Sweden Tax & Business Guide - Deloitte

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Basic facts
Population 9.0m Inflation 0.5% (2005)
Main languages Swedish GDP per head US$39,352*
Currency Swedish krona (SEK) GDP growth 2.6% (2005)*
Economic communities European Economic Area, EU, OECD, WTO
GDP sources 1.8% agriculture, 28.1% industry, 70.1% services
*Economist Intelligence Unit.
Political environment

Sweden is a constitutional monarchy, with a unicameral parliament.

In elections in September 2006 the opposition centre-right alliance under Fredrik Reinfeldt, leader of the Moderate Party, defeated Goran Persson, the prime minister and leader of the Social Democratic Party. The Social Democrats had been in power for the past 12 years.
Foreign trade and investment
Exports US$129.3bn (2005)* Imports US$107.8bn (2005)*
*Economist Intelligence Unit.

Leading export markets: The US, Germany, the UK, Norway and Denmark.

Major exports: Motor vehicles, military aircraft, chemicals and high-technology goods.

Non-Swedish businesses are expected to adopt Swedish rules and practices, such as annual accounts and employee representation on boards. Foreign firms may acquire Swedish concerns without prior government approval, and Swedish firms may not restrict foreign ownership of shares. Companies operating in Sweden have access to all EU investment incentives.
Business and financing
Business forms Joint stock companies

The joint stock company (aktiebolag, or AB) is the organisational form recommended by local banks and government authorities. Branches are subject to many requirements that apply to Swedish joint stock companies, eg employment of a resident managing director and disclosure of accounts, and are not eligible for certain tax deductions.

Foreign firms tend to access financial markets through major domestic commercial banks.

The main financial centre is the capital, Stockholm.
Labour environment
Unemployment rate 5.8% (2005)* Minimum wage None
*Economist Intelligence Unit.

Minimum wages are set by collective-bargaining contracts each year.

About 90% of the workforce is organised, including both blue- and white-collar workers.

Social security contributions amount to 32.28% (2006) of base pay. Individual pension schemes are negotiated between employers and unions.

European Economic Area (EEA) citizens may enter and work in Sweden without residence or work permits. Non-EEA nationals must obtain a work permit.
Taxation
Corporate tax
Main rate 28%

Resident companies are taxed on their worldwide income; non-resident companies are taxed only on Swedish-source income. A company is considered resident for tax purposes if it is registered with the Swedish Companies Registration Office. Tax at a flat rate of 28% is imposed on profits. Dividends paid between resident companies are exempt from tax, provided the shareholding is business-related (unquoted shares, unless held as stock, and quoted shares representing at least 10% of the voting rights or held for sound business reasons for more than 12 months). Foreign dividends received may be exempt in circumstances where the dividend would have been exempt if the payer had been resident in Sweden.
Individual tax
Progressive rates up to 53Ò58%

Resident individuals are taxed on their worldwide income; non-residents are taxed only on Swedish-source income. A person whose principal home is in Sweden or who permanently stays in Sweden is considered to be resident for tax purposes. A period of six consecutive months or more normally qualifies for permanent stay. Persons who have an essential connection to Sweden and previously have had their principal home in Sweden for more than ten years are presumed to remain tax resident in Sweden unless proven otherwise. Municipal income tax is imposed on employment income at rates averaging 31% depending on the locality. National income tax on employment income is charged at 20Ò25%. National income tax is charged on capital income at a flat rate of 30%. A 25% flat rate income tax applies to income of non-residents.
Capital gains
Gains are generally taxed as income

Capital gains of companies are generally taxed as income. Gains of companies from the sale of shares or other securities in a resident company are not subject to tax, provided that the shareholding is business-related. Gains of companies from shares in non-resident companies are also tax-exempt if the non-resident company is equivalent to a Swedish limited liability company and the shareholding is deemed to be business-related. Gains of individuals are generally included in taxable income. Only 90% of gains on immovable property used in an individualÌs business are taxed. Deferral of tax is possible on the sale of an individualÌs main dwelling, subject to certain conditions. When a dwelling, including the main residence, is sold, two-thirds of the gain is taxed (20% effective tax).
Indirect tax
VAT standard rate 25% Lower rates 12%, 6%

Value-added tax (VAT) applies to most transactions at the standard rate of 25%. A 12% rate applies to foodstuffs and some tourism services. The 6% rate is charged on newspapers, periodicals and domestic passenger transport. Exports, some financial services and prescription medicines are zero-rated. Exemptions include the leasing and transfer of immovable property and cars.

Registration is compulsory for businesses.
Tax administration and compliance
Tax year Corporations: accounting year; Individuals: calendar year

Tax is charged on companies for the assessment year, based on income of the previous year, known as the income year (which corresponds to the accounting period of the company). A company makes a provisional return and makes advance payments of tax based on a preliminary assessment. Final tax returns are due by May 2nd in the assessment year, and a final assessment, based on the tax return, is generally issued in December of the assessment year. Employment income is taxed by withholding. Income of individuals not taxed by withholding may be subject to pre-assessment and collected by provisional payments during the year. The final assessment is generally issued in December of the assessment year.
Additional tax information
Withholding taxes Dividends 30%, Interest 0%, Royalties 28%. Rates may be reduced by tax treaty or EU directives.
Tax treaties Sweden has concluded more than 80 tax treaties.
Dividends Domestic dividends are exempt for companies, and there is a participation exemption.
Revenue protection There is transfer-pricing and offshore-subsidiary legislation.
Groups Loss transfer is possible within groups.
Incentives Tax relief for highly qualified foreign experts, scientists and key persons; 25% reduction of gross salary and basis for employer social security contributions.
Other taxes Capital duty, Excise duty, Import duty, National real estate tax, Net wealth tax, Stamp duty, Special salary tax.