Taxes in Sweden

Tax obligations in Sweden are incumbent on all employees as well as entrepreneurs. Business in Sweden requires the fulfilment of payments, such as the annual tax return with the Swedish tax authorities and taxes - Sweden provides a number of reliefs for its tax residents. Failure to meet the obligations of business owners in a timely manner may result in serious consequences, including financial ones. The exact amount of tax depends on the legal form and type of business activity chosen, annual income and whether you hire employees. In Sweden, the fiscal burden is on all entrepreneurs. This is done in accordance with the rules laid down by laws passed by the government there. The taxes attributable to doing business in Sweden consist of three elements: income tax (which includes both national and local tax), VAT (i.e. value added tax) and employment tax (which applies to entrepreneurs with employees).

1. Income tax. The owner of the company is required to register it, before undertaking any transactions, with the Swedish tax authority, Skatteverket. At the same time, he/she declares the expected income for the tax year. On this basis, the office calculates the amount of tax. An advance payment of income tax is then made each month. If the annual income is lower than initially declared, the tax office will reimburse the overpayment, while if it is higher, the tax office will be obliged to cover the difference.

The situation is quite different for owners of sole proprietorships, as they are treated as natural persons under Swedish legislation. This means that tax is calculated on a general basis, as business income is equated with the salary the entrepreneur receives. Hence, the formalities are significantly reduced compared to the procedures that legal entities have to go through. The income tax rate for individuals is set each year by the relevant authorities. In 2020, individuals with an income of less than SEK 490 700 were exempt from the national tax and the local tax was between 30 and 35%. On the other hand, the tax for income above SEK 509 300 was equal to 20% + local tax.

Polish entrepreneurs who run or would like to set up a business in Sweden should pay special attention to a document that, in certain cases, allows costs to be significantly reduced. We are talking about the Convention between the Government of the Republic of Poland and the Government of the Kingdom of Sweden on Double Taxation and Prevention of Tax Evasion with Respect to Taxes on Income of 19 November 2004 - the regulations contained therein stipulate that persons, who earn both in Poland and Sweden, shall pay tax in the country of tax residence.

2. VAT - Mervärdesskatt - so-called MOMS. Entrepreneurs offering specific goods and services are subject to this tax. The business owner is then obliged to register the company as a VAT payer, which is added to:
   • the sale of goods;
   • the provision of services;
   • the exchange or withdrawal of own money from the company.
   The percentage rates are NOT the same for all services and goods. They are respectively:
   • 25% - basic rate;
   • 12% - reduced rate - includes groceries, hotels, handicrafts;
   • 6% - low rate - covers newspapers, books, passenger transport, among others.
3. Employment tax. This type of tax applies to business owners who have decided to hire employees. The Swedish employment tax (Arbeidsgiveravgift) and advances for employee tax (Forskuddstrekk) are calculated on the basis of the employee's gross salary including other employee benefits.

Taxation - Sweden's legislation regulates that a person becomes a tax resident if he or she has resided in the country for a period of six months and has a permanent place of residence. Accordingly, a Swedish tax resident permanently lives and works in Sweden. A citizen or resident who has spent at least 10 years in Sweden maintains residency for up to 5 years after leaving Swedish territory. In addition, according to the legislation, profits, from the sale of shares in a Swedish company, may be subject to income tax.

In contrast, persons whose stay in Sweden is less than 183 days are considered non-residents during the following 12 months. This entails the right to be taxed with a lump sum of income tax called SINK. The percentage rate of this tax is 25% and is deducted from the gross amount of wages. With this type of tax, it is not required to submit an annual tax return to the tax office, but at the same time this excludes the granting of allowances and thus also tax refunds. Swedish tax residents who are employed in a company or who are self-employed are entitled to a number of tax reliefs, which can later be deducted from their taxes and reimbursed in the annual tax return. All you have to do is present the relevant documents to the tax office - Skatteverket - confirming your right to these allowances.

