It is not uncommon for employers to offer their employees 'free housing' when they are seconded to work in Sweden. In fact, it is standard procedure to provide an employee with housing when going abroad temporarily. But how does Sweden treat this type of benefit in kind, from a tax perspective? Learn more about Swedish Tax Aspects of Employer-Provided Housing in this article.
Is Employer-Provided Housing Subject to Swedish Tax?
As a main rule, Sweden taxes its tax residents on their global income, which also includes cash remuneration as well as benefits in kind. According to Swedish tax law, a housing benefit provided by an employer is seen as a taxable benefit in kind for the employee, provided that the employee is tax resident in Sweden. Also, should the employee be a non tax resident in Sweden, a housing benefit in Sweden could still be subject to Swedish taxes.
It is important to establish whether a person is to be seen as tax resident or not in Sweden. This is usually the case if a person spend more than six consecutive months in Sweden. However, due to the Swedish Supreme Administrative Court's precedents, as little as approx. 100 days in Sweden per annum can lead to tax residency. One must examine the person's stay in Sweden, in relation to case law, which stipulates that special regard should be given to the travel pattern's length, regularity and extent. Depending on whether the employee enjoying the housing benefit is a tax resident in Sweden or not, the tax treatment will differ.
How is a Housing Benefit Taxed for a Swedish Non Tax Resident?
For an employee that is a non tax resident in Sweden, a Swedish tax claim would be at hand on income and benefits in kind due to work that is physically performed in Sweden. However, there are exceptions. According to a provision in the Swedish Non Tax Resident Regime Law ("SINK"), a person with a temporary employment or mission in Sweden, can receive tax free housing from his/her employer. This has to be analyzed by a tax lawyer.
However, if the exception is not applicable, the main rule is that the benefit should be subject to the Swedish Non Tax Resident Regime Law, which entails a taxation at 25 % without possibilities of deductions. Lastly, it is also possible for an employee to receive housing in Sweden tax free, if the employee fulfills the so-called 183 day rule. A separate analysis has to be made in this regard, determining whether the grounds of the 183 day rule are fulfilled.
Are Housing Benefits subject to Swedish Tax for a Swedish Tax Resident?
As previously mentioned, a Housing Benefit would as a main rule be subject to Swedish Income Tax. However, there is an exception. If an employee fulfills the rule for "dual housing", it is possible to deduct the taxable value of a Housing Benefit. Sometimes, however, the employee would only be entitled to deduct costs for accommodation that is kept in the employee's home state.
It is also possible, that the work in Sweden is seen as performed during a business trip, which will render the housing benefit as tax free for the employee.
Employer Aspects of Housing Benefits in Sweden
Under Swedish domestic tax law, the obligations of employers are interlinked with whether their remuneration is taxed in the hand of the employee. If Swedish tax is due on a housing benefit, this is to be reported to the Swedish Tax Agency. It should also be subject to Preliminary Tax Withholding by the employer.
However, special rules apply to the employer reporting of Housing Benefits. Instead of reporting the Fair Market Value (FMV) of the benefit, the employer should apply standardized benefit valuations, that is issued once per annum by the Swedish Tax Agency. Should Swedish Social Security Fees be due on a Housing Benefit enjoyed in Sweden, these should also be levied on the basis of the standardized benefit valuations. However, foreign employers without a Permanent Establishment in Sweden can withhold 30 % tax instead of applying the standardized benefit valuations.
To summarize, whether a housing benefit provided in Sweden is subject to Swedish tax, has to be analyzed in relation to each employee coming to Sweden. Firstly, it has to be established if the employee is to be seen as tax resident or non tax resident. Subsequently, it has to be established if any exception is applicable. Contact us if you would like assistance with tax consequences of sending staff to Sweden.
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