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Tax Guide Sweden

Sweden is situated in the north of Europe. It became a part of the European Union in 1995. It is widely known for its welfare system that has helped create an equitable economic environment. The political environment in Sweden can be best described as stable. As far as taxation is concerned, it can be seen that they have a fairly straightforward taxation system that can be defined as progressive.

Personal Income Tax for Swedish Residents

As far as Personal employment income is concerned, it is taxed at progressive rates in Sweden. The following rates are applicable on personal income taxes:

  • In the case where employment income ranges from 0 SEK (Swedish kronor) to 532,000 SEK: A zero-rated national income tax rate is applied. On the other hand, a 32% municipal income tax is levied.
  • Where employment income exceeds 532,200 SEK (Swedish kronor): A national income tax rate of 20% is applicable. Similarly, a municipal income tax rate of 32% is applicable.

Personal Income Tax for Non-Residents in Sweden

As far as non-residents are concerned, they are constituted as people residing in Sweden, and working for a Swedish employer with a Permanent Establishment (PE) in Sweden. They are taxed at a flat rate of 25% at source.

The same rate of tax is applied in the case where pension is paid to a non-tax resident in Sweden, by a Swedish source.

Capital Income Tax in Sweden

As far as Capital Income Tax in Sweden is concerned, it is taxed at a flat rate of 30%.

Social Security Contributions

Social Security Contributions are also applicable at a rate of 31.42%, of the total remuneration paid in cash, and in kind, by a Swedish employer. This rate is applicable to both, Swedish employers, as well as those foreign employers who have a Permanent Establishment (PE) in Sweden. In the case where the foreign companies do not have a Permanent Establishment (PE), in that case they are liable to register for the payment of social security contributions.

Corporate Income Taxes in Sweden

As far as Corporate Income Taxes are concerned, it can be seen that as far as resident companies in Sweden are concerned, they are liable to pay taxes on their worldwide income. On the other hand, as far as non-resident entities are concerned, they are liable to pay taxes only on income that is sourced from Sweden. In this regard, all the income that is gained by the business is treated as business income. The taxable income is taxed at a rate of 20.6%. This rate has been applicable from 1st January 2021.

Other Corporate Taxes in Sweden

There are several other corporate taxes that are applicable in Sweden. These different taxes are given below:

  • Value Added Tax: A consumption tax in the form of value added tax is applicable for companies in Sweden. In fact, the Swedish tax system is aligned with EU rules. The VAT rate that is levied on goods and services is 25%. However, reduced rates are applicable on certain goods and services. Examples of these goods include hotel accommodations, food necessity items, in addition to newspapers, magazines as well as other cultural services. The reduced rate applied here is roughly 6%.
  • Custom Duties: As a member of the European Union, Sweden is also part of the Customs union that further enforces the community customs union that makes them liable to charge customs duty as a percentage of goods being imported in Sweden.
  • Excise Duties: The excise duties charged in Sweden are aligned with the EU rules. Excise duty is charged on three main areas, which include alcohol tax, tobacco tax, as well as tax levied on fuels and electricity.
  • Real Estate Tax: The annual real estate tax that is levied on business premises amounts to 1% of the assessed property value. As far as industrial properties are concerned, property tax is supposed to be charged at a rate of 0.5%.
  • Stamp Duty: An additional stamp duty of 4.25% is also levied on the direct transfer of any real estate. The tax base in this case constitutes of the higher o the two between the purchase considerations or the tax assessed value of the real estate before the transfer takes place.
  • Payroll Taxes: There are no payroll taxes, in exception to the social fee.
  • Social Fee: Mandatory Social Fee is charged at a rate of 31%. This is payable by employers, against the remuneration extended to the employees. However, a reduced rate is applicable for people that are aged above 65 and under 18. Social security charges are also deductible for purposes of corporate tax.

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