Many costs incurred for the purpose of earning income, Swedish tax law allows you to deduct in your income tax return. Thus, you may obtain relief:

• for commuting to work - these costs can be deducted if the distance from your home to work is at least 5 km or if travelling by car reduces the commuting time by at least 2 hours compared to other means of transport. In this case, fuel receipts or parking tickets are proof of entitlement to the deduction. If the journey is made by public transport, the tickets are sufficient and the distance between home and work is equal to or greater than 2 km;
• for business trips - Traktemente - the expenses incurred for transport, accommodation and meals are included in this situation. Any kind of tickets (air, ferry, coach) or fuel bills, as well as receipts and invoices, confirming the purchase of food or the payment of accommodation for the duration of the mission, must be kept as proof;
• for having a dual household - in case you have one household in Poland and another in Sweden, you are entitled to deduct all expenses related to the trip to your home country. However, these visits may not take place more than once a week. Proof is then provided by airline tickets or fuel bills. Part of the costs for renting accommodation or utilities (electricity, gas, heating, internet and telephone bills) are also deductible;
• for renting a dwelling - as in the case of a dual household, part of the rent for utilities and services (electricity, gas, heating, internet, telephone) is also deductible;
• for other work-related expenses;
• for the payment of individual pension contributions;
• income tax - Jbbskattereduktion;
• tax based on the length of service - Grndavdrag.

A very important aspect, which is closely related to tax refunds and allowances, is earnings, because in order to be able to deduct the indicated costs from tax, one must earn at least 90% of income in Sweden. As one can easily guess, persons considered to be so-called non-residents, who are covered by the SINK tax, are not entitled to any deductions. Income tax in Sweden is progressive, meaning that the tax rate depends on the amount of income earned: the higher the earnings, the higher the tax. It is important to take into account which legal entity you have: physical or legal. This is because there are separate rates for each group in the Swedish system.

1. Personal income tax.
   A physical personality in Sweden is held by all employees of Swedish companies and owners of sole proprietorships. The rate varies in this respect from 30 to 50 per cent. This is because income tax consists of national tax and local tax. Taxes paid to the state range from 0 to 20 per cent, where 0 per cent means tax exemption, which came to SEK 490 700. On the other hand, with an income of SEK 509 300, it is 20%. Meanwhile, the local tax is set by the legitimate regional authorities. The rate on average varies between 30 and 35%.
2. Corporate income tax.
   Legal entities in Sweden include Swedish companies. The amount of tax is determined based on the income declared by the company for the tax year in question, when registering with the tax authorities. The percentage rate is invariably 28%. Advance tax payments are made every 12th day of the month, except in January and August, when the deadline is postponed to the 17th day of the month. At the end of the year, after the company has submitted its annual tax return, the Skatteverket - the Swedish Tax Agency - makes a statement which, if it does not coincide with the company's income predicted at the beginning, adjusts it accordingly:
   • when the declared income was higher than the actual income, the authority will ask for a surcharge;
   • when the declared income was lower than the actual income, the office will return the overpayment to us.
3. Flat tax.
   Flat rate taxation refers to foreigners who:
   • are not Swedish tax residents;
   • are employed by a domestic or foreign entrepreneur; The tax rate is 25 per cent.

At the same time, employees - non-residents, staying in Sweden for less than 183 days, and working for companies without a permanent establishment in Sweden, are NOT subject to tax liability, as Sweden adjusts its taxes to the situation of individual groups of employees. VAT in Sweden is added to company transactions, from sale to purchase to own payment. In addition, the tax rate is heterogeneous. Its amount depends on the type of business, while business within certain industries is completely free of it. On the other hand, the timing of the settlement itself is primarily linked to the size of the business.

The standard rate of VAT for a company in Sweden falls into one of 3 categories:

1. standard rate - 25%;
2. reduced rate - 12% - applies to foodstuffs, hotel services and handicrafts;
3. low rate - 6% - applies to labour, cultural events, work, books, etc;

Purchase and sale transactions are extremely important, as it is the difference between the two that is the amount to be paid. This is because the corresponding deductions are made from VAT. In this case, sales made as part of company operations are the same as output tax. Meanwhile, purchases with input tax. Swedish input tax can be deducted from costs when the purchase related to goods or services that are essential to the business. However, there are some exceptions to this, such as passenger cars.

VAT is accounted for on the basis of the appropriate declaration, which is then submitted to the Swedish tax authority, the Satteverket. In terms of the payment deadline, the size of the company is crucial:

• small companies with a turnover of SEK 1 million settle the VAT once a year, once every three months or once a month;
• Medium-sized companies with a turnover of SEK 1 million - 40 million submit the return once every three months or once a month;
• large companies with a turnover of more than SEK 40 million are required to submit the return on a monthly basis.

Applications must be submitted by the 12th of each month. Exceptions are medium-sized companies, which have until the 26th of each month. In Sweden, compulsory registration as a VAT payer requires entrepreneurs to simultaneously charge and pay the correct amount on goods distributed, services provided, as well as purchases for the company's operations and own disbursements from the company. Entry in the Swedish VAT register is available in two forms: electronic and paper. The first option requires logging into the tax office's system at skatteverket.se. If you choose the second option, you will need to download and complete form SKV 4620 and then deliver it directly to your nearest Skatteverket branch.

