Skip to content

Sweden

General Information

Country Name: Kingdom of Sweden
Currency: Swedish Krona (SEK)
Primary Tax Authority: Swedish Tax Agency (Skatteverket)

Key Legislation

  • Instrument of Government (Regeringsformen): Part of the Swedish Constitution, it provides the foundational principles for taxation and government functions.
  • Income Tax Act (Inkomstskattelagen): Regulates personal and corporate income taxation.
  • Value Added Tax Act (Mervärdesskattelagen): Governs VAT.
  • Social Security Act (Socialförsäkringsbalken): Regulates social security contributions.
  • Tax Procedure Act (Skatteförfarandelagen): Governs tax administration, including assessment and appeal processes.

Fiscal Authority Allocation

Sweden has a centralized tax system, with the Swedish Tax Agency (Skatteverket) responsible for the administration and collection of taxes.

Taxes Collected by Central Authorities:

  • Income tax (personal and corporate)
  • VAT
  • Customs duties
  • Social security contributions

Taxes Collected by Local Authorities:

  • Property tax (local portion)
  • Certain local business taxes

Revenue Sharing Mechanisms:

Revenue collected centrally is allocated to local governments based on a formula that considers factors such as population and need.

Corporate Income Tax (CIT)

  • Standard CIT Rate: 22%.
  • Taxable Income Definition: All worldwide income of resident corporations is subject to CIT. Non-resident companies are taxed on Swedish-sourced income.
  • Deductible Expenses: Business-related expenses, including salaries, utilities, and cost of goods sold, are deductible.
  • Loss Carryforwards: Losses can be carried forward indefinitely.
  • Tax Incentives: R&D tax credits and various investment incentives for specific industries.

Value-Added Tax (VAT)

  • Standard VAT Rate: 25%.
  • Reduced Rate: 12% (e.g., for food, restaurants), 6% (e.g., for books, newspapers, and public transport).
  • Exemptions: Healthcare, education, and certain cultural activities are exempt from VAT.
  • Refunds: VAT refunds are available for registered businesses, including exporters.

Personal Income Tax (PIT)

  • PIT Rates: Progressive rates from 0% to 57%. The top rate applies to income exceeding SEK 703,000 (for tax year 2023).
  • Taxable Income Thresholds: Income up to SEK 20,200 is tax-free; income above this threshold is taxed progressively.
  • Deductions and Exemptions: Various deductions are available, including for work-related expenses and interest on loans.
  • Treatment of Foreign Income: Residents are taxed on worldwide income. Relief through tax credits or exemptions is provided under Double Tax Treaties (DTT).
  • Special Rules for Expatriates: Certain expatriates may benefit from special tax regimes or exemptions.

Additional Mandatory Contributions

Social Security Contributions:

  • Rate: Contributions are made to the Swedish Social Insurance Agency (Försäkringskassan).
  • Contribution Rate: Employers contribute approximately 31.42% of gross salary; employees contribute 7% (for pensions).
  • Mandatory Participation: All employees and self-employed individuals are required to participate.

Withholding Taxes

  • Dividends: 30% withholding tax, which may be reduced under DTT.
  • Interest: 30% withholding tax, potentially reduced under DTT.
  • Royalties: 30% withholding tax, with reduced rates available under DTT.
  • Payments to Non-Residents: Generally subject to withholding tax, with reduced rates under DTT provisions.

Transfer Pricing Rules

Sweden follows the OECD guidelines for transfer pricing. Companies must maintain documentation for related-party transactions and comply with the arm’s length principle.

Special Tax Regimes

  • Free Zones: Sweden does not have specific free trade zones, but various regional investment incentives are available.
  • Investment Incentives: Tax incentives for R&D, green technology, and investments in certain regions.

Other Taxes

  • Property Tax: Local authorities levy property tax based on property value.
  • Customs Duties: Applied to imports based on the Customs Act.

Double Taxation Agreements (DTAs)

Sweden has signed 76 DTAs to avoid double taxation and provide reduced withholding tax rates on dividends, interest, and royalties.

Compliance and Reporting

  • Corporate Tax Filing Deadline: Annual corporate income tax returns must be filed within six months of the end of the fiscal year.
  • VAT Filing: VAT returns are filed monthly or quarterly, depending on turnover.
  • Penalties for Non-Compliance: Penalties for late filing and non-compliance include fines and interest on unpaid amounts.

Recent Developments

  • Tax Reforms: Sweden is updating its tax regulations to enhance transparency and address tax avoidance.
  • Environmental Taxation: Increasing focus on environmental taxes and incentives for green technology investments.
  • Digital Taxation: Sweden is exploring measures to tax digital services and cross-border e-commerce more effectively.

Subscribe to my free newsletter for regular updates on law, taxation and business worldwide.

Tags: