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Double Tax Treaties in Sweden

Double Tax Treaties in Sweden

More than 60 double tax treaties in Sweden are in force, serving for the avoidance of double taxation.

The treaties allow both Sweden and the other signatory state to prevent double taxation and cooperate, for the purpose of being able to property apply their respective tax laws.

Both companies and individuals deriving active and passive income both from Sweden and their country of origin can benefit from the provisions of the double tax treaties in Sweden.

Foreign investors who wish to open a company in Sweden can benefit from knowing more if a treaty exists between Sweden and their country of origin.

With what countries has Sweden concluded double tax treaties?

Swedish double taxation agreement is in force with the following countries:

Albania, Argentina, Australia, Austria, Bangladesh, Barbados, Belgium, Belarus, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Faeroe Islands, Finland, France, Gambia, Germany, Greece, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Kenya, Korea, Latvia, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mauritius, Mexico, Montenegro, Namibia, Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Switzerland, Taiwan, Tanzania, Thailand, Trinidad and Tobago, Tunisia, Turkey, Ukraine, United Kingdom, United States, Venezuela, Vietnam, Zambia, Zimbabwe.  

Please keep in mind that this list on double tax treaties in Sweden should be used for informational purposes.

Sweden is trying to expand this network every year so as a result many draft agreements are in pending.

If you are interested in knowing more about any of these conventions, our team of company formation agents in Sweden can help answer your questions.

We can assist those who wish to know specific details about the UK-Sweden double tax treaty, as well as the treaties that are in force (or about to enter into force) with other countries.

Swedish tax treaty is mainly regulating the rules of avoidance of the double taxation of income and capital. A company’s income and capital is taxed only in the residence country of the shareholders or only in Sweden (in this case, the tax is afterwards returned based on the non resident’s request). 

In order to benefit from the reductions or exemptions, the applicant is required to provide a certificate of tax residency, issued by the competent entity in its country of origin.

What are the taxes covered by the Swedish double tax treaties?

As an example, the taxes covered by the convention for the avoidance of double taxation between Sweden and the United States in the case of Sweden are the following:

  • –  the state income tax;
  • –  the communal income tax;
  • –  the state capital tax;
  • – the excise tax (in insurance premiums paid to foreign insurers);
  • –  the special income tax on non-residents.

Investors who wish to know the specific taxes covered by the convention between Sweden and their country or origin, such as the UK-Sweden double tax treaty, can reach out to our team who specializes in company formation in Sweden.

Are the taxes reduced under the tax treaties?

Double taxation in Sweden is of interest for those deriving dividends from the country. However, Sweden does not impose a withholding tax on dividends that are paid to residents (either companies or individuals), however, a withholding tax of 30% is in place in case of dividend payments made to non-residents (companies or individuals). This 30% tax can be reduced under a tax treaty, as well as under the EU parent-subsidiary, if applicable.

The double tax treaties in Sweden are concluded especially because the Swedish government is interested in attracting foreign capital and by the necessity of avoiding the tax frauds.

The double tax treaties also include the obligation to provide information regarding the taxpayers. Sweden is exchanging lists with taxpayers with the treaty countries every year in order to avoid the tax frauds.

Also, protocols of exchange of information are signed with offshore jurisdictions with the same purpose of avoiding the tax frauds.

The most common used model for elaborating these treaties is the model offered by the Organization for Economic Cooperation and Development, OECD, and this is also used for the conventions regarding double taxation in Sweden.

Double tax treaty clauses

Swedish tax treaty, or a convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes in income includes several articles that refer to the various taxes whish are subject of the said treaty.

The agreement also defines the terms “resident” and “permanent establishment”, in the context of double taxation. For the purpose of the convention, a resident is any person, natural or legal, which is liable to tax on the grounds of domicile residence, place of management or incorporation.

For the purpose of a double tax treaty, a permanent establishment in Sweden is a fixed place of business through which a legal entity carries out its activities in part or in whole. This can be a branch, an office, a place of management, a factory or a workshop.

Swedish double taxation agreement can apply to a construction site in Sweden, or to a building, only if the project is a permanent establishment that lasts more than 12 months.

A permanent establishment does not include facilities used only for storage purposes, or solely for the display or the delivery of the company’s goods or merchandise.

The income derived from real property by a resident of one of the contracting states located in the other contracting state can be taxed in the other state. This also refers to income from agriculture or forestry.

Taxes in Sweden

Investors who are interested in company formation in Sweden should know that the following taxes apply to companies:

  • – Corporate income tax: this has a rate of 20.6% and the same rate also applies to branches;
  • – Value-added tax: imposed at a standard rate of 25%, with two reduced rates of 6% and 12%; some types of goods and services are zero-rated;
  • – Social security contributions: the employer is the one to pay aggregate social security contributions amounting to 31.42%; the rate is lower or 0% depending on the age of the employee;
  • – Other taxes: a real property tax applies annually on companies that own real property; the rates range between 0.2% and 2.2%.

While there is no payroll in Sweden as a separate tax to be paid by the employer, as a company that hires employees your business will need to be compliant with the social security contributions. Our team can give you more details about the requirements, as well as the current social security rates and the filing and payment deadlines for these taxes. You can reach out to us for more information.

Contact us if you want to know more about the double tax treaties in Sweden and the provisions of such as convention concluded with a certain foreign country of interest.

Foreign investors interested in doing business in Sweden can reach out to our team for detailed information about taxation, as well as the existing double tax treaties. If you are a foreign investor from a country that has signed such an agreement with Sweden, knowing more about its provisions before or immediately after you set up a company in Sweden can be helpful for your future activities.  

We can also assist investors who are interested in virtual office services in Sweden.