Sweden Global Payroll and Tax Information Guide

January 16, 2019 | Yana Todorova 5 Mins read

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Payroll in Sweden – 2021 Updates

Due to covid-19, the following measures were taken by the Swedish authorities: 

    • Resources to municipalities and regions – municipalities and regions have received considerable resources for additional costs resulting from COVID-19 so as to support the management of deferred health care and to alleviate the consequences of the loss of tax revenue caused by the recession. Funds have also been allocated to strengthen care of older people and to raise staff skills. General government grants have been raised more than local government tax income has decreased.
    • Financial support to companies and individuals – companies have received financial support to be able to overwinter the crisis and avoid redundancies.
    • A powerful green restart – includes investments in energy efficiency in multi-dwelling buildings, expanded charging infrastructure for heavy vehicles, earlier railway maintenance, measures to protect valuable nature, a tax reduction for the installation of green technology and circular economy initiatives.
    • Increased transitioning opportunities – the Swedish government made temporary changes to unemployment insurance, strengthened health insurance, and increased the opportunities of transitioning. The Knowledge Boost has been reinforced by providing more places in education and training that meet society’s needs and giving groups that have difficulty getting established in the labour market better possibilities of supplementing their knowledge and finding jobs.
    • Fiscal policy has played a greater role than in previous crises


Basic Facts about Payroll in Sweden

Payroll in Sweden involves certain obligations on the part of employers, who should be primarily concerned with observing relevant tax laws. A business’ payroll process must take into account individual income tax, social security contributions, payroll and sales taxes, and withholding tax. Taxes are levied at the national, county, and municipal levels. Setting up payroll requires information from employees, including a

Swedish Tax Identification Number (TIN). Employers also must provide mandated workplace protections. Employees are guaranteed vacation time, maternity and sickness leave, and termination pay, among other services, regardless of their job. Employees must be issued with a payslip every pay-date, and payroll records must be kept for at least 7 years. The tax year in Sweden runs from January 1st through to December 31st. Individual tax returns are due by 2 May of the year following the income year (calendar year).

Taxes

Payments to employees other than regular wages are subject to an income tax withholding rate of 30%. Employees with total annual income of less than SEK 1,000 are not subject to income tax withholding. Non-residents employed in Sweden are taxed a flat rate of 25 percent. Non-Swedish residents employed by non-Swedish firms are exempt from paying any income tax provided they do not spend more than 183 days in Sweden over a 12-month period. Employers withhold income taxes and social insurance contributions using the Pay-As-You-Earn (PAYE) system from employee wages monthly. The income tax accrued as employees are paid by employers (not self-employed) is called the preliminary tax, or A-tax.

Corporate tax

Corporate income tax in Sweden is 21.4% since 2019. A decision has also been made to lower the corporate tax rate to 20.6% by 2021.

Income tax

Residents of Sweden are liable to income taxation and social insurance contributions on their worldwide income.

Residents Income Tax Table for 2021 – Employment Income and Business income

Municipal Income Tax on Earned Income and Business Income – Levied with 32.27% (average rate) on total of taxable income.

Taxable income (SEK) Tax on lower amount Tax within bracket                                        
Up to 523,200 SEK 0 0%
From and above 523,300 SEK 0 20%

The top marginal rate on earned income is approximately 55.5% in practice.

Payroll tax

Payroll tax is taxed at a rate of 31.42% for employers, or 28.97% for the self-employed, although this may differ to individuals under 26 or above 66 to encourage greater labour force participation.

Sales tax

Sales tax is 25%.

Withholding tax

Sweden does not levy withholding tax on interest or royalty payments. However, royalty payments made to nonresidents are deemed to derive from a Swedish business and are taxed as income from a permanent establishment in Sweden.

Social taxes

Sweden has one of the most highly developed welