Taxes applicable in Sweden

Anyone planning to find employment or set up their own business in Sweden must be aware that they will be subject to numerous obligations - from registering with the relevant authorities to meeting deadlines for settlements and paying taxes. Knowing which regulations and deadlines to comply with will help you avoid penalties associated with missing deadlines or failing to submit documents. When it comes to taxes in Sweden, their scope and amount depends on the legal form, the type of activity, the company's annual turnover, but also whether the Swedish company has employees. Before starting your business in Sweden, it is advisable to familiarize yourself with all the important issues concerning Swedish taxes. The obligation to pay taxes in Sweden applies both to a person who works in Sweden, but also to those who run their own business in Sweden. Failure to comply with the tax obligation or to settle with the Swedish tax authorities on time risks penal interest or an administrative fine. It is worth knowing that taxes are considered to be the main costs charged to companies. They have specific rates that must be paid periodically on dates that are set by the Skatteverket (Swedish Tax Agency). Importantly, taxation usually depends on the legal form of the business, the annual turnover of the company in question or the number of employees in the company.

Limited tax liability in Sweden applies to foreign natural or legal persons. This means that only income earned in Sweden is taxed. However, if a person is permanently resident in Sweden, limited tax liability turns into unlimited tax liability, which means that all income, including income from other countries, will already be subject to taxation in Sweden. In other words, unlimited tax liability extends to persons who reside in the country for most or all of the tax year. Tax residency is the place of a person's tax liability closely linked to the time of residence in the country during the year and the centre of economic and personal interests. A person is considered to be a Swedish tax resident if he or she resides in the country more than 183 days per year or lives in the country permanently.

Non-residents are those who are in Sweden for less than 183 days per year. They are entitled to SINK tax at a rate of 25 per cent. It is worth remembering that the SINK tax does not require the submission of an annual tax return and therefore prevents the use of tax credits and Swedish tax refunds. Every Swedish employee and entrepreneur has to submit a tax return once a year, which contains all information about income earned and expenses incurred covering the last tax year. The information from this declaration and the documents that the taxpayer has attached to it are the basis for calculating the Swedish tax refund. Importantly, all tax-deductible expenses must be accurately documented, without which the tax office will not take the allowances into account. However, it is worth remembering that tax allowances in Sweden are only available to persons who have earned 90 per cent of their total income in the country.

The following costs can be deducted from the tax in Sweden:

• commuting costs - these must be substantiated by fuel receipts, parking tickets or public transport tickets. Importantly, the distance between the place of work and the place of residence must be more than 5 kilometres. Another condition, which is fulfilled relatively less frequently, is to prove that commuting by car shortens the travel time to work by at least 120 minutes;
• costs of renting a flat in Sweden - you can deduct part of the costs related to rent, electricity, gas, heating, internet and telephone;
• deduction of costs paid for insurance in a country other than Sweden - proof of these contributions and an A1 form must be provided;
• costs of the employee's business trip - the deduction of accommodation, transport and food costs, which will be confirmed by plane tickets, ferry tickets, etc., fuel receipts, as well as invoices that will confirm all accommodating expenses;
• costs of running two households - one in Poland and one in Sweden - a double household entitles the holder to deduct the costs of travel to the home country, which must be substantiated by tickets, fuel invoices, etc;
• further education costs - a deduction is available for those who need to further their education to keep their current job. The deduction does not apply if the training is carried out in order to look for a new job.

Infographic: "Tax deductions in Sweden". Income tax in Sweden is progressive - the final amount depends on the annual income of the individual. The final amount of tax to be paid, in addition to the income, which determines the tax group membership, is also dependent on where the business is based or where the taxpayer resides.

Infographic: "Income tax rates for individuals in Sweden..."

Swedish income tax:

1. for ordinary employees
   No tax - on income below SEK 409.7k,
   20% - with income between SEK 490.7k and 689.3k,
   25% - with income higher than SEK 689.3k,
2. for foreign employees - SINK rate - 25%,
3. for legal entities - 28%.

SINK (statlig inkomstskatt för utomlands bosatta) is a tax for non-residents, i.e. economic migrants. These are people who stay in the country for less than 183 days a year and work for a Swedish or foreign employer. However, it is important to note that no tax deductions can be made for SINK tax. Swedish law states that taxpayers are required to pay tax advances. In order to calculate the amount of tax due, a preliminary declaration must be submitted. The Skatteverket will make a preliminary estimate of the amount of tax and monthly advance payments. A new company must submit a preliminary declaration at the business registration stage.

If it so happens that the income earned during the year does not agree with the income declared to the authority, the taxpayer may amend the preliminary declaration. The final tax return is submitted at the end of the tax year - it is the basis for calculating the amount of tax, as well as refunds or surcharges. The calculated tax is compared with the advance tax payments and when a company has paid too much, it receives a refund of the overpayment, and when it has paid too little, it has to pay a surcharge.

