The Swedish tax system includes many direct and indirect taxes and contributions. The most important direct taxes are the national and local income taxes and the national tax on capital.
Indirect Tax has two main sources: value-added tax and excises on duties. Tax legislation is passed by Parliament; but the local authorities are at liberty to set the income tax rates in their respective municipalities and county council districts.
Sweden has concluded conventions for the avoidance of double taxation on income and capital with some 60 countries.
Sweden taxable is being generated from three segments
from capital or
Tax regulations and rates differs for the above sources of income.
Income From Employment
Typical sources of income under this head is salaries and pensions and all forms of fringe benefits such as meals, travel and use of a company car plus reimbursement for expenses, travel, etc.
Deductions are granted for the followings:
travel to and from work
on-the-job (business) travel with a private vehicle
higher living expenses in conjunction with business trips.
Income From Capital
Income in this category is taxed at a fixed rate regardless of the amount. Examples of income from capital can be
- capital gains from the sale of stocks, bonds, real estate, personal property
rent of flats or houses unless this is undertaken as a business activity.
INCOME FROM BUSINESS
This source of income includes the business of limited companies and businesses operated by individuals. Income from business activities is liable to taxation. Income from capital is considered as part of the business activity if it is generated by capital invested in the business.
Taxable income is calculated on the basis of generally accepted accounting principles with a nexus to the company's accounts. Deduction can be claimed on all costs necessary to maintain and develop the business operation.
Annual depreciation is permitted for assets invested in the business operation following either a fixed rate of depreciation on the book value of the asset or on a fixed rate on based on the acquisition value of the remaining equipment. The cost of equipment with a shorter economic life, i.e. less than three years, as well as equipment of a lesser value.
OTHER DIRECT TAXES THROUGH NATIONAL CAPITAL
The Government of Sweden levy taxes on the followings
- Real estate tax on private houses, residential buildings on farms and rented residential and business premises.
- Inheritance tax in the event of additional capital received by an heir on the occasion of a person´s death. The tax is based on the amount received.
The main sources of indirect taxes are
- Value added Tax
- Excises duty
- Social security contributions
1. VALUE-ADDED TAX
Value-added tax (VAT) is a state sales tax that is levied on all increases in value throughout the production and distribution chain and reported to the tax authorities. Under this tax regime, value added at every stage of the production process is subject to tax. This tax affects: Producers, providers of services, wholesalers, and retailer. VAT is also to be paid on the value of acquisitions from other businesses within the European Union (EU) and for the import of goods and services from countries outside the EU. No VAT is paid on exports to non-EU nations. Individuals and companies who are liable to pay tax declare their VAT in the annual tax return if their tax base is not higher than SEK 1 million. The VAT is then included in their final tax assessment. If the tax base exceeds SEK 1 million the company has to account for the VAT in a special return that is submitted and paid monthly.
2. EXCISE DUTIES
Excise duties are levied on some goods and services such as gaming, energy, alcohol and tobacco.
3. SOCIAL SECURITY CONTRIBUTIONS
Social security contributions are levied in the form of payroll taxes and a tax on the earnings of the self-employed. Payroll taxes are paid by the employer and are calculated on the basis of salary plus any other taxable benefits provided to the employee.
INCOME TAX RETURNS
- Filing of an income tax return every year is essential for Individuals and legal entities.
- Spouses has to file their return individually.
- tax returns are assessed on the basis of individuals' salaries, other forms of remuneration, assets and savings which employers, banks and other credit institutions are obliged to supply to the tax authorities.
For other individuals and legal entities file a more detailed type of tax return either electronically or manually only for this category of taxpayer.
ASSESSMENTS AND APPEALS
Assessment of tax are done by the local tax offices. A person is aggrieved by the decision can ask the office to reconsider its decision at any time during the five years from the assessment year for the disputed refund, or go for an appeal against the decision to the County Administrative Court. Appeals are first submitted to the local tax office, which reconsiders the decision before sending to the County Administrative Court. The Court's decisions may, in turn, be referred to one of Sweden´s four administrative courts of appeal. Under certain conditions the verdicts of the later courts may be appealed to the Supreme Administrative Court.
PENALTY FOR TAX EVASION
A person who submits incorrect or insufficient information in a tax return is charged a penalty, which is an administrative, economic sanction of the tax authorities. The rule of thumb is that this penalty amounts to 40 percent of the tax that should have been paid. This penalty does not prevent a person from also being prosecuted for tax evasion. Cases of tax evasion are handled by the regular court system. The maximum punishment for tax evasion is normally two years' imprisonment
TAXES FOR NON-RESIDENT
If an alien stays in Sweden for less than six months, his tax liability is limited to the extent that income arising from sources in Sweden and not on income arising from other sources, or origin country. Taxable earned income is subject to special income tax on non-residents (SINK) or special income tax on non-resident entertainers and artistes (LSI).
SPECIAL INCOME TAX ON NON-RESIDENTS (SINK)
In this type of cases the employer on the gross amount of the remuneration normally will withhold 25 per cent and that expenses are not deductible. This income shall not be included in a Swedish tax return.
- Accommodation allowance while work was performed in Sweden
- Reimbursement for fares to and from Sweden
income which under a double taxation treaty, is tax exempt in Sweden.
If the stay in Sweden does not exceed 183 days in a 12-month period the same also applies to income paid by a foreign employer who does not have a permanent establishment in Sweden.
SPECIAL INCOME TAX ON NON-RESIDENT ENTERTAINERS AND ARTISTES (LSI)
Tax normally has to be deducted at 15 percent at source from gross earnings and that no deductions are allowed for expenses. This income shall not be included in a Swedish tax return.
Taxable LSI income includes cash payment or other consideration emanating from Sweden for artistic or sporting activity conducted in Sweden or on board a Swedish ship by an entertainer or athlete resident abroad.
PAYMENT OF TAX DURING THE INCOME YEAR
Swedish employers and foreign employers with a permanent establishment in Sweden are obliged to deduct and pay preliminary tax for employees in Sweden.
Preliminary A-tax is paid by the employer making tax deduction from the salary and paying the tax to the tax authority.
Special A-tax is paid by the assessee in person if the employer does not have to make a tax deduction.