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Sweden: Taxes and Costs

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High rental income taxes and CGT

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	22.8%	28.2%	28%
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Source:			Disclaimer

INDIVIDUAL TAXATION

Non-residents are liable to tax on their Swedish-sourced income. Married couples are taxed separately.

STATE INCOME TAX

In Sweden taxable income is classified according to source. Each category is taxed differently. The classifications are:

• Income from employment,
• Income from capital and investment,
• Profits from business

When computing 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 (but not capital) income and annual depreciation rate for buildings is 2%.

Rental Income as Capital Income

Rental income from private property is considered to be income from capital, and taxed 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.

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.

Rental income from a property that the owners do not intend to use as their residence will be considered business income.

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. Active business income is liable to social security contributions levied at 30.71%. Passive business income is liable to special employer’s contribution or special salary tax levied at 24.26%.

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

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 accordingly regardless of whether the rental income has been considered as capital income or business income. The gain is computed by deducting the acquisition price, selling costs and costs of improvement within the last five years from the selling price, after which 22/30 (for private properties) or 90% (for other properties) of the gain will be subject to the 30% tax rate. If loss is incurred, a taxpayer may deduct half of the loss from the tax return for private properties and 63% for other properties.

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 depending on the municipality. The average rate is 31.6%. Taxable income is calculated according to the same rules as national taxation.

For taxpayers with an income below SEK28,800 (€35,104) for 2008 only municipal income tax is levied. The municipal tax is not deductible when computing for the state income tax liability.

CORPORATE TAXATION

INCOME TAX

Income earned by companies is generally taxed at the corporate tax rate of 28%. Expenses related to business operations such as depreciation, repairs, maintenance, renovations, interest payments, as well as real estate payments are deductible in the aggregate business income.

Capital Gains

Capital gains realized by corporations are considered as business income and taxed at the corporate tax rate of 28%. When selling a property or business asset, depreciation expense that was deducted for income tax purposes is brought back through the reverse write-down method.

PROPERTY TAX

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

Properties with residential buildings are subject to a municipal fee, which formally is a state real estate tax.

For properties with one-or-two family homes, municipal property fee is levied at either the 0.75% of the property’s assessed value or SEK6,000 (€641), whichever is higher. Property owners of apartment buildings (hyreshus) should pay either SEK1,200 (€128) or 0.5% real estate tax on the assessed value for the residential part of the property, whichever is higher. This fee is deductible when calculating business income tax.

If the property is less than ten years old, the municipal property fee will be lower. Newly-built buildings are exempt from property fee up to the fifth year. Subsequent years up to the tenth year, the fee is reduced by 50%.

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

Sweden - more data and information

• Guide to buying houses and registering property sales in Sweden

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