All remuneration from employment, whether in cash or in kind, is treated as taxable income. Director’s fees, bonuses, commissions, pensions, annuities, allowances, tax equalisation payments, and incentives (e.g. stock options, share programs) are considered as employment income. A housing benefit, a company car, and free meals are the major taxable benefits in kind. Compensation is normally taxed when paid out (cash principle). Specific rules apply for incentives that are subject to restrictions.
Premiums to employer pension plans, which do not qualify as tax favourable pension plans under Swedish law, may be considered taxable income for the employee.
Loans from an employer to an employee at low or no interest are deemed to generate a taxable benefit. The taxable benefit is deductible as an interest cost. Note that members of management and shareholders may not be allowed to lend money from the employer due to the Swedish financial assistance rules.
Employee stock options trigger taxation as employment income when exercised. The value of the benefit should be determined as the difference between the fair market value and the exercise price.
Favourable rules regarding qualified employee stock options are implemented in 2018. The rules apply to a very restricted type of small companies under very specific circumstances.
Income from closely held companies
Special rules apply to the taxation of income from closely held companies. Since the rules are complicated, it is recommended that PwC be contacted for advice.
Capital gains and investment income
Individuals resident in Sweden are taxed on capital gains realised during the period of residence. All current income from bank savings, financial instruments, claims of different kinds, dividends, and gains received by a resident person is taxable as investment income. For example, interest income, dividends, gains on the sale of stock and private property, and rental income from letting real estate or apartments are taxable.
Individuals who have been resident in Sweden continue to have a tax liability on capital gains from the disposal of, inter alia, Swedish stock and similar assets during a ten-year period after they leave Sweden. This time limit is reduced in several double taxation agreements (DTAs).
Non-resident individuals are taxed on Swedish source gains (e.g. capital gains on Swedish real estate and tenant owner’s apartments).
Investment income and capital gains are normally taxed at a 30% flat rate.
Sale of real estate and apartments
A tax rate of 22% applies to the sale of private real property and tenant owner’s apartments. Under certain circumstances, it is possible to defer the taxation of gains, up to a certain amount, from selling a private real property when a new private real property (house or apartment) is bought either in Sweden or the EU/European Economic Area (EEA) area. The deferred gain will be subject to investment income tax on a notional income computed based on the deferred gain.
Sale of stock
Capital gains on stocks are taxed at 30%. The taxable gain on the sale of stock is the net profit (i.e. the sales price less the average purchase price for all stock of the same kind). Only 70% of the calculated loss may normally be deducted.
For non-quoted shares, the tax rate is 25% since only 5/6 of the gain is taxable. The same applies for losses on non-quoted shares (i.e. only 5/6 of the calculated loss can be deducted at 70%).
Special rules apply to the taxation of capital gains from the sale of stock of closely held companies. The rules are complicated, and it is therefore recommended that PwC be contacted for advice.
Sale of personal assets
Gains on the sale of personal assets are taxable only if they exceed SEK 50,000 per year. The acquisition cost of personal assets is either the real purchase price or, optionally, 25% of the sales price. Other assets are taxed on the net profit without the mentioned limitations.
Employee stock options generally do not qualify as securities and trigger taxation as employment income when exercised (see Equity compensation above). Sale of the underlying share is normally taxed as capital gains.
Worldwide rental income from the letting of private property is normally considered as capital income. Tax is assessed on annual rentals and other income received from the real property after deduction of related expenses. For private property (house), the related expenses are deemed to amount to a standard amount of SEK 40,000 and 20% of the annual rental income. Specific rules apply for letting apartments and if the house/apartment is let to the employer.
Foreign endowment policies, such as life insurance policies and foreign pension insurances, that are owned by the individual are generally subject to an annual yield tax.
Exchange of foreign currency
Exchange of foreign currency, as well as payment of debt in foreign currency, is generally taxable as investment income.