Stockholm ranks 24th out of 231 countries in the world for its quality of living according to the latest survey conducted by Mercer, an American consulting firm. Sweden’s capital is known for its high quality of life, a strong economy, green spaces, good education and healthcare, and work-life balance. To maintain the wide range of public services and infrastructure it offers, the government uses taxation as an important source of revenue. If you’re planning to relocate to Stockholm, one of the most important things that you should look at in depth is the taxation system. As a resident and a law-abiding citizen, you are obliged to pay your dues to the government. Here are the most basic things that you should know before making the move.
Residency Rules
Taxes are the lifeblood of any country helping pay for government services, programs, and infrastructure. Hence, you will be paying a considerable amount of money for taxes throughout your lifetime whether you are an employee, business owner or work as a freelancer. Taxes constitute a big part of your expenses from levies on personal earnings to sales duties on products and services. The main difference is countries, provinces, and counties collect taxes in different ways and apply various rates.
If you live and work in the country for at least 6 months a year, then you are considered a tax resident of Sweden. You are also required to list yourself in the Swedish Population Register. Similarly, if you are in possession of a permanent home in Stockholm and live in it during half of the year or 183 days in a calendar year, then you are a tax resident. Even if you do not meet the physical presence requirements, you will still be considered a fiscal resident of the city if the center of your economic interests is in Stockholm. These factors include having a permanent job or business activities in the capital. In addition, close personal and economic ties to the city may also categorize your status as a tax resident of the country. The Swedish Tax Agency or Skatteverket is the main agency that can determine your tax residency status.
Personal Income Taxes, Contributions and Other Levies
Sweden implements a progressive tax system which means that the amount you need to pay goes up as your income increases. The tax rates and rules as well as brackets for personal income tax are set at the national level and are uniform across the country ranging from approximately 32% to 57%.
However, local taxes differ throughout the country depending on the municipality you live in. These payments are used to cover services such as waste management and local infrastructure. In addition to municipal taxes, you are also liable for property taxes. It is already pre-filled in the income tax return statement, so you are not likely to forget your obligation. It is usually calculated at 0.75% of the property’s taxable value. Apart from income and local taxes, you will be required to pay social security contributions to fund social benefits such as healthcare, pensions, and unemployment benefits. Sweden boasts of an excellent healthcare system as well as a high level of education which is mainly funded by government revenues from taxation. Employers bear the bulk of the burden paying an additional 31.42% of the gross income of its employees to the social security system. Around 7% of total earnings is shouldered by the worker. If freelancing, your share of contributions is 28.97%.
As a resident of Stockholm, you have tax responsibilities that must be respected. Personal income taxes, municipal levies, property tax, and social security contributions are the most important duties that must be paid.
