Taxes in Sweden
Tax liability in Sweden applies to any person who is self-employed or employed. The form of business conducted, the turnover of the company and the issue of employment of employees determine the extent of Swedish taxes that apply to the business owner and their amount. Running a Swedish business involves various formalities. The entrepreneur should familiarize himself/herself with the regulations and deadlines set by the authorities to avoid the consequences of failing to comply with the obligations.
Tax liability in Sweden
Entrepreneurs who have established their own business in Sweden and live in the country are obliged to pay Swedish taxes in accordance with the applicable regulations. The Swedish tax authority may impose financial penalties - penal interest or an administrative fine - in the event of non-compliance with the tax obligation and failure to pay on time.
Persons earning income simultaneously in Poland and Sweden should familiarize themselves with the legal act regulating income relations of both countries - 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 Income Tax Evasion of 19 November 2004.
The Convention regulates all issues that involve tax liability to both countries. Earned income is therefore not subject to double taxation, and in Sweden the tax obligation is met in accordance with the law.
The main cost of a company in Sweden is taxes. The amount as well as the type of taxes depend on the legal form and nature of the business, its turnover during the tax year and the fact that the entrepreneur hires employees. They are paid on a cyclical basis, on dates set by the Swedish Tax Agency (Skatteverket) and at specific rates.
What is worth knowing about VAT in Sweden?
What is worth knowing about income tax in Sweden?
- VAT (Mervärdesskatt or so-called moms) in Sweden is paid by a business that offers to sell taxable goods and services.
- VAT must be charged in Sweden on all transactions carried out, at each stage of distribution and production. A transaction is understood to be the sale of goods, the provision of services, an exchange or the company's own payment.
- Swedish VAT is settled by means of a tax return, submitted once a year, once every three months or once a month to the Skatteverket (tax office).
- Swedish income tax for individuals, i.e., among other things, for sole proprietorships, is calculated on a general basis - based on the company's earned income during the year.
- For legal persons, i.e. for example companies, income tax in 2020 was 28% on the company's profit.
- Tax is paid in the form of monthly advance payments. Their amount is calculated by the office on the basis of the declaration of expected income in the given tax year.
- The declaration is submitted when registering the company with the tax office and later at the beginning of each tax year.
Income tax rates in 2020:
What is worth knowing about employment tax in Sweden?
- taxable income from SEK 0 to 490 700 - national tax is 0% and local tax is 30-35%;
- taxable income above SEK 509 300 - national tax is 20%, and local tax is 30-35%.
- Swedish companies with employees are required to pay employer tax in addition to VAT and income tax.
- Arbeidsgiveravgift, or Swedish employment tax, and Forskuddstrekk, or employee advance income tax, are calculated on the basis of the employee's gross salary, including other employee benefits.
VAT in Sweden
Value added tax, or VAT (in Sweden known as moms), is determined based on the transaction carried out - the type of service or good. The tax applies to all transactions carried out by a company, at each stage of distribution and production. Companies whose customers are all registered for VAT do not have to register as Swedish VAT payers.
Swedish VAT is charged on every taxable transaction carried out by a company - services, sale of goods, own payment or exchange.
The rates of VAT in Sweden are:
25% - basic
12 - reduced
6% - low.
The reduced rate applies to hotel services, foodstuffs, handicrafts or camping. The low rate applies to newspapers, passenger transport services, copyrights for certain works and cultural events.
The obligation to pay VAT entitles the company to the relevant deductions. Output tax is charged on sales, while input tax is paid on purchases. The entrepreneur should only pay the difference between Swedish input tax and output tax. Input tax can be deducted if the transaction relates to purchases that are necessary for the business. Deductions exclude, for example, passenger cars.
Swedish VAT is settled on the basis of the tax return delivered to the Skatteverket on the prescribed dates. Depending on the size and turnover of the company, the VAT return is submitted once a year, once every three months or once a month.
The deadline for payment of VAT is the 12th of each month, while for medium-sized companies the tax may be paid by the 26th of each month.
VAT in Sweden is not charged for industries such as financial or banking services, education and medical care. It is also not charged when exporting goods to a country outside the European Union. When a company sells goods to an EU buyer who is registered for VAT, then Swedish VAT is not charged and the tax liability only applies to the buyer. Moms is charged when the buyer is not a VAT payer.
Entry in the Swedish VAT register
The Swedish VAT register lists businesses that are required to charge and pay a certain amount of VAT. You can make an entry in the Swedish VAT register:
- on paper by means of form SKV 4620, which must be submitted directly to your local tax office;
- via the Swedish Tax Agency's website skatteverket.se.
The registration for VAT in Sweden is closely linked to the obligation to calculate and pay VAT and to keep accounts in accordance with the country's tax regulations.
The registration as a VAT payer of a company that is obliged to charge and pay value added tax should take place no later than two weeks before the start of operations. When all the company's customers are registered for VAT in Sweden, then the company does not need to register for VAT.
The VAT registration also entails the need to keep documentation indicating the amount of tax charged. A VAT payer in Sweden must issue documents indicating the percentage of tax included in the sale price. Deduction of input tax is possible if the invoices include the VAT amount.
Filing a VAT return - Rules
The applicable Swedish value added tax, or 'moms', is charged on each taxable transaction, irrespective of the stage of distribution and production, and is settled through a tax return. The Swedish VAT return that a business submits should include all information that relates to VAT transactions.
The VAT return can be submitted once a month, once every three months or once a year, depending on the type of business, the size of the company and the annual turnover. The frequency is specified on the completed registration application at the Skatteverket.
Once a year, once every three months or once a month - small companies with a turnover of less than SEK 1 million per year. Once every three months or once a month - Medium-sized companies with a turnover of between SEK 1 million and SEK 40 million per year Once a month - Large companies with a turnover of more than SEK 40 million per year.
VAT should be paid by the 12th of each month at the latest. Medium-sized companies are an exception, as these have the option to pay VAT by the 26th of each month.
Income tax in Sweden
Swedish taxpayers are subject to a progressive tax scale. Income and place of residence or business determine tax group membership and rate. Swedish income tax is a progressive tax, which depends on the income earned in a given tax year. Individuals, i.e. employees and sole proprietors, pay an income tax rate ranging from 30% to more than 50%.
Kommun and Landsting are local Swedish income taxes, which depend on the municipality or region to which the taxpayer is assigned. The rates are 30-35%, while the proceeds from local taxes are used to fund the local education system and the healthcare system. National income tax in Sweden ranges from 0% to 20%, depending on the amount of income earned in a given tax year.
Swedish income tax rates for individuals in 2020:
- taxable income from SEK 0 to 490 700 - national tax is 0%, local tax 30-35%;
- income above SEK 509 300 - national tax is 20%, local tax 30-35%.
For legal entities, including companies, the fixed income tax is 28% on the company's profit. A person who is not tax resident in Sweden and who works for a foreign or Swedish employer is subject to a flat rate tax (SINK - statlig inkomstskatt för utomlands bosatta), which is 25%.
In 2020, the income tax was:
- 25% for foreign (non-tax resident) employees,
- for individuals - 0-20% (national tax) + 30-35% (local tax),
- 28% for legal entities.
Income tax does not apply to individuals who work for a company without a permanent establishment in Sweden and are not Swedish tax residents. This applies to employees who have spent up to 183 days in Sweden.
The amount of Swedish income tax is calculated on the basis of a declaration of expected profit for the tax year. The tax return is submitted at the stage of registration of the company at the tax office (Skatteverket), at which time the tax office calculates the advance payments, which must be paid within the prescribed deadlines.
The tax return is sent to the Skatteverket by digital post or traditionally in paper form, delivered to the address indicated. If the income actually earned during the year differs from the income declared to the authority, the company may correct the preliminary declaration during the tax year. The final declaration is submitted at the end of the tax year and is the basis for calculating the amount of tax to be paid or refunded.
Employing an employee and Swedish taxes
A Swedish company that employs employees is required to pay employer tax (Arbetsgivaravgifter) in addition to income tax and VAT. This comprises, among other things, employment tax, insurance premiums and the employee's pension contribution.
It is the Swedish employer's responsibility to pay the taxes and contributions that are associated with the employment of employees. The employer's tax is 31.42% and is calculated on the tax base (gross amount) and other employee benefits.
The due date for payment of employer tax is the 12th of each month. Employment tax is paid into an individual account at Skatteverket.
If an employer in Sweden employs employees, it should report this fact to the Skatteverket, from where it will later receive PAYE forms. These are necessary for calculating and paying employment tax. The form contains details of the employer's contributions and tax for the employees. The employee's salary and other benefits must be shown, as well as the amount of tax and contributions.
Swedish tax allowances
Employees and entrepreneurs in Sweden should submit a tax return once a year, which contains all information related to income and expenses incurred during the year. The annual tax return also allows for the deduction of certain costs incurred in connection with the business or work.
What is worth knowing about tax deductions in Sweden?
- Tax deductions in Sweden are intended for individuals whose earned income exceeds 90% of their personal income.
- Expenses that qualify for deductions should be properly documented - then the office will take into account the deductions, if any.
- The tax refund in Sweden is calculated on the basis of the information available to the tax office and the documents attached to the tax return.
- The general tax settlement in Sweden allows the taxpayer to deduct certain allowances which are related to work and residence in the country.
- Tax residents, thanks to the applicable tax legislation, have the possibility to deduct deductible costs and pension contributions from their tax base in Sweden.
- Commuting costs must be documented by providing fuel receipts or parking tickets. Please note that the distance between the place of residence and the workplace should be at least 5 kilometres, or the commute by car should save a minimum of two hours compared to other means of transport.
- If a Swedish employee wishes to deduct commuting expenses, taking into account public transport, the distance between the place of residence and the workplace should be at least 2 kilometres.
- The Swedish tax allowances also extend to persons with two tax holdings - in Sweden and in Poland. A dual household allows for the deduction of travel expenses to the home country no more than once a week. Such costs are documented by plane tickets or fuel receipts. It is also possible to deduct part of the costs of rented accommodation in Sweden, relating to rent, gas, electricity, heating and telephone or internet bills.
- When travelling on business, it is possible to deduct the employee's transport, board and lodging costs. It is necessary to present air, coach or ferry tickets, fuel receipts and invoices and receipts that document food and accommodation expenses during the business trip.
- SINK taxpayers are not entitled to any deductions and tax credits do not apply to them. They only apply to the general settlement with the tax office.
Tax resident in Sweden
Tax residency is related to significant ties to Sweden, such as permanent residence and work in Sweden. The resident should have a centre of economic and personal interests, the so-called centre of life interests in Sweden. A tax resident is a person who resides in Sweden continuously for at least six months and has a permanent residence.
What is worth knowing about tax residence in Sweden?
- Tax residency means that a person has a tax liability in the country.
- It involves the time of residence and the centre of economic and personal interests in the country during the year.
- If a tax resident has citizenship of the country or has resided there for a minimum of ten years after leaving Sweden, he or she retains residency for a period of five years after leaving the country.
- Swedish tax legislation allows profits from the sale of shares in a Swedish company to be subject to income tax for up to ten years after the loss of tax residence.
- Persons residing in Sweden for less than 183 days are considered non-residents during the year and are entitled to a lump-sum SINK income tax of 25 per cent on the gross amount of remuneration. The SINK tax prevents deductions, i.e. also a tax refund in Sweden, but does not require the filing of an annual tax return.
Import and export in Sweden
Poland's and Sweden's membership in the European Union enables the exchange of goods between the two countries. Importing and exporting in Sweden requires adherence to current regulations that involve customs duties and VAT. Individual goods are categorised according to customs tariffs and set rates. The Swedish Customs Administration (Tullverket) sets the customs duties.
VAT, which is charged on the importation of goods, has to be reported in the tax return to the tax office. If companies are not Swedish VAT payers, imports are reported directly to Swedish Customs. The customs value of the goods should be stated in Swedish kronor. Most goods are subject to the standard VAT rate (25% on their value). A reduced rate (12%) applies mainly to foodstuffs, not including tobacco and alcohol. A low rate (6%) is imposed on, for example, books and newspapers.
A person from the EU who comes to Sweden does not pay customs duty on items for personal use.
The customs tariff in Sweden ranges from 0% to 20%, while the amount payable depends on the declared value of the goods, together with the cost of transport to the EU border.
It is not permitted to import into Sweden:
Restrictions on the export of goods include:
- doping substances,
- flammable materials,
- items of particular cultural value,
- products of strategic importance.
In addition to income tax, VAT and employer tax, there are also so-called corporations taxes in Sweden. These include:
- enterprise tax,
- property tax,
- stamp duty on mortgages,
- environmental taxes (carbon tax, sulphur tax, energy tax).
Taxable capital gains that arise from the sale of a company are treated as business income with a tax rate of 22%. The tax exemption covers capital gains derived from the sale of shares of a company that is Swedish resident, provided that the funds are used for business purposes. When the company is resident in the European Union, then business purposes are recognized if the company owns a minimum of 10% of the shares in the subsidiary. When the company operates outside the EU, its size should be similar to forms such as a limited liability company or business association in Sweden.
Swedish companies also pay an annual real estate tax. All real estate other than semi-detached houses and dwellings in Sweden are subject to this tax. The real estate tax amounts to 0.2-2.8 per cent and is deductible from the corporate tax base. The transfer or granting of mortgages with an interest rate of 2% on real estate and land use rights is subject to a stamp duty of 4.25% for legal persons or 1.5% for natural persons.
Another tax operating in Sweden is Kupongskatten, or dividend tax. It amounts to 30% and is collected at source.