Understanding your duties when it comes to taxes is essential. If you get it wrong, and file a tax return too late, or pay the wrong amount, you could end up being fined, or even having a criminal case to answer. It’s not worth the hassle. However, if you’re an expatriate, a cross-border commuter, or a non-resident foreigner living in a different country for a short while, figuring out your responsibilities regarding tax can be a challenge.
It’s hard in part, because what tax you’ll pay depends on your personal circumstances. It’s not just about what you earn. Where you live, and for how long, can make a difference - as well as your income sources, and family set-up. As you may have already discovered, tax is a complex legal area, and it’s important that you understand your own unique situation.
This overview of the Swedish income tax system is a great starting point. If you think you might need to pay tax on some or all of your income in Sweden, get professional advice to make sure you get it right and pay the right amount.
For tax purposes in Sweden, you’ll need to report income from your salary, along with any benefits in kind or other payments your employer might give you. You also have to report income from other sources such as rental income and capital gains - however, how this is taxed depends on where it comes from, and how much you receive. For example, income from renting an unfurnished property is treated differently depending on whether it amounts to more or less than €15,000 a year.
It’s relatively complicated, so if you’re unfamiliar with the Swedish income tax system, taking professional advice can help.
What income tax you’ll be required to pay in Sweden depends on your personal circumstances. To figure it out, you need to know your tax status. In basic terms, you’ll be classified as either:
- A resident taxpayer
- A non-resident taxpayer
In Sweden, the tax year is the same as the calendar year - 1 January through to 31 December. Resident taxpayers spend the majority of their time living in Sweden - so 183 days or more in any given year. If that’s your situation then you have to pay tax on worldwide income to the Swedish tax authorities.
If you’re self-employed, and have a permanent business base in Sweden then you also have to pay tax on any income you make from that base, to Sweden, regardless of where you live.
(Source, 11 December 2017)
You might be classified as having non-resident status for tax purposes, if you spend less than half of the calendar year in Sweden. In that case, you’ll only have to pay tax to the Swedish authorities on money you’ve earned in Sweden. Don’t forget though, if this is your situation, you’ll have to check your tax liabilities wherever you lived for the rest of the tax year too - and you might also have to pay tax elsewhere in the world on some of your income.
(Source, 11 December 2017)
This can be complicated, and you might need the help of a tax accountant to help untangle your taxes. If you’re in Sweden for more than half the year, so over 183 days in a tax/calendar year, then you’re likely to be judged to be a tax resident there. You’ll have to pay tax on your worldwide income to Sweden.
If you’re in Sweden for less than half of the year, you’ll probably be considered non-resident for tax purposes. That still means you’ll have to pay tax in Sweden, but only on income you’ve earned there. However, if you’re considered tax resident during that tax year in another country, you might be asked to pay tax on worldwide income there. In that case, you’ll need to rely on double taxation treaties to make sure you don’t end up paying tax on the same income twice. More on this later.
Swedish taxes are based on a progressive system. There’s a tax-free allowance - a lower limit of earnings under which no tax is charged - and then a two-stage tax. A base tax is paid on earnings over the tax-free allowance, with a higher tax rate applied if you earn above a second threshold.
The most up to date rates available for resident taxpayers on earned income in Sweden are as follows:
|Income range||Sweden income tax rate (%) 2017|
|SEK 438,900 - SEK 638,499||20%|
|Over SEK 638,500||25%|
Different tax rates might be applied for income from other sources - such as money you earn from renting out a property, or investment income and interest from savings.
If you’re non-resident for tax purposes, then you may be taxed according to SINK - statlig inkomstskatt för utomlands bosatta - state income tax for non-residents. In this case you’re charged a flat rate, usually 20%, on your income, but you can’t claim the deductions that a resident might. However, if you’d rather be taxed according to the regular programme of income taxes, then you can apply for that instead, under some circumstances.
The Swedish tax authorities publish guidance to the tax system in a whole range of languages, including English. This can help you understand the way your taxes are calculated.
Here are some of the exemptions, deductions and credits that you might need to know about.
The tax breaks, exemptions, deductions and credits you’re eligible for depend on your personal situation. To claim most of these allowances you have to include them on your tax declaration.
The basic deduction is usually included automatically in the calculation of your tax, but if you’re out of the country for some of the year, you might have to claim it through your tax return. You can do this if the majority of your income is made in Sweden, even if you don’t always live there.
(Source, 4 January 2018)
You can deduct payments made for certain things from your taxable income. There are limits and rules about how you do this, set out in the guidelines to the tax return. The things you might be able to deduct from your taxable income include the cost of commuting and business travel, work clothes and an increase in living expenses caused by relocating temporarily for work.
Exactly what you can claim depends on your circumstances - for example, you might be able to claim against the costs of running a home office or buying relevant professional publications, if your employer doesn’t offer this as part of your job. However, you’ll need receipts to claim any professional expense against tax.
(Source, 11 December 2017)
Double taxation agreements are put in place to ensure that people don’t have to pay tax twice on the same income. If you’re a cross-border commuter for example, or if you live and work in different places across the course of a year, you might find that two different countries want you to pay tax.
A double taxation treaty is there to make sure that you can offset the tax paid in one country against that paid in another.
Sweden has double taxation agreements with the following countries. However, not all agreements cover all types of income, so it’s important to get professional advice if you think that you might need to pay tax in more than one country:
|Sweden double taxation agreements|
|British Virgin Islands||Namibia|
|Denmark||St Kitts and Nevis|
|Egypt||St Vincent and the Grenadines|
|Guernsey||Turks and Caicos|
|Gibraltar||Trinidad and Tobago|
|Isle of Man||UAE|
|Italy||Yugoslavia (Former states, excluding Macedonia)|
(Source, 11 December 2017)
Reporting your tax electronically is encouraged in Sweden. You can do this as long as you have a Swedish personal identification number, and have registered for e-services.
(Source, 11 December 2017)
You can get help with your tax return either online, or by visiting your local tax office. Using the online system to submit your tax return and then pay your bill, is usually quicker and easier than using paper forms.
If you’re a foreigner paying taxes electronically in Sweden, you’ll have to submit your payment in Swedish krona. Don’t forget to add any charges made for the transfer, which can be especially high if you’re converting your money from a different currency,.
To make sure you don’t pay more than you need to, you have to check the exchange rate used on the transaction, too. This can be a rip off, because banks and money exchange services often don’t give customers the real, mid-market rate, which you’d find on Google. This can be the case especially if you use a service that claims to offer fee-free exchange. They still have to make a profit, so they mark up the rate by 4-5%. They keep the difference, and you’re out of pocket.
There’s a better option out there. Try Wise. Wise works differently than banks. You’ll still get your money transferred quickly and safely, but transactions will always use the real exchange rate, and there’s just a small, upfront fee to pay.
This is possible because Wise doesn’t use the pricey SWIFT system for making bank transfers. This brings down the costs of making international transfers, and Wise can pass on the savings to the customer.
You might be able to pay your taxes directly using a transfer from Wise. Otherwise, if you don’t already have a bank account in Sweden, you could transfer the payment to a friend or family member who does, to bring down the costs.
You could save even more money on currency conversions, with a new Wise borderless multi-currency account. With this new type of account, you’re able to hold your money in any one of dozens of different currencies all in the same account. It’s simple to check your balance, and then whenever you need to, you can switch between currencies, using the real exchange rate every time, and with only a small transparent fee.
If it’s the first time you’ve navigated the Swedish tax system then you might find it unfamiliar. And if your situation is complicated even more, because you’re a cross-border commuter, or if you juggle life between different countries, taking some professional advice can be a good choice in the long run. You might have to pay for the help, but getting your tax payment wrong can be an expensive mistake.
Whatever you decide to do, you don’t want to be out of pocket because of unfair fees added when you change your currency. Thats where Wise might be able to help. See if you can get a better deal from Wise if you find yourself needing to pay your taxes abroad.
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