Crypto assets are becoming increasingly common among the general public – both as an investment and as currency. In Sweden, a recent study showed that six percent of Swedes own crypto assets.
However, the conventional financial and legal system of countries has had a hard time accepting and classifying crypto assets. This has also been the case of the Swedish tax treatment of crypto income, but during the last few years, the legal situation has become somewhat more clear.
In this article, we will cover some basics of crypto taxation in Sweden, followed by the possibility of avoiding the Swedish tax of income from crypto assets.
Am I liable to pay Swedish tax on my crypto gains/income?
Sweden has a global tax claim on its tax residents, meaning that Sweden wants to tax all income, regardless of source, of a Swedish tax resident. This tax claim does include crypto income and gains. Without going into detail, a person who is living permanently is almost always also seen as tax resident in Sweden. Therefore, all persons living permanently in Sweden are usually subject to a Swedish tax claim on their crypto income/gains.
However, foreign (non-Swedish) nationals living in Sweden can sometimes claim benefits under a tax treaty, that can prevent Sweden from taxing crypto income of that person. If the claim is successful, this means that crypto income of that individual is tax free in Sweden. In general, this requires that the individual is seen as tax resident in another country than Sweden, and that the person has assets and family members in that country. Please do not hesitate to reach out to us, if you would like to explore whether this option could be available for you.
How are crypto income/gains taxed in Sweden? What is the applicable tax rate?
For a long time, the Swedish tax treatment of crypto income was unclear. However, the legal situation was clarified, to a great extent, by a verdict from the Swedish Supreme Administrative Court (HFD) during 2018.
In the verdict, the court established the following defining principles of taxation of crypto assets:
Crypto assets are neither to be classified as securities or currencies, under Swedish tax law.
Crypto assets are instead to be classified as “Other Capital Assets” under Swedish tax law (Chapter 52 of the Swedish Income Tax Act).
By classifying crypto assets as “Other Capital Assets”, capital gains on crypto assets are subject to the Swedish Capital Tax at 30 %. Capital gains are to be calculated by applying the so-called Cost Average Method, which means that an average acquisition price is calculated that is based on every acquisition of the asset in point.
Furthermore, capital losses on crypto assets are only deductible against capital gains to a limitation of 70 %. According to the Swedish tax rules on capital deficits, a person that has made an overall negative capital result, can decrease his/her employment income tax with part of the capital deficit. This is a quite unique regulation, from an international tax perspective, which could be used in a planned manner.
Can I avoid Swedish tax on crypto income/gains?
As mentioned, the Swedish tax claim can be limited by applying provisions of a tax treaty. Consequently, if one intends to sell a bigger amount of crypto assets, that would trigger a serious tax bill in Sweden, there are ways to ensure that the gain is not taxable by Sweden.
In order to succeed with this, a tax lawyer should properly assess the possibility of attaining tax treaty residency in another state, that preferably do not tax crypto income. In order to stay away from Tax Anti Avoidance rules, a clear strategy must be formed, on how to carry out the proposed actions.
In some cases, we have used special Swedish tax rules, and transferred holdings of crypto assets to foreign holding companies. Combining the Swedish tax rules, EU tax law, and domestic legislation of another state, crypto income can be totally tax free. However, this would usually require the individual to drop his/her ties to Sweden, at least partly. With some legal creativity, however, a skilled lawyer can set up a strategy that enables the individual to still be able to spend time in Sweden, and to own assets in Sweden.
Contact us if you have any questions regarding this tax planning opportunity.
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