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TAX

Living in Sweden? Here’s how your taxes are changing in 2020

Sweden's tax reforms will affect several groups of people in 2020. But what do you stand to gain or lose from the changes?

Living in Sweden? Here's how your taxes are changing in 2020
Here are some of the main tax news to be aware of. Photo: Tomas Oneborg/SvD/TT

What do you get if your income is high?

Sweden is to scrap its austerity tax for high earners in 2020, one of the most radical and controversial tax reforms in recent years. It comes as a result of the deal that allowed the Social Democrats and Green Party to form a government earlier this year with the support of the opposition Centre Party and Liberals.

According to the finance ministry this means that Sweden's 345,000 highest earners will get a tax cut of on average 17,700 kronor ($1,887) a year. And according to the TT news agency's calculations, those who earn 75,000 kronor a month will effectively get a tax cut of around 1,200 kronor a month next year.

The austerity tax (known as värnskatt in Swedish) was introduced in 1995 as a temporary move to consolidate the budget after Sweden's 1990s financial crisis. It was originally intended to be scrapped three years after its introduction, but it stuck around and formed part of the state income tax.

In practice, people aged above 65 can earn up to 504,400 kronor a year before they have to pay Swedish state income tax (which means income above this limit is taxed at 20 percent), and up to 703,000 kronor a year before they have to pay the soon-to-be-former austerity tax (which taxes income above the second limit at another 5 percentage units). The state income tax and austerity tax are separate from regional and local taxes, which are paid on on average 32.28 percent of your income, depending on where you live.

You can read more about how taxation works in Sweden here.


If you're on a high income, your tax bill will get reduced. Photo: Martina Holmberg/TT

What do you get if you are retired?

Old-age pensioners on a pension of more than 17,000 kronor a month are set to get a slightly lower tax bill. For a pensioner receiving 17,500 kronor a month, this translates into a tax cut of almost 100 kronor.

Pensioners on a low income, who are entitled to a so-called guarantee pension – a minimum pension regardless of a person's salary status when they were working – will see their minimum raised by 200 kronor a month. This means the guarantee pension becomes 8,596 kronor a month next year.

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Old-age pensioners are in line for a small tax cut. Photo: Fredrik Sandberg/TT

What do you get if you live in rural Sweden?

If you're working in one of around 80 municipalities in rural and remote parts of Sweden, you are set to get a tax cut of 137 kronor a month. This decision affects around 850,000 people in total.

The cuts target municipalities that are part of Sweden's so-called regional development areas A and B, areas that struggle with challenges such as depopulation, high local taxes and dwindling welfare services. The Local explains more about who is entitled to the tax cut in this article.


Sweden is trying to boost rural areas. Photo: Helena Landstedt/TT

What do you get if you drive a car?

A complicated fuel tax change will see the price per litre of petrol effectively increase by around 0.15 kronor at the pump, an adjustment for inflation mitigated by a decision to lower the petrol tax at the same time.

Since July 2018, consumers who buy cars with low carbon dioxide (CO2) emissions get a bonus of up to 60,000 kronor. From January 1st next year, the emission limit for cars entitled to this bonus will be raised from 60 gram CO2 per kilometre to 70 gram per kilometre. The limit is set according to the Worldwide Harmonized Light Vehicle Test Procedure (WLTP), which is the EU's new way of measuring emissions.


The price of petrol will increase at the pump in 2020. Photo: Pontus Lundahl/TT

What do you get if you sell a home?

From July 1st, Sweden will reintroduce the ceiling for how much of the capital gains tax based on the sale of a property can be deferred to be taxed at a later date. When the cap was removed this figure was 1.45 million kronor, and when it is reintroduced it will be raised to three million kronor.

The deferred amount is currently taxed at a flat rate of 0.5 percent per year. According to the four-party government deal, this interest will be scrapped, but the decision has not yet been finalized.


Read more about buying a home in Sweden in this article on The Local. Photo: Janerik Henriksson/TT

Member comments

  1. Most people can earn up to 504,400 kronor a year before they have to pay Swedish state tax (which means income above this limit is taxed at 20 percent), and up to 703,000 kronor a year before they have to pay the soon-to-be-former austerity tax (which taxes income above the second limit at another 5 percentage units). THIS IS 100% UNTRUE.

  2. People, in general don’t care where the taxes go to. State or Local, taxes are taxes. Most pay about 1/3 in taxes. Thanks Fru Löfgren for replying.

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For members

WORKING IN SWEDEN

CHECKLIST: Here’s what you need to do if you move away from Sweden

What authorities do you need to inform before you leave, are you liable to Swedish tax and how can you access your Swedish pension? Here's a checklist.

