following the income year (extensions are available). The corporation also must file a preliminary tax return on or before 30 November of the year before the income year and make monthly estimated tax payments during the income year based on the preliminary tax return. A final assessment is made in the year following the income year (normally issued in December) and either a refund is issued or a final balance must be paid.
Penalties A fee of SEK 5,000 is imposed for late filing, with additional fees if the failure to file continues. A surcharge of 40% of the tax due on hidden income is levied if the taxpayer has omitted or provided false information on the return. If filing is incomplete or there is no filing, the tax authorities may estimate the tax payable. Interest penalties are levied on outstanding taxes.
Rulings Advance rulings may be issued by the Council for Advance Tax Rulings to resident or nonresident companies on corporate income tax, VAT, the real estate tax and the general anti-avoidance provision.
Sweden vat (Value added tax) rate
The general rate of VAT for goods and services in Sweden is 25% of the assessed value. Certain goods and services are exempt from tax or taxed at a lower rate (12% or 6%).
In general, output VAT is levied on all domestic sales but not on export or EU sales. Returns for input and output VAT need to be settled each month with the Swedish tax authorities.
With the new regulations that apply from 1 January 2008 you may also report the VAT on a three-month basis. New regulations for reporting VAT in the construction sector came into effect on 1 July 2007. A reverse charge mechanism is used for construction services. Purchasers who sell certain construction services on more than a temporary basis must report and pay VAT for such services. The seller of these construction services does not charge VAT on the invoice. The legislation conforms to the EU Directives.
Taxable transactions VAT is levied on the supply of VATable goods or services in Sweden, the intra-Community (EU) acquisition of VATable goods, the acquisition of services from a foreign company and any importation of VATable goods into Sweden.
VAT Registration A company that is VAT liable in Sweden must register for VAT purposes.
Filing and payment of tax VAT returns are filed and tax is paid monthly or quarterly. However, for companies with a turnover of less than SEK 1 million, VAT may be reported in the income tax return.