Thailand has long been a popular destination for Swedes. Some travel to the country every winter to escape the cold Swedish weather, while others move there permanently. A significant number of Swedes also own properties or condominiums in Thailand. Owning a residence raises several tax issues for a Swede, which will be briefly addressed in this article.
Must I pay taxes in Sweden even if I live in Thailand?
From a tax perspective, Sweden categorizes individuals into two groups – either unlimited or limited tax liability. The latter group is generally only liable for income that is considered to originate (have its source) in Sweden. This includes, for example, wages from work in Sweden, capital gains from the sale of a property in Sweden, and dividends from Swedish companies.
On the other hand, a person considered to have unlimited tax liability is liable to pay taxes in Sweden on their global income. This includes income earned in Thailand, capital gains from the sale of assets located in Thailand, and business income from Thailand.
As a general rule, you are required to pay tax in Sweden on all income, even if you live in Thailand, provided you are deemed to have unlimited tax liability in Sweden. Whether you have unlimited tax liability despite living abroad depends on whether you have "substantial ties" to Sweden or are deemed to have "permanent residence" in Sweden.
At Nomadtax, we always assess whether our clients have substantial ties or permanent residence and provide advice on measures that can be taken to avoid Swedish tax liability on these grounds.
There are, however, situations where one may have both substantial ties and permanent residence without Sweden having the right to tax their income as a resident of Thailand. This is because the Swedish-Thai tax treaty may limit Sweden’s right to tax most of your income. A careful analysis of your status under the tax treaty is necessary, and we always assist our clients with this before planning a move to Thailand.
How is rental income from property in Thailand taxed by Sweden?
As a general rule, Sweden wishes to tax rental income from properties in Thailand if you have unlimited tax liability in Sweden. It is also important to determine whether the income should be classified as capital income or business income, which depends on how the property/residence is classified under Swedish law.
However, the Swedish-Thai tax treaty can affect Sweden’s right to tax rental income from Thailand. To invoke the tax treaty, this must be claimed in the Swedish tax return, and you need to substantiate your claim with relevant evidence, such as various certificates from Thai authorities.
One aspect that must also be considered when assessing the taxation of a property in Thailand is that many individuals choose to own property through a Thai company, which is a consequence of Thailand’s prohibition on non-citizens owning land. This has significant implications for taxation, and one should also ensure that the corporate structure is tax-optimal.
How is a capital gain from the sale of property in Thailand taxed by Sweden?
An individual with unlimited tax liability in Sweden is liable to pay taxes on capital gains from the sale of properties in Thailand. Here, too, an analysis of the property’s tax classification is required – either as a business property or private property. In some cases, there is a risk that the property may be seen as inventory, which could lead to highly unfavorable tax consequences.
Fortunately, there is also a possibility that the Swedish-Thai tax treaty may prevent Sweden from taxing the capital gain at all. However, an individual assessment needs to be made in each specific case. As mentioned above, it is crucial whether the property is held through a company, which, as noted, is common in Thailand.
Are you living in, or considering moving to Thailand, and have previously lived in Sweden? Don’t hesitate to contact us for tax advice regarding Swedish-Thai-related tax matters.
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