Infographic: "Advance income tax payments - deadlines". The tax year in Sweden is equal to the calendar year, so it runs from 1 January to 31 December. Tax settlement in Sweden is done on the basis of an income tax return. Foreign legal entities are required to submit it by 2 May and a foreign individual by 31 May.

After the end of the tax year, it is necessary to settle with the Swedish tax authority. Tax return in Sweden is done almost entirely remotely (by post or electronically). The tax return you receive in March/April from the Skatteverket should be checked and supplemented if necessary. For the settlement, you need a KU-13 document, which is the equivalent of the Polish PIT-11 (it contains information about income and contributions paid).

The Skatteverket issues the settlement decision from September to December. It is then that the taxpayer is informed about the refund or possible underpayment, which must be paid within 90 days).

It is worth remembering that if an employee stays in Sweden for more than 6 months in a year, he/she may be considered as resident in Sweden, and this means that he/she will have to pay tax on the same basis as other permanent residents of Sweden.

• January/February - the employer sends the employee an annual summary of income on form KU10/KU13 (equivalent to PIT);
• March/April - Skatteverket (Swedish Tax Agency) sends tax returns to the taxpayer's address;
• 2 May - deadline for submission of completed returns to the office;
• June - December - the tax office issues tax decisions and sends tax refunds or summonses.

Importantly, the Skatteverket has the right to charge a late payment penalty of SEK 1,250 for late settlement. VAT (Mervärdesskatt - moms) in Sweden, i.e. the tax on goods and services, applies to all transactions at each stage of production and distribution (provision of services, sale of goods, payment, exchange).

VAT rates in Sweden are:

• 25% (the rate applicable to most goods and services),
• 12% (e.g. for foodstuffs, catering, e-books, hotels, restaurants),
• 6% (for books, newspapers, transportation of people),
• 0% (for prescription drugs, print shops and international transport).

Infographic: "VAT rates in Sweden".

VAT in Sweden is settled on the basis of a tax return, which must be submitted to the Skatteverket in due time. The frequency of settlement depends on the annual turnover and the size of the company (monthly, quarterly or annually). This is already determined when registering the company with the Skatteverket. Payment deadlines vary: medium-sized companies on the 26th day of the month, others on the 12th day of the month.

Infographic: "Swedish VAT is settled..."

Note that if all customers of a business are VAT payers, the business is exempt from registering as a VAT payer. In contrast, financial and banking services, medical care and education, as well as goods exported to a non-EU country are exempt from VAT itself.

It is also worth remembering that if a Swedish company sells goods to a company operating within the European Union that is registered as a VAT payer, Swedish moms tax does not apply. The Swedish VAT register is a collection of companies that are payers of Swedish VAT. Registration in this register can be done via the Swedish tax authority's website skatteverket.se or stationary - form SKV 4620 must be delivered directly to the Skatteverket's office. The registration must be done at the latest 14 days before the start of operation of the company.

[INFOGRAPHIC: A business in Sweden must be entered in the VAT register when: sells goods or services to other EU countries; sells goods or services to countries outside the European Union; moves goods necessary for its business to another EU country without changing the owner of the goods.]

Registration as a VAT payer in Sweden imposes an obligation on the company to keep reliable accounts that comply with current law. It is, of course, also mandatory to account for VAT accordingly and to keep records confirming the amount of tax charged.

It is worth remembering that sales documents issued by a VAT payer in Sweden should include the percentage of tax that goes into the price of the goods or services, as only such invoices allow for the deduction of input tax. Every Swedish company is obliged to pay income tax and VAT (moms). However, if an entrepreneur hires employees, he or she is also charged a special employer tax (Arbetsgivaravgifter).

The amount of the Swedish employer tax is 31.42% on the gross salary. It consists of:

• pension contribution - 10.21%,
• employment tax - 11.62%,
• insurance contribution - 3.55%.

Infographic: "Basic taxes for a company in Sweden".

Swedish employers receive special documents (PAYE forms) from the office, which make it easier for them to pay employee taxes. All you need to do is to prepare the information on the amount of salary, all fringe benefits, the amount of estimated tax and the amount of the employer's contribution in Sweden. Importantly, the employer's tax must be paid by the 12th of each month.

1. Real estate tax for Swedish companies - covers all real estate related to the company, with the exception of semi-detached houses and dwellings. This tax ranges from 0.2% to 2.8% and, importantly, is deductible from the corporate tax base.
2. corporate taxes - property tax, corporation tax, stamp duty included in the cost of a mortgage and environmental taxes (energy, carbon, sulphur).
3. Kupongskatten, which is the Swedish tax on dividends (the share of profit that can be received by the holder of shares in a joint-stock company or a shareholder in a limited liability company) - its amount is 30%.
4. Tax on capital gains that come from the sale of a company - these are treated as business income with a tax rate of 22%. Capital gains made after the sale of a company that was Swedish resident may be exempt from this tax. Interestingly, the condition for the exemption is that the funds are used for business purposes.

Poland and Sweden's membership in the European Union ensures a quick and easy exchange of goods between the two countries. However, it should not be forgotten that Swedish imports and exports have their own regulations related to customs duties and VAT. For simplicity, goods are categorized according to the customs rates and tariffs that the Swedish Customs Administration (Tullverket) has set.

VAT (moms) on the import of goods must be taken into account when completing the tax return to the Swedish Tax Agency (Skatteverket), and the rate must be stated in Swedish kronor (SEK). Most goods are subject to a VAT rate of 25 per cent, the 12 per cent rate applies mainly to foodstuffs (except alcohol and tobacco) and the 6 per cent rate applies to books and newspapers. It is worth knowing that if a company is not a VAT payer in Sweden, imports must be declared to Tullverket, the Swedish customs office. As for the Swedish customs tariff, it ranges from 0% to 20% and the amount payable depends on the value of the goods being transported. 1. What is folkbokföring?
The population register (folkbokföring) is the primary tool for recording the population living in Sweden. The register contains information about who lives in Sweden, where, how long, their marital status, etc. Correct registration is relevant to many Swedish rights and obligations, e.g. where a person is to pay taxes.

2. Who is subject to limited and unlimited tax liability in Sweden?
Limited tax liability in Sweden covers foreign legal entities. This means that only income originating in Sweden is taxed. In contrast, unlimited tax liability in Sweden applies to persons who are resident in the country for most or all of the tax year. In this case, all income is taxed, whether it originates in Sweden.

3. Who in Sweden can benefit from tax credits?
The Swedish tax credits are for people whose income earned in Sweden exceeds 90% of their total income.

4. What are the deadlines for filing a tax return in Sweden?
Foreign legal entities must file a return no later than 2 May of the year following the income year. An individual resident abroad must file a tax return no later than 31 May of the year following the income year.

5. What is SINK?
SINK, or more precisely statlig inkomstskatt för utomlands bosatta, is a special tax for non-residents, i.e. labour migrants working in Sweden for less than 183 days per year. Currently, the SINK rate is 25 per cent and, importantly, does not provide for the possibility of tax credits.

6. Is the double taxation agreement between Poland and Sweden still valid?
Yes, this agreement is still valid. Thanks to it, Poles working in Sweden avoid paying double tax in both countries.

7. What is tax residence?
Tax residency is the place where a person is liable to pay tax. It is closely related to the time of residence in the country during the year and the centre of economic and personal interests.

8. What is the Skatteverket?
Skatteverket is the Swedish tax authority.

9. What are the VAT rates (moms) in Sweden?
The VAT rates in Sweden are: 25% (the rate for most goods and services), 12% (e.g. for foodstuffs) or 6% (for books, newspapers, carriage). The tax is settled by means of a tax return that can be submitted monthly, quarterly or annually (depending on the size of the business).

10. What are the payment deadlines for VAT in Sweden?
The due date for VAT varies: medium-sized companies on the 26th of the month, others on the 12th of the month.

11. What is an Arbetsgivaravgifter?
Arbetsgivaravgifter is the Swedish employer tax. It includes employment tax, employee pension contributions or insurance premiums. The Swedish employer tax is calculated on the gross paycheck and amounts to 31.42%.

12. How long after leaving Sweden do I retain tax residence in Sweden?
A person who has lived in Sweden for at least ten years retains tax residence for five years after leaving the country.

13. What is the rate of Swedish corporation tax?
The company tax in Sweden (a.k.a. corporate tax) is 28 per cent. The amount of this tax is calculated on the basis of the expected annual income of the company in question. Such income is estimated at the beginning of the year, but can of course be adjusted. Corporation tax must be paid by the 12th of the month - except January and August (then by the 17th of the month).

14. What documents are needed to settle tax in Sweden?
You will need the following documents to settle your tax in Sweden:

• a completed and signed form with your personal information,
• Inkomstdeklaration 1 document (tax return sent by Skatteverket in April), - Bank account for tax refunds document,
• statement of earnings from employer(s),
• copy of employment contract(s),
• original certificate confirming the bank account number, specifying the bank's name, address, IBAN and SWIFT number and signed and stamped by a bank employee (the certificate must not be older than 6 months),
• copy of identity document,
• documents confirming costs to be deducted (ferry or plane tickets, fuel invoices, proof of payment for accommodation, electricity, gas).

15. What is a Personnummer?
Personnummer (the equivalent of a Polish PESEL number) is a Swedish personal number that you can obtain by registering at Folkbokforingen.

16. Do I have to pay customs duty on personal effects when entering Sweden?
If a person enters Sweden from within the European Union, they do not pay customs duty on personal effects.