CHECKLIST: Here's what you need to do if you move away from Sweden

Tell the relevant authorities if you’re leaving for more than a year

If you’re planning on leaving Sweden for more than a year, you will have to let the authorities know. The main authorities in question are Skatteverket (the Tax Agency) and Försäkringskassan (the Social Insurance Agency).

Försäkringskassan

You have to tell Försäkringskassan when you leave so they can assess whether or not you still qualify for Swedish social insurance. As a general rule, you aren’t eligible for Swedish social insurance if you move away from Sweden, but there are exceptions, such as maternity or paternity benefits if you’re moving to another EU country.

This also applies to any family members who move with you – any over-18’s should send in their own documentation to Försäkingskassan about their move abroad. If you’re moving abroad with anyone under 18, you can include them in your own report to Försäkringskassan.

If both legal guardians are moving abroad together, both need to include any children in their application. If one legal guardian is moving abroad and the other is staying in Sweden, you need the guardian staying in Sweden to co-sign your application. If you are the sole legal guardian of any under-18’s travelling with you, you don’t need any documentation from the other parent.

You can register a move abroad with Försäkringskassan on the Mina sidor service on their website, here (log in with BankID).

Skatteverket

If you are moving abroad for a year or longer, you also need to tell the Tax Agency. This also applies if you were planning on moving abroad for less than a year but ended up staying for longer.

If you move to another Nordic country, you will also need to register your move with that country’s authorities if you will be there for six months or more. You’ll be deregistered from the Swedish population register the same day you become registered in another Nordic country’s register.

This doesn’t mean that you’ll lose your personnummer – you’ll still be able to use it if you ever move back to Sweden – but you will no longer be registered as resident in Sweden.

Similarly to Försäkringskassan, you will also need to report any children you are bringing with you, and both legal guardians must sign the form, whether or not both guardians are moving abroad or not.

In some cases, you may still be liable to pay tax in Sweden even if you live abroad – particularly if you are a Swedish citizen or have lived in Sweden for at least ten years. This could be due to owning or renting out property in Sweden, having family in Sweden, or owning a business in Sweden.

You can tell the tax agency of your plans to move abroad here.

Contact your a-kassa, if relevant

If you are member of a Swedish a-kassa (unemployment insurance), make sure you tell them that you’re leaving the country. As a general rule, you have unemployment insurance in the country you work in, so you will most likely have to cancel your a-kassa subscription.

If you are moving to another country with the a-kassa system, such as Denmark or Finland, it may pay to wait until you have joined a new a-kassa in that country before you cancel your membership in Sweden.

This is due to the fact, in some countries, you only qualify for benefits once you fulfil a membership and employment requirement. In Sweden and Denmark, you must have been a member for 12 months before you qualify. In Finland, the membership requirement is 26 weeks.

If you qualify for a-kassa in Sweden before you leave the country, you may be able to transfer your a-kassa membership period over to your new a-kassa abroad and qualify there straight away, but this usually only applies if your period of a-kassa membership is unbroken.

Check what applies in your new country before you cancel your membership in Sweden – your a-kassa should be able to help you with this.

Contact your union, if relevant

Similarly, if you are a member of a Swedish union or fackförbund, let them know you’re moving abroad.

If you’re moving to another Nordic country, they might be able to point you in the direction of the relevant union in that country, if you want to remain a member of a union in your new country.

If you’re moving to another EU country, you may be able to remain a member of your Swedish union as a foreign worker with the status utlandsvistelse.

If you chose to do this, you will usually pay a lower monthly fee than you do in Sweden, and they can still provide assistance with work related issues – although it may make more sense to join a local union in your field with more knowledge of the labout market.

If you don’t want to be a member of a union in your new country and don’t want to be a member of a Swedish union, you should contact your  union and ask them to cancel your membership.

Collect relevant documents regarding your Swedish pension

If you have worked in Sweden and paid tax for any length of time, you will have paid in to a Swedish pension. You retain this pension wherever you move, but you must apply for it yourself.

To do so, you will need to give details of when you lived and worked in Sweden, as well as providing copies of work contracts, if you have them. If you have these documents before you leave Sweden, make copies so that you can provide them when asked.

If you move to the EU/EES or Switzerland, you may also have the right to other, non-work based pensions, such as guarantee pension for low- or no-income earners, or the income pension complement (inkomstpensionstillägg).

Currently, you can receive your Swedish pension once you turn 62 – although there is a proposal in parliament due to raise pension age to 63 for those born after 1961 from 2023, so this may change.

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