Taxation in Sweden
Encyclopedia
Salary incomes
Taxation in Sweden on salaries for an employee involves contributing to three different levels of government: the municipalityMunicipalities of Sweden
The municipalities of Sweden are the local government entities of Sweden. The current 290 municipalities are organized into 21 counties...
, the county council
County Councils of Sweden
A county council, or landsting, is an elected assembly of a county in Sweden. A county council is a political entity, elected by the county electorate and typically its main responsibilities lie within the public health care system. In each county there is also a county administrative board which...
, and the central government
Government of Sweden
The Government of the Kingdom of Sweden is the supreme executive authority of Sweden. It consists of the Prime Minister and cabinet ministers appointed by the Prime Minister. The Government is responsible for their actions to the Riksdag, which is the legislative assembly...
. Social security contributions are paid to finance the social security system.
Income tax on salaries are deducted by the employer (a PAYE
PAYE
Pay as you earn or PAYE refers to a system of withholding of income tax from payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns. PAYE may also refer to withholding of the...
system) and paid by the employer to the Swedish Tax Agency
Swedish Tax Agency
The Swedish Tax Agency is a government agency in Sweden responsible for national tax collection and administering the population registration....
(Skatteverket).
The effective taxation in Sweden is commonly cited as among the highest in the world.
Sweden
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
has a taxation system for income from work that combines an income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
(paid by the employee) with social security contributions (employers contributions) that are paid by the employer. The total salary cost for the employer is thereby the gross salary plus the social security contributions. The employer makes monthly preliminary deductions (PAYE
PAYE
Pay as you earn or PAYE refers to a system of withholding of income tax from payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns. PAYE may also refer to withholding of the...
) for income tax and also pays the social security contributions to the Swedish Tax Agency.
Only the income tax deducted is visible on the salary slip. The income tax is contingent on the person being taxable in Sweden, and the social security contributions are contingent on the person being part of the Swedish social insurance scheme. The income tax is finalised through a yearly tax assessment the year following the income year.
Social security contributions
The specifics of the social security contributions (employer's contributions) may be found at the Swedish Tax Agencys Website.Example of salary taxation through PAYE
(Assumptions: Income tax (Direct - 32%), Employer social fee (indirect - 31.42%))From a pay of "100", the Employer first pays "32" in Income tax (direct - 32%), on top of that the Employer also pays an additional "31.42" in Employers social fees (indirect - 31.42%).
Thus, from a pay check of "100", 63.42/131.42 (i.e. 48.3%) is paid as taxes, although the employer's contribution is a fee for the employees adherence to the Swedish social security scheme. The effective rate may be lowered by for example earned income tax credits and private retirement savings contributions.
Value added tax
The value added taxValue added tax
A value added tax or value-added tax is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its...
(mervärdesskatt or moms) rate in Sweden is 25%, with exceptions for food and services like hotel room rental fees (12%), and for sales of publication
Publication
To publish is to make content available to the public. While specific use of the term may vary among countries, it is usually applied to text, images, or other audio-visual content on any medium, including paper or electronic publishing forms such as websites, e-books, Compact Discs and MP3s...
s, admission ticket
Ticket (admission)
A ticket is a voucher that indicates that one has paid for admission to an event or establishment such as a theatre, movie theater, amusement park, zoo, museum, concert, or other attraction, or permission to travel on a vehicle such as an airliner, train, bus, or boat, typically because one has...
s to cultural events and travel within Sweden (6%).
Registering a non-Swedish company or sole trader in Sweden
A foreign company conducting business in Sweden, whether a natural or a legal person, may become taxable for VATVat
Vat or VAT may refer to:* A type of container such as a barrel, storage tank, or tub, often constructed of welded sheet stainless steel, and used for holding, storing, and processing liquids such as milk, wine, and beer...
, employer´s contributions and/or income tax. The company should then apply for registration at the Swedish Tax Agency
Swedish Tax Agency
The Swedish Tax Agency is a government agency in Sweden responsible for national tax collection and administering the population registration....
, and may apply for a Swedish F-tax certificate.
In the ‘Tax application for foreign entrepreneurs´ brochure and form, SKV 419 and SKV 4632 respectively, there is information on how to submit the application.
Sole traders who have a Swedish personal number, and corporations that have a representative who has a Swedish personal number and who is also authorised to sign (authorised to sign by himself) on behalf of the company, may submit the application electronically through the verksamt.se website. Verksamt.se is jointly managed by the Swedish Tax Agency (Skatteverket), the Swedish Companies Registration Office (Bolagsverket) and the Swedish Agency for Economic and Regional Growth (Tillväxtverket). Other foreign companies may submit their application directly to the International Tax Offices at the Swedish Tax Agency by post. When registered with the Swedish Tax Agency, the foreign company receives a unique Swedish identity number. For natural persons to receive such a number they must verify their identity with a passport or another such identity card or documentation. For a legal person it is required that the identity is verified with some form of attested certificate of registration/incorporation and that the representative demonstrates his/her authority to represent (sign) on behalf of the legal person when it requests registration for taxation. Foreign legal persons active in Sweden should first contact the Swedish Companies Registration Office to ask if they are required to register a branch office. If such a registration is made with the Swedish Companies Registration Office, they will supply a Swedish registration number that will also be used by the Swedish Tax Agency. For contact information, see the Swedish Companies Registrations Office website.
Further information in English can be had at the Swedish Tax Agency's website