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Residence and domicile
How is residence/domicile determined for tax liability purposes in your jurisdiction?
An individual’s residence determines his or her tax liability in Sweden. For tax purposes, an individual is considered a resident if he or she lives in Sweden.
An individual who does not live in Sweden, but who stays in the country permanently, is also considered a resident for tax purposes. There are no explicit rules in Swedish tax legislation regarding what constitutes a permanent stay. However, according to the Swedish tax authority, an individual who regularly stays overnight in Sweden for a consecutive period of six months should be considered as resident in Sweden. Notably, an individual could be deemed to stay in Sweden regularly even if he or she spends less time in Sweden than abroad.
If an individual does not stay in Sweden on a permanent basis, but has previously lived in Sweden and has essential connections there, he or she would be considered resident for tax purposes. Swedish tax law contains examples of which circumstances should be considered when deciding whether an individual has an essential connection to Sweden.
Describe the income tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).
An individual who is regarded as tax resident in Sweden is liable to tax on all worldwide income from his or her arrival in Sweden. Income is divided into three categories:
· employment income;
· business income; and
· capital income.
Income is calculated separately for each category and is taxable unless explicitly exempted.
Income from employment and business is subject to local and national tax. Local tax is charged on the total taxable employment income at a progressive rate, ranging from 29.19% to 35.15%, depending on the municipality. A basic national tax of 20% is levied on taxable income exceeding Skr438,900. A higher national tax of 25% is levied on taxable income exceeding Skr638,500. In addition, social security contributions are levied on business income at 31.42%.
The income of employment or business is deducted with a basic reduction ranging from Skr19,300 to Skr35,100, depending on the level of income.
Individuals must file an annual tax return with the Swedish Tax Agency each May following the preceding calendar year.
Describe the capital gains tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).
Capital income includes, for example, interest income from bank savings, dividends and capital gains from the sale of financial investments, real estate or other assets. Investment income is taxed at a flat rate of 30%.
To calculate the taxable income from capital, gross capital income is reduced by capital costs (ie, interest costs and capital losses). Some capital losses are deductible only to 70% or less. What remains after these deductions is taxed at the flat rate of 30%. A deficit results in a tax reduction from the tax on employment or business income. The reduction is calculated as 30% of the deficit, up to a maximum of Skr100,000, and 21% on any amount exceeding Skr100,000. An unused tax reduction cannot be carried forward for use in subsequent years.
There are detailed rules regarding some of the more complex questions in the capital gains area – for example:
· the sale of a share of a partnership or a limited company;
· the treatment of losses in connection with winding up a business; and
· the calculation of the capital gains tax base of shares and immovable property.
Inheritance and lifetime gifts
Describe the inheritance and gift tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).
Sweden has no inheritance, estate or gift tax.
What taxes apply to individuals’ acquisition and disposal of real estate in your jurisdiction?
Stamp duty is levied on the transfer of real estate. The tax base for stamp duty is the higher of the purchase price and the assessed value of the property. The tax rate for individuals is 1.5% (for legal entities this increases to 4.25%). The buyer and the seller are jointly liable to pay stamp duty, but in practice stamp duty is paid by the buyer. Stamp duty is also levied on real estate mortgages.
A municipal fee is levied on private properties (private dwellings). The fee amounts to 0.75% of the assessed value of the property, up to a maximum of Skr7,687 per year. Real estate other than private dwellings is taxed between 0.2% and 1.0% of the assessed value of the property.
Non-real estate assets
Do any taxes apply to the acquisition and disposal of other assets apart from real estate?
The holding of investments might be a taxable event, depending on the type of investment. Swedish residents will be taxed on the deemed return of a foreign (non-Swedish) life insurance policy. Individuals are also liable for annual yield tax on assets in a capital insurance policy or an investment savings account (a Swedish financial savings instrument). Unit holders of an investment fund are liable for a standardised tax of 0.12% on the value of their units in the investment fund at the beginning of each year.
Other applicable tax regimes
Are any other direct or indirect tax regimes relevant to individuals?
Swedish value added tax is levied on the supply on goods or services unless these are exempt. The standard rate is 25%, with reduced rates of 12% and 6%.
Customs duties apply to goods imported from outside the European Union. Excise duties apply on certain types of good (eg, alcohol, tobacco and energy).
Are there any special tax planning considerations for individuals with a link to your jurisdiction?
An individual who is tax resident in Sweden is liable to tax on all worldwide income from his or her arrival in Sweden. In order to avoid Swedish capital gains tax, individuals should considering selling their assets before entering the country. Payment from a trust to a Swedish tax resident is expected to be taxed as income from employment. Therefore, it is advisable to investigate alternatives and possibilities to finalise or terminate payments from a trust to individuals who intend to move to Sweden.