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Sweden: Personal Income Tax

An individual is considered to be a resident for Swedish tax purposes if the individual has a home at his disposal in Sweden. Any individual without such a real home within Sweden can also be treated as a resident for Swedish tax purposes, provided the individual resides in Sweden permanently. Any individual not residing in Sweden for at least six consecutive months, is without a home at his disposal in Sweden and does not have any significant connections to Sweden is generally treated as a non-resident for Swedish tax purposes.

Non-resident individuals working in Sweden are taxed under a special tax regime: the Special Income Tax Act (SITA). The SITA regime entails a final withholding tax on the gross income. Filing an annual tax return is not required and no deductions are allowed. The rate of the SITA has been lowered from 25% to 20% as of 1 January 2014.

Under certain circumstances, non-resident tax payers can opt for the resident taxation regime. Since the Swedish government introduced several additional tax credits in the resident taxation regime as of 1 January 2014, the lowering of the SITA rate to 20% comes as no surprise. The Swedish government wishes to maintain a certain balance in the taxation system. Furthermore, lowering the SITA rate to 20% has neutralized the incentive for non-resident tax payers to opt for the resident taxation regime – something that would have dramatically increased the administrative burden of the Swedish Tax Authorities.

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