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EXPLAINED: Everything you need to know about investing in Sweden

Despite, or perhaps because of, the pandemic, last year saw record growth in the number of people in Sweden who earn shares. But knowing how to invest in Sweden can be tricky if you're not used to the system. Here are the basics.

EXPLAINED: Everything you need to know about investing in Sweden
Buying and selling shares online no longer requires screens like this. Photo: Erik Mårtensson/TT

What share of the population in Sweden own shares?

Although you might expect the centre-left Social Democrats to be sceptical of private investment, according to Henrik Tell, a Stockholm-based independent financial advisor, all parties have tended to promote greater share ownership among the public, with the government of Göran Persson launching a concerted campaign to get people to invest in the state telecoms company Telia when it was floated back in 2000.

“There was a lot of encouragement for private people to go in as owners and so on,” he remembers. “And then the pension system is also equity-oriented and has been for some time now.” 

Nearly 190,000 new Swedes became shareholders in 2020, according to a report by Euroclear, meaning 20 percent of the population now own shares, the highest proportion since share ownership started to fall in 2010. That’s a higher share than in the UK, where only 12 percent of households own shares directly, and far above most other European countries. 

Indeed, if you count Swedes who have passive exposure to shares through work pension schemes, everyone is in some way invested in the market. 

What taxes do you face if you buy shares in Sweden? 

The encouragement to buy shares in Sweden doesn’t stretch to taxation.

While in for example the UK capital gains tax on the sale of shares has been cut to 10 percent for those outside the highest income bracket (20 percent for those inside), in Sweden you pay 30 percent tax on profits. If you make a loss on an investment, you can offset 70 percent of it against tax.

The 30 percent capital gains tax on profits is well above the European average of 19.5 percent (although below Denmark on 42 percent, Finland on 34 percent, and Norway on nearly 32 percent).

There is also 30 percent tax on any dividends you receive from shares you own, whereas in the UK you can earn up to £2,000 of payouts a year without paying any tax, and then pay only 7.5 percent tax on any dividends beyond this (it’s 32 percent for those in the higher bracket).

The UK also encourages share ownership by allowing people to put substantial sums in an Individual Savings Accounts (ISA), where neither profits nor dividends are taxed. 

With the Swedish alternative, the investeringssparkonto (investing savings account), you are shielded from capital gains tax, but instead have to pay an annual so-called schablonskatt tax on the entire value of the sum held. At 0.375 percent in 2020, that seems a small amount, but over a lifetime of saving it can be significant. 

What is an ISK, kapitalförsäkring, or depå account? 

A depå or aktie-och fondkonto is an account, held either with a traditional bank such as Swedbank, SEB or Handelsbanken, or with a specialist bank/online share-dealing site such as Avanza or Nordnet. The account can be used to hold and deal in shares or funds. 

An investeringssparkonto or ISK is a ringed savings and share account, the contents of which are not subject to capital gains tax, but instead to an annual schablonskatt. With an investeringssparkonto, you yourself own the shares and funds and can vote in company annual shareholder meetings. 

A kapitalförsäkring is an insurance product where shares, funds and other savings are held in your name by a bank or insurance company. A kapitalförsäkring is taxed in the same way as an ISK. As you do not own the shares or funds directly, you cannot vote in company annual shareholder meetings.  

Which type of account should you choose? 

An ISK or kapitalförsäkring only makes sense if you’re making a profit on your investments (which hopefully, you are). According to a calculation by the online stockbroker Avanza, if you expect to make a gain on your investments of at least 1.27 percent in 2021, then you are better off paying schablonskatt.

If you invest 100,000 kronor and make a gain of 7 percent, you will pay about 401 kronor in tax if you have an ISK or kapitalförsäkring and 2,100 kronor if you have a normal deposit account. 

If you make a loss of 20 percent, however, you would still be paying 300 kronor in tax if you had an ISK whereas if you had a deposit account you would pay no tax at all. 

It can also be quite complicated declaring your profits and losses if you hold your shares in a deposit account, as for each share you need to declare the total acquisition price and the total proceeds of any sales. Using an ISK or kapitalförsäkring means you can avoid this.

For most people, it makes more sense to invest through an ISK than a kapitalförsäkring, as banks or insurance companies tend to levy higher fees on the latter. 

