Sweden is renowned for its innovative designers, music, egalitarian society, and progressive policies, drawing adventurous souls to explore its vast wilderness. In recent years, an increasing number of digital nomads have chosen Sweden as their base. However, it's crucial for digital nomads to understand the tax implications of residing in Sweden. In this article, we'll explore key tax considerations for digital nomads working from Sweden.
When does a Digital Nomad become Tax Resident in Sweden?
Sweden applies three alternative grounds, when determining whether an individual is to be seen as tax resident in Sweden. The grounds are the following:
Individuals that live permanently in Sweden
Individuals that has their habitual abode in Sweden
Individuals that has previously lived in Sweden, but still has ‘essential ties’ to Sweden after migrating from Sweden
The first ground, living permanently in Sweden, is of no legal importance, since the second ground will always be fulfilled before the first. Therefore, lets skip to the second ground.
According to the second ground, a person that is seen as having his/her habitual abode in Sweden will also become tax resident here. It is said in the legislation’s preparatory works, that habitual abode is usually considered to be at hand, when a person is spending more than six consecutive months in Sweden. However, due to ambiguous case law, a person can have his/her habitual abode in Sweden, by just spending around 80 days per annum in Sweden.
The reason is that due to case law, one also has to consider the regularity, the extent, and the recurrence of the pattern of stay in Sweden, in order to establish whether habitual abode is at hand. This is quite complex, and the rule has been subject to criticism, for being vague and hard to apply.
Usually, however, digital nomads will become tax residents in Sweden if they spend six months here, without any longer breaks (time outside of Sweden).
Are Non-Tax Resident Digital Nomads exempt from Swedish taxes?
A Swedish tax resident is liable to taxes on his/her global income. This includes income from abroad, such as dividends from non-Swedish companies, employment income from non-Swedish employers, and similar. This could be a headache for digital nomads with income streams from abroad, that are also taxed in the country of origin.
However, individuals that are Non-Tax Residents are, as a main rule, only subject to taxes on Swedish-sourced income. For example, Non-Tax Residents are taxed on employment income that is attributable to work performed in Sweden. Therefore, a digital nomad would technically be subject to Swedish taxes, if he/she works remotely from Sweden. In some cases it is possible to have employment income exempt by applying the 183-day-rule, although the rule’s applicability has been narrowed down with the implementation of the economic employer concept.
It is also possible that a tax treaty can restrict Sweden’s right to tax certain income received by a digital nomad in Sweden. An analysis must be made in each case, since there are multiple factors that affect the application of a tax treaty’s provisions.
Do Digital Nomads in Sweden risk becoming Double Taxed?
As touched on previously, this is a real risk in some cases when digital nomads live in Sweden. However, provided that the other country has entered into a tax treaty with Sweden, this risk should not be too big. Although, to mitigate double taxation, one must claim the applicability of the tax treaty, which is usually done in a Swedish Tax Return. This could be quite complicated, even for native Swedish speakers, since it is quite technically complicated.
What is the Tax Optimal Setup for a Digital Nomad working from Sweden?
This is a hard question to answer. In some cases, when a digital nomad only intends to be present in Sweden for a number of months, it could be beneficial to act through a non-Swedish company. However, there might also be risks derived from this, especially if the work goes on for more than six months.
Sweden also has a special Non-Tax Resident regime, applying to employment income, that can be quite beneficial sometime, since it offers a flat 25 % tax.
To summarize, one has to assess each digital nomad’s situation, in order to create a setup that is optimal from a tax perspective. Please do not hesitate to reach out to us, if you are interested in this.
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