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Aug 01, 2016

Medium rental income taxes and CGT


INDIVIDUAL TAXATION

Nonresidents are liable to tax on their Swedish-sourced income. Married couples are taxed separately for income tax purposes.

STATE INCOME TAX

In Sweden taxable income is classified according to source. Each category is taxed differently. The classifications are: (1) income from employment; (2) income from capital and investment; and (3) profits from business.

STATE INCOME TAX 2016

TAXABLE INCOME , SEK (€) TAX RATE
Up to 430,200 (€45,284) 0%
430,200 – 625,800 (€65,874) 20% on band over €45,284
Over 625,800 (€65,874) 25% on all income over €65,874
Source: Global Property Guide

STATE INCOME TAX 2015

TAXABLE INCOME , SEK (€) TAX RATE
Up to 443,300 (€46,663) 0%
443,300 – 629,200 (€66,232)

20% on band over €46,663

Over 629,200 (€66,232) 25% on all income over €66,232
Source: Global Property Guide

RENTAL INCOME
Rental income can be considered as capital or investment income, or business income.

Rental Income as Business Income

Business income is defined as income derived from an independent, commercial (yrkesmässig) and profit-making activity. If these three conditions are not met, then income earned is considered as either employment income, or income from capital.

Business income is taxed at progressive rates. Rental income from a property that the owners do not intend to use as their residence is considered business income.

In computing for the taxable income, actually incurred annual costs (such as real property tax, insurance, maintenance, water, electricity, some less extensive repairs of the property and realtor agency fees) are all deductible. Depreciation is also deductible when calculating business income and annual depreciation rate for buildings is 2%.

Business income is further subject to additional taxes. These taxes are levied on the taxable income and are deductible when computing for income tax liability.

When selling the property, depreciation is brought back through reverse write-down method.

Rental Income as Capital Income

Only rental income from private property (property used as a primary residence) is considered to be income from capital at a flat rate of 30%. Private property is defined by law as a property that the owners are using or planning to use as their residence.

Capital Gains (Income from Capital)

Capital gains or losses made by individuals on their properties are considered as income from capital and will be taxed at a flat rate of 30%, regardless of whether the rental income has been considered as capital income or business income. The taxable capital gain is calculated as selling price less acquisition costs.

For properties used in business, only 90% of the capital gain (selling price less acquisition costs) is taxable.

For private properties or properties used as a primary residence, the allowed deductions are acquisition price, improvement costs and repair costs (deemed to have increased the property value) incurred during the last five years prior to selling the property. Only 22/30 of the capital gain (selling price less allowable deductions) are subject to tax.

MUNICIPAL INCOME TAX

The municipal income tax comprises taxes for the municipality and the county council.
It is levied on employment and business income, but not on income from capital. It is imposed at a flat rate that varies from 28.89% to 34.17%, depending on the municipality. The average rate is 31.52%.

For taxpayers who have been subject only to limited tax liability in Sweden during the whole fiscal year, e.g. nonresidents, the rate is 25%. Taxable income is calculated according to the same rules as state taxation.

PROPERTY TAX

Real Estate Tax/ Municipal Fee
(statlig fastighetsskatt/ communal fastighetsavgift)

Properties are subject to a municipal fee, which formally is a state real estate tax. Real property tax is levied at rates ranging between 0.2% and 2.8% on the tax assessed value of the property. The applicable tax rates depend on the property type and use.

For residential properties such as single family homes and apartments owned by individuals, municipal fee is levied at either the 0.75% of the property’s assessed value or SEK7,262 (€764), whichever is higher.

For apartment buildings owned by residents’ associations, municipal fee is levied at either 0.30% of the property’s assessed value or SEK1,302 (€133), whichever is higher.

State real estate tax is levied at 1% of the assessed value for commercial properties and 0.5% for industrial properties.






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