Taxation of foreign individuals engaged for employment in Sweden

Tax Liability
The Swedish taxation of individuals is based on the individual’s residential status, i.e. individuals considered to be Swedish residents are subject to unlimited tax liability on their worldwide income, whereas non-residents are taxed only on Swedish source income, i.e. individuals with a limited tax liability.

Those considered as resident are individuals that live in Sweden, habitually reside in Sweden for a period of at least six months, or individuals that have essential ties to Sweden. Non-residents are individuals not considered to habitually reside in Sweden. This means that you are normally not resident in Sweden should your stay in Sweden be less than six months. However, please be informed that according to case law regarding habitual residence, visits shorter than 6 months that occur repeatedly can constitute residency; hence an individual assessment is recommended in order to determine if the individual is a resident in Sweden for tax purposes or not.

Swedish Residents, subject to unlimited tax liability, are taxed with a progressive tax rate on employment income. The municipal tax rate ranges between municipalities from approximately 29-35 percent. On income exceeding certain thresholds additional state tax of 20 percent is levied, potentially resulting in a marginal tax rate amounting to approximately 55 percent.

For foreign individuals engaged for employment in Sweden, there are mainly two tax regimes to consider which – if applicable – can reduce the individual’s taxation compared to taxation according to the ordinary rules for individuals residing in Sweden with unlimited tax liability.

Special Income Tax Regime for non-resident individuals
Individuals considered as non-residents in Sweden can apply with the Swedish Tax Agency to be taxed according to the special income tax regime for non-resident individuals, better known as “SINK” (Sw. särskild inkomstskatt för utomlands bosatta). For individuals covered by SINK, employment income is taxed with a flat tax rate of 25 percent. However, if taxed according to the SINK-rules there is no possibility to make deductions for e.g. incurred travel costs etc., hence non-residents can choose to be taxed as if they were Swedish tax residents which then entitles them to make certain deductions.

Whether or not it is beneficial to be taxed under SINK or not is dependent on the circumstances in each case, but high-income individuals generally often benefit from applying SINK given the flat tax rate of 25 percent.

Expert Tax Relief
Foreign individuals taking up employment in Sweden for a Swedish employer or a foreign employer with a permanent establishment in Sweden during a limited time period might be able to be able to apply for a special tax relief scheme better known as the expert tax relief.

In order to be granted expert tax relief certain conditions must be fulfilled. First of all, the individual must not intend (at the date of application at least) to stay in Sweden for longer than five years. Furthermore, the individual cannot be a Swedish citizen nor can the individual have been resident, i.e. lived or habitually resided, in Sweden within a period of five years prior to the assignment in Sweden.

An application for expert tax relief can be granted based on one of the following grounds:

• The individual is considered as key personnel (executive or manager) or a specialist/expert/researcher whom has skills and competence that is difficult to recruit in Sweden.
• The individual receive monthly remuneration (including benefits) amounting to a minimum amount of two – by the state determined – price base amount (Sw. prisbasbelopp), i.e. SEK 96,600, (48,300*2) for income year 2022.

We generally recommend clients to apply for the expert tax relief if they fulfil the remuneration requirement, as it under some circumstances can be difficult to prove that the individual falls under the category of key personnel.

To be taxed with expert tax relief, an application must be filed with the Taxation of research Board (Sw. Forskarskattenämnden) within three months from the time the work in Sweden started.

If granted expert tax relief, the basis for taxable income and social contribution are reduced with 25 percent, i.e. taxable income and basis for social contribution is 75 percent of the employment income received. The rules are applicable the first five years of the assignment. Further, moving expenses (to and from Sweden), expenses for two home travels for the expatriate and family members and children’s school fees paid by the employer are tax exempt.

Please note that the applicability of tax treaties may limit or reduce the imposed taxation.