Most people do thorough research before moving to a new country. Questions such as “In what neighbourhood should I live?”, “How is the weather?”, and “How good is the public transport system?” are among the common questions.
However, a very important aspect of relocating to a new country, and particularly to Sweden, is the impact of taxes. Sometimes the tax aspect is overlooked, which can lead to nasty surprises. Since you are reading this – you have taken the first step to avoid any unwanted tax surprises. Well done.
When do I become Tax Resident in Sweden?
Most countries in the world have a set threshold for becoming tax resident. The usual rule is that one becomes tax resident after spending 183 days during a calendar year in the new country.
Unfortunately, there is no such threshold in Sweden - which has been heavily criticized. However, in general, a person moving to Sweden will become tax resident, if he/she spends more than six consecutive months in Sweden. If the person is commuting back and forth to another country, or if the person stays significant time in other countries, the tax residency assessment could be very complicated. In these cases, a study of Swedish case law would be necessary to answer when/if the person is tax resident in Sweden.
This case law, do in some situations lead to persons on a scouting trip (to look for a home or similar) in Sweden, becoming tax resident from the date of the scouting trip, which could lead to severe tax consequences.
What is the effect of me becoming Tax Resident in Sweden?
Sweden’s tax claim on its tax residents, is covering their global income. Hence, dividends from foreign companies, selling of real estate located outside of Sweden, salary from working for a foreign company, and other “foreign-sourced” income – will be included in Sweden’s tax claim.
So how high are the Swedish taxes? Sweden has one of the highest tax rates in the world. Employment income is taxed with approx. 30 – 55 % tax. Dividends are usually subject to a flat 30 % tax, together with capital gains. Dividends from a company (Swedish or foreign) that the owner is active in, are usually subject to a special tax regime, that leads to part of the dividend being taxed as employment income (30 - 55 %). This is normally an unwanted surprise for entrepreneurs with their own company coming to Sweden. There are tax planning strategies available though (dividends within a threshold can be subject to 20 % tax), but the rules are technically very complicated, why tax advice is needed.
Can tax treaties affect my taxation in Sweden?
Yes. Sweden is part to many bilateral tax treaties. The primary purpose of a tax treaty is to mitigate situations of double taxation, i.e. when a person or company is taxed in two countries on the same income. Double taxation is very common among expats living in Sweden - due to them being tax liable in their home country but also in Sweden after moving here.
A tax treaty can limit Sweden’s right to tax a Swedish tax resident. Therefore, tax treaties can also be applied for tax planning purposes. However, a tax lawyer must analyse the applicable tax treaty, its potential effects, and how to structure the move in an optimal way to benefit from the tax treaty’s provision. Doing this assessment, will usually mean that a lot of Swedish Crowns (name of our currency) are saved. Wrongfully claiming benefits under a tax treaty can sometimes lead to tax penalties, why it is important to get professional help with this.
Do I have to register with the Tax Agency when arriving in Sweden?
Generally speaking, a person will be obligated to register as resident with the Swedish Tax Agency after coming here. This registration leads to the issuing of a Swedish social security number ("personnummer") – which is essential for living in Sweden.
When do I have to file a Swedish Tax Return?
If a person is tax resident in Sweden during any day of a calendar year – that person is obligated to file a Swedish tax return for that year. The deadline for this is in the beginning of May, the year after the “tax year”.
Many newcoming expats in Sweden employ a tax lawyer to take care of the preparation and filing of their first tax return in Sweden, at least for the first year. We do this every year for a number of expats living in Sweden. This is done primarily due to three purposes:
Ensuring that the person does not violate Swedish tax law, which can lead to severe penalties and in some cases criminal law procedures.
Ensuring that foreign-sourced income (and costs) are properly classified under Swedish tax legislation.
Ensuring that a tax optimal treatment is applied to the person’s income. This usually involves claiming benefits under tax treaties, and optimizing potential deductions, and arguing for the treatment of foreign-sourced income.
Tax optimization of relocation to Sweden
As mentioned, we believe that a person that moves to Sweden needs professional advice with their tax situation. The reason is that international tax law is very complicated, which can lead to unwanted surprises and heavy costs. Avoid this potential headache, and reach out to us before completing your move to Sweden.
All too often, we get contacted by expats that have undertaken actions in connection to their move to Sweden, that lead to severe tax consequences for them. A lot of money can be saved, if certain transactions such as selling real estate, shares, or transferring securities, are performed with proper timing. Also, in some cases we actively affect key circumstances to gain tax treaty residence in the most optimal state. Sometimes, it can also be beneficial to have a tax lawyer producing a preliminary tax calculation, in order for you to be able to forecast how much money you will have to put aside every year for taxes.
Contact us here. We promise you. Its worth it.
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