Wondering if you have to pay tax in Sweden? Find, in this article, all that you need to know on the Swedish tax system.
As an expat in Sweden, you will probably wonder whether you have to pay tax. You should know, above all, that the Swedish tax system is rather high. Indeed, valued added tax (VAT) on goods and services, for instance, applies at a rate of 25%! Hence, you are advised to inquire on all types of taxes that apply to expats and residents and on related conditions.
Foreigners working for a company which has been operating in Sweden for at least 6 months have to pay SINK tax, that is income tax, at a rate of 25% of the total salary. In this case, SINK tax is deducted at source by the employer and paid to the State. So if you are staying and living in Sweden for more than 6 months, you will have to abide to the tax laws applying to your municipality or county.
You do not have to pay tax if your employer does not have any infrastructure in Sweden (office, building, etc.). You are also exempted from tax if you are working for a company which is not based in Sweden for a maximum of 183 days.
Value added tax (VAT) in Sweden applies as follows:
- 25% on goods and services
- 12% on food, hotels, etc.
- 6% on newspapers, magazines, books, public transport, concert tickets, etc.
In general, the funds collected from income tax is used to consolidate the famous “Swedish Model”. Indeed, this social and economic model guarantees employment, equal salaries for equal jobs and collective welfare of the society as a whole. These greatly contribute to Sweden's rank before the United Nations in terms of human development.
Tax is generally managed by municipalities, county councils and the Swedish parliament, which are known as the Riksdag. The Skatteverket, that is the Tax Office, for its part receives tax payments. Taxpayers' money is then transferred to the State, county councils and municipalities. It is then used to finance education, health care, defense and public administration. A huge part is also used to finance pensions and other benefits.
As mentioned above, tax is deducted at source in Sweden. Hence, employers are responsible of the whole process. Income tax is then transferred to the State along with employers contributions.
Employees having worked for 12 months are entitled to an account of their contributions for the current tax year. This document is also submitted to the Skatteverket which will then send a tax return to taxpayers in April. Taxpayers then have to submit this duly filled and signed form to the Skatteverket on May 2nd at the latest. The Skatteverket will then check whether there has been any mistake (wrong accounts, etc).
Income tax for residents includes both national and municipal tax. Municipal tax is deducted at a flat rate which varies from one municipality to another. The current average rate is 31.86%. The national tax, for its part, applies at a rate of 20% on income ranging between 420,800 SEK and 602,600 SEK. Beyond this scale, it applies at a rate of 25%.
Besides income tax and VAT, other types of taxes also apply at the following rates:
- 29-34 % for municipal tax
- 1-2 % for church and funeral fees
- variable property tax (for owners of individual or twin houses).
Specialized foreign employees such as scientists, researchers, technicians, specialists, etc, are eligible to the Expert Tax which is a tax relief. The purpose of this relief is to cater for the lack of skills locally. Experts will thus pay tax on only 75% of their income.
However, this relief only applies for the first three years of employment in the country, although expatriates can stay for 5 consecutive years in Sweden. Note that the Expert Tax does not apply to Swedish nationals. Moreover, expats are eligible to this tax relief only once, even if they are moving back to Sweden for a new mission following their 5 years stay.
Finally, Sweden has set up a special program to help newcomers better understand the tax system.