Registration is necessary when doing business in Sweden when:

• we move goods, which are indispensable for our business, to another EU country without changing the ownership of the goods;
• sell goods or services to other EU countries;
• sell goods or services to countries outside the EU.

The entrepreneur should register 2 weeks before starting the business. This procedure is not necessary if all customers of the company are listed in the Swedish VAT register. However, all those who are subject to VAT must also keep records. When selling, the VAT payer must issue an invoice with a percentage of the tax, as only then can the tax be deducted. The Swedish VAT return (Mervärdesskatt - so-called moms) is filed by all registered entrepreneurs. This applies to all types of transactions to which the relevant rate applicable to the industry is added. Settlement takes place as appropriate: annually, every three months or monthly. The settlement cycle depends on the size of the company and its annual turnover.

The Swedish tax system provides accordingly that:

• small companies with a turnover of SEK 1 million settle the VAT once a year, once every three months or once a month;
• medium-sized companies with a turnover of SEK 1 million - 40 million submit a return once every three months or once a month;
• large companies with a turnover of more than SEK 40 million are required to submit the return on a monthly basis.

Applications are received by the Swedish Tax Agency (Skatteverket) by the 12th of each month. The exception is medium-sized companies, which have time until the 26th of each month. The owner of a company in Sweden is obliged to register as an employer when hiring an employee. The employer tax in Sweden (Arbetsgivaravgifter) includes, among other things, employment tax, the employee's pension contributions and the employee's health insurance. The amount of this tax is calculated based on the employee's salary and other benefits. The percentage rate is 31.42%.

The authority responsible for keeping records of employers is the Skatteverket, the Swedish Tax Agency, where the designated amount of tax must be paid by the 12th of each month. The money is deposited in an individual account at the office. The tax base consists of:

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

In order to complete all formalities, the Swedish employer receives a PAYE form from the local tax office. When completing the document, the following information is required:

1. the amount of the employer's contributions;
2. the tax on employment:
   • amount of honorarium;
   • other employee benefits;
   • the amount of tax and contributions calculated.

Swedish corporate taxes:

1. corporate tax - income derived from the sale of shares of a company is treated as business income in Sweden, on which the tax rate is 22%. However, if the shares sold are to be used for the purposes of an ongoing Swedish tax resident company, such gain is exempt from tax. If the company is tax resident in one of the EU countries and the money obtained from the transaction is to be used for the purposes of the company, tax exemption is possible if the company owns at least 10% of the shares of the subsidiary. However, in the case of companies operating outside the EU, their legal form should be similar to that of a Swedish limited liability company or business association. Meanwhile, the Swedish dividend tax is levied at source and amounts to 30%;
2. real estate tax - covers all real estate, except dwellings and semi-detached houses. The Swedish real estate tax is between 0.2% and 2.8%. Legal entities are allowed to deduct this tax;
3. Stamp duty on mortgages - the transfer or granting of a mortgage at a 2% rate for the use of real estate and land use rights, the tax office imposes a tax of 1.5% - for natural persons; and 4.25% - for legal persons;
4. environmental taxes:
   • energy tax;
   • carbon tax;
   • sulphur tax.

Part of the trade relationship, between Poland and Sweden, is governed by EU regulations. In turn, Swedish law imposes appropriate customs duties and VAT on specific categories of imported and exported goods.

The Swedish customs tariff ranges from 0 to 20%. The amount of duty depends on the declared value, while also taking into account the cost of transporting the goods to the EU border. On the other hand, the VAT charged on importation must be included by the Swedish tax resident entrepreneur in the tax return submitted to the tax office (Skatteverket). Otherwise, (if the company is not tax resident in Sweden), the Swedish Customs Authority - Tullverket - has direct jurisdiction. The customs value of goods is to be stated in SEK. The VAT rate is mostly 25% on the value of the goods. Foodstuffs (except tobacco and alcohol) are subject to a reduced rate of 12%. Books and magazines are subject to a low rate of 6%. A complete ban on entry into Sweden includes:

• drugs
• doping substances;
• pornography.

Restrictions or a complete ban on exports from Sweden apply to, among others:

• combustibles
• products of strategic importance;
• items of special cultural value.

Persons entering Sweden from within the EU do not pay customs duties on items for personal use.

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