Every week, a number of Swedish tax residents receive an unwelcome letter in their mailbox or on Kivra – in the form of a "query" ("Fråga") from the Swedish Tax Agency ("Skatteverket"). The feeling of panic can easily set in. Did I really have the right to that deduction? Should I have included that foreign income in my tax return? These questions, and many others, are not uncommon when receiving a query from the Tax Agency.
Why have I received a query from the Swedish Tax Agency?
When the Tax Agency processes a tax return, it may be the case that the case officer requires additional information in order to, for example, approve a deduction claimed in the tax return. For instance, it may involve the Tax Agency wanting to obtain documentation showing that income has been taxed abroad – which is a requirement for the so-called six-month rule to exempt foreign work income from Swedish tax.
Apart from questions related to a submitted income tax return, the Tax Agency can also initiate a form of tax audit by sending a query. The Tax Agency often works with specific focus areas (often related to certain income types that are frequently declared incorrectly or not declared at all) and then sends queries to individuals they have identified through various means.
In recent years, several Swedish individuals have received queries about their cryptocurrency income. Because there were indications that a significant portion of cryptocurrency income were not being declared by Swedish tax residents, it seemed like the Tax Agency had made a special effort to uncover fraudulent cryptocurrency income reporting. Since Sweden has information exchange agreements with several countries, information provided by another country can also be the basis for initiating a tax audit that leads to the Tax Agency sending a query.
How should I respond to a query from the Swedish Tax Agency?
Most of the time, the Tax Agency aims to reassess a person's tax, by increasing the taxable income, which leads to the Tax Agency sending a query to someone suspected of making a tax-related mistake. Unfortunately, a person who has their taxes reassessed by the Tax Agency often risks additional tax penalties on the reassessed tax. Tax penalties are usually 40% of the additional tax – which can result in a significant tax bill for the affected individual. In serious cases, suspicions of tax crimes may also arise, leading the Tax Agency to contact a prosecutor, which, in the worst case, can lead to imprisonment after a criminal law procedure.
Given these risks, it is important to respond to a query from the Tax Agency thoughtfully and correctly. Since tax law is a complex area, you should consider hiring a tax lawyer to represent you in your dealings with the Tax Agency. This is especially relevant in cases of substantial income. It is also important to keep in mind that the Tax Agency can use the response to the query to attempt to impose other taxes than the ones initially addressed in the query.
Furthermore, it is crucial to consider which party (you or the Tax Agency) is considered to bear the burden of proof according to relevant tax rules. In some cases, it is the Tax Agency that must prove that something. In such cases, the information provided in a response to the Tax Agency's query should be evaluated. A tax lawyer can assist you in legally requesting the Tax Agency to provide the documents they have in the case, which can be an important strategy for understanding the type of information the Tax Agency possesses. This could be crucial information for assessing potential chances of success in a court process versus the Swedish Tax Agency.
What happens after I've responded to a query from the Swedish Tax Agency?
After you have responded to a query from the Swedish Tax Agency, it sometimes happens that the Tax Agency sends additional queries to you, i.e. follow up questions. In other cases, the Tax Agency believes it has sufficient grounds to issue a "proposal for a decision," and you are encouraged to submit your opinions on it. After this, the Tax Agency usually issues a reassessment decision, which can be appealed to the appropriate administrative court.
Since a case in an administrative court is based on the reassessment by the Tax Agency, sometimes the Tax Agency's query – and your response to it – becomes crucial evidence in the legal process. Therefore, it's advisable to seek legal assistance as early as possible in the process – that is, when you receive the query from the Tax Agency. Unfortunately, it's not uncommon for individuals to seek help from a lawyer against the Tax Agency only when it's too late.
Contact us at nomadtax if you need assistance with a query you've received from the Tax Agency.
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