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Generally, an individual is considered a resident of Sweden if he/she has a real home in Sweden. An individual without a real home in Sweden, but who stays permanently in the country, is also considered a resident. Normally, six consecutive months of stay in any period in Sweden qualifies for a permanent stay.

There are no explicit rules governing what would constitute a consecutive and permanent 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 a Swedish resident. An individual could be deemed to stay regularly even if the individual spends more nights abroad than in Sweden.

Foreign individuals who spend less than six consecutive months in Sweden are generally considered nonresident. This is normally the case for foreign nationals who visit Sweden temporarily for business and/or pleasure. A nonresident individual is subject to tax in Sweden only on Swedish-source income.

A nonresident who derives income from services rendered in Sweden may be taxed under the Special Income Tax Act (SINK). Nonresidents who qualify for taxation under SINK pay a final national income tax of 25% at source. No deductions are allowed. To qualify for taxation under SINK, the nonresident individual or the employer must apply to the Swedish Tax Agency for the 25% concession before any payment is made.

Taxable income and rates
A basic national tax of 20% is levied on taxable income in excess of SEK 328,800 (2008). A higher national tax of 25% is levied on taxable income in excess of SEK 495,000. Local tax is charged at a flat fee ranging from 28.9% to 34%. Since each municipality can set its own rate, the actual amount payable depends on the municipality of residence.

Determination of taxable income
The national income tax is levied on income derived from employment, business and investments, although investment income is treated separately. Municipal income tax is levied on income derived from employment and business but not on investment income. The municipal tax is not deductible in calculating taxable income subject to the national tax.

All earned and unearned income is taxed separately for married couples, although returns are correlated by cross referencing personal security numbers, and spouses can balance each other's income and deductions. 

Taxable income includes worldwide income (for residents), with some exceptions for foreign source income covered by double taxation agreements.

Fringe benefits are included in taxable income at market value; these include subsidised lunches, per diem travel allowances, favourable loans, insurance, company cars and company subsidised private medical care.

Investment income
Individuals considered tax residents of Sweden are liable for income tax on worldwide investment income such as interest income from bank savings, dividends and capital gains from the sale of financial investments, real estate or other assets. Income from capital is taxed at a flat rate of 30%. No personal allowance is granted in the category income from capital but all interest paid, including credit card interest, and capital losses are, in principle, deductible against capital income.

Capital losses are, in principal, computed in the same way as gains. All capital losses, with the exception of losses on personal assets, are deductible in the category income from capital for a resident taxpayer. The deduction of capital losses is, in general, restricted to 70%, although there are exceptions to this rule.

When computing investment income, all types of capital, including capital gains, are added together, and all types of deductible capital costs, including capital losses, are deducted. Except for interest on loans used in a business, interest costs are deductible when computing capital income.

A positive capital result is taxed at 30%. If the net income from capital is negative, the taxpayer is entitled to a tax reduction of 30% of a deficit up to SEK 100,000. Where the negative income from capital exceeds SEK 100,000, the tax reduction is 21 % of the remaining deficit. The tax reduction may be used to offset income tax on employment and business income, as well as real property tax amounting to the same fiscal year. There is no carryforward of losses from the category income from capital. Any amount not absorbed in this way in the current year cannot be used in a later year.

Sweden imposes a 15% tax on yields from private pension funds.

The maximum basic deduction for 2009 (income year 2008) is SEK 31,600. Costs for commuting are deductible to the extent they exceed SEK 8,000 per year. However, several restrictions apply. Business travel expenses are deductible to the extent not reimbursed by the employer. The Swedish Tax Agency sets specific per diem amounts for costs other than travel and accommodation. Reimbursements exceeding the per diem amounts are taxed as salary. Most Swedish companies have adjusted their reimbursement policies to correspond with the tax regulations.

Swedish tax law permits, under certain circumstances, a deduction for increased costs of living. Individuals on temporary assignments who maintain a place of residence in their home country may qualify for this deduction. The deduction is, generally, available for a maximum period of two to three years. However, the maximum length of the assignment in Sweden that could qualify as temporary is not defined in tax law. 

In general, the following deductions may be claimed:

•           Increased housing costs on location.

•           Increased cost of living the first month with a daily standard amount.

•           Home trips to an EU or EEA country

Note, however, that deductions are not automatically available for assignments in Sweden. The deductions may be questioned by the Swedish Tax Agency and each individual case will be examined on its own merits.

Special expatriate tax regime
Foreign experts, scientists and executives who work temporarily in Sweden and who are resident in Sweden for tax purposes may benefit from a special tax regime.

An individual qualifying for tax relief is entitled to a 25% reduction of taxable income for the first three years of employment. Accordingly, the employer will receive a 25% reduction in the basis for calculating social security contributions.

Furthermore, reimbursement of expenses related to the assignment in Sweden for moving to and from Sweden, travels to the home country (a maximum two per calendar year and person) and school fees for children are exempt from taxation. 

The legislation applies to foreign experts, scientists and other key personnel if the work involves:

  • Expert assignments at a position or competence level that would imply considerable difficulties to recruit within Sweden.
  • Qualified research or development assignments at a position or competence level that would imply considerable difficulties to recruit within Sweden.

Capital taxes
Sweden has abolished wealth taxation and, therefore, no wealth tax is levied.


Source: Deloitte

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