IT Contracting in Sweden: Money & Tax
Profile written by Matt Walters of Capital GES (updated September 2016).
Although not immediately quoted as a contract destination, the wide variety of sectors using contract services in Sweden makes it an increasingly popular option.
A person who has a right of residence must register with the Swedish Migration Board no later than three months after entering the country.
If you are an EU/EEA citizen and are working in Sweden but live in another EU/EEA country to which you return regularly, you do not need to register in Sweden.
iii. Permanent Residence
In the instance that you require proof of your permanent right of residence, you can apply for a permanent residence card (PUK) at any of the Migration Board’s Permit Units.
II. Taxation in Sweden
The Swedish tax year is the calendar year; taxpayers must file an annual tax return in May of the year following the tax year. Basic tax rates are banded between 0% and 25% dependant on income, but a further municipal tax of up to 34.2% also applies.
Swedish tax allowances:
i. 25% Tax allowance
Foreign experts performing an activity in Sweden requiring rare skills benefit from an expatriate tax regime so long as the assignment does not exceed 3 years, the remuneration is borne by a Swedish entity, and the individual did not reside in Sweden during the 5 years prior to the application. Under this regime, 25% of the employee’s income as well as moving and schooling expenses and two annual trips home are exempted from Swedish tax and social security contributions during the first 3 years of the assignment in Sweden. For 2012, the requirement of having “rare skills” is fulfilled if the taxpayer’s monthly salary, including benefits in kind, exceeds SEK 88’000.
ii. Basic allowance
A basic allowance of between SEK 18’700 and 34’000 is deducted from the taxpayer’s earned income.
i. There are allowances for commuting and work-related travel costs
ii. Resident individuals may deduct the expense for construction work and refurbishments carried out on their dwellings
Alimony paid to a former spouse is deductible. Maintenance paid for the upkeep of a child is not deductible.
A deduction of up to SEK 50’000 is available for services in and around the home such as cleaning, ironing, childminding, etc. In these cases 50% of the expense is tax-deductible, up to a maximum deduction of SEK 50’000.
III. Social Security
Social security must be paid on your salary in Sweden unless your employer can detach you from another EU country by means of an E101 certificate.
Care must be taken here, and it is worth taking advice, as detachment by means of an E101 may not be the best solution in all cases due to either a) the duration of your intended stay in the country, b) the level of cover provided, or c) the cost of said contributions. It is also worth noting that, under the EU social charter, social security contributions made within an EU country will count towards your pension time stamp for the UK.
IV. Work permits
Citizens of EU/EEA countries and Switzerland do not need a work permit to take up employment in Sweden.
Citizens of all other countries must go through a full registration and work permit process. A work permit can only be obtained if no suitable candidate can be found in Sweden or another Member State of the EU/EEA or Switzerland.
Capital GES is an international payroll and contract-management company providing tailor-made tax planning services to contractors working overseas. For more detailed information on your personal situation, please contact Capital on +41 32 732 97 00.