Sweden is a country that is not only known for its high quality of life, but also for its high taxes. In 2023, both residents and those working temporarily in Sweden face different forms of taxation. In this article, we take a look at the key aspects of the Swedish tax system.
Who is liable for tax in Sweden?
Every person working and doing business in Sweden has an obligation to pay taxes. Failure to fulfil this obligation or incorrect accounting may lead to financial consequences such as administrative penalties and penal interest.
Tax for non-residents – SINK
The tax for non-residents, known as SINK, is a specific taxation system for people who work in Sweden for less than 183 days. The SINK tax rate is 25% and is withheld from the salary by the employer. SINK taxpayers do not have to file an annual tax return, but are not eligible for tax credits.
Tax for residents
For those who are tax resident in Sweden, there is a tax system consisting of two main taxes: municipality tax and state tax. The municipal tax ranges from 29% to 34%, depending on the taxpayer’s place of residence. The state tax is 20% on income exceeding SEK 598500.
Basic tax allowances in Sweden
In Sweden, there are many types of tax reliefs for individuals that can significantly reduce the tax burden. Among the most notable reliefs are:
- Commuting allowance: available to those who commute at least 20 km (for public transport) or 50 km (for private car). It can cover the cost of fuel or public transport tickets.
- Double household allowance: is available to people who maintain a second household in Sweden while their family lives in another country. It takes into account expenses such as rent, service charges or travel costs between the country of residence and Sweden..
- Allowance for expenses incurred in connection with work: this applies to expenses that the employee incurs on his or her own, such as work clothes, professional literature or professional training.
In order to benefit from these concessions, it is necessary to document the expenses incurred, so it is important to keep all invoices and receipts.
Tax-free allowance – up to SEK 40500
Sweden has a tax-free amount, which depends on the income earned and is deducted from the income tax base. The free amount in Sweden is SEK 15400 for earnings above SEK 413600, while for low earnings it ranges from SEK 22300 for the income bracket 22300SEK to 52400SEK up to SEK 40500 for the income bracket 142900 SEK to 413599 SEK. The basic tax-free amount (‘grundavdrag’) is a deduction that the Swedish Tax Agency approves automatically.
The 90% rule – the key to a favourable settlement
EU citizens working in Sweden who are tax residents of that country can claim these reliefs if they earn at least 90% of their global income in Sweden. It is also worth remembering that most EU countries and Sweden have a double taxation treaty, thanks to which income earned in Sweden is not taxed in the taxpayer’s country of residence, but is taken into account when determining the tax rate for “domestic” income.
Summary
Those working in Sweden need to be aware of their tax obligations and account for themselves accordingly. The Swedish tax system is quite complicated, so it is advisable to entrust your tax return to a professional. Remember that the deadline for the tax return for the previous year at the Swedish tax office is 2 May this year. The initial decision you receive at your home address does not mean that you are already settled.