But beware of specific rules in your home country. In the US, for example, ISKs are very difficult to report to tax authorities, and you may be penalised for owning mutual funds over a certain amount – which is common both in ISKs and kapitalförsäkringar.

The advantage of a kapitalförsäkring is that it is very flexible. You can set it up so that it pays out a certain sum every month, make your children the beneficiary, or lock in funds until you reach a certain age, making it similar in some ways to a pension account. 

“You can save until a certain age, for example until 65 years old, and then you can tell the insurance company that you want a monthly payout for the rest of your life or for 20 years, and then you will have that automatically,” explains Stefan Thelenius, a pensions and insurance expert at the Swedish Consumers’ Banking and Finance Bureau. 

You can also open a kapitalförsäkring as a company, but make a person the beneficiary, which you can’t do with an ISK. You can also make a child the beneficiary, or set who will receive a payout from the fund on your death. This will happen automatically, which can make inheritance simpler. 

What bank or provider should I choose? 

When saving with a kapitalförsäkring it can make an enormous difference what bank you choose, as some levy extremely high fees. If you run a comparison on the Swedish Consumers’ Banking and Finance Bureau’s website of how many fees you will be charged if you save 5,000 kronor every year for 20 years, the most expensive provider, SEB Kapital, charges 170,000 kronor, a full fifth of the 757,000 saved, whereas the cheapest, Avanza’s charges just 16,000 kronor. That’s a big difference. 

Similarly, if you have an ISK or deposit account with one of the specialist stockbrokers such as Avanza or Nordnet, it tends to be significantly cheaper to buy and sell shares than it is if you have a similar account with a normal consumer bank such as Swedbank, SEB or Handelsbanken. The advantage of using your normal bank is that it is slightly more convenient to have all of your savings and income in one place. 

Why is it important that some foreigners moving to Sweden invest?

The Swedish pension system is designed for people to pay in over about 30 years, so if you’ve come to Sweden in mid-life and intend to retire here and don’t have pension savings in your home country, you might find that you don’t build up enough of a pension to retire comfortably.

If you have any spare cash, then it might be worth saving to supplement your pension. You can see how big your pot is projected to be at the Pension authority’s Min Pension website. 

If you are self-employed you will only automatically be paying into the lowest form of state pension, or allmänna pension, which will not provide for a comfortable retirement, particularly if you only arrived in Sweden later in life. If the surplus or överskott on your company is above a certain amount (550,000 kronor a month in 2021), then it is tax efficient to top up your pension through a pensionförsäkring, as you will already be earning enough to qualify for the maximum allmänna pension

But if the surplus is lower than this, then it is more efficient to top up your pension through investing in an ISK or kapitalförsäkring

Finally, of course, if you are already paying as much possible into your state, occupational and private pension, and are still have more spare cash than you can spend (lucky you!), it makes sense to save it, and, so long as there isn’t a market crash, your savings are likely to grow faster invested than in an ordinary bank account. 

If I have shares and funds held in an account abroad, how do I move them to Sweden? 

Theoretically, free movement of investments is enshrined in the EU’s Maastricht Treaty, but in practice moving shares from a bank or online stockbroker in one EU country to one in Sweden is difficult for a private individual. It is simpler to sell the shares, transfer money and reinvest in Sweden. 

If I have shares and funds held in an account abroad, where are the dividends and profits taxed? 

According to Ann Strömbäck, a tax partner at PWC in Sweden, if you are resident in Sweden, you should pay tax on any income or profits you make anywhere in the world in Sweden. 

“If you are resident in Sweden you are taxable for your worldwide income, so we tax 100 percent of your dividend income in Sweden,” she explained. 

However, when other countries levy a withholding tax on dividends, Sweden will normally give you a tax credit equal to half of the tax withheld abroad. 

“We have double tax treaties giving Sweden the right normally to tax half of the dividend income, or 15 percent,” she said.

Member comments

  1. Worth noting that Freetrade is launching in Sweden relatively soon (currently setting up the Stockholm EU HQ).

    As someone that struggles with swedish; a locally available, english language, alternative to global investing is going to be a welcome addition.

    1. yeah, but I doubt they will be able to offer ISK account (no capital gains tax). I have Avanza, their app is only in Swedish and tools on the app are really really basic, (not even stop loss / take profit orders on non-swedish share) but I forgive them since I do not have to pay capital gains tax and trading fees are lowest in Sweden 🙂

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For members


Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information: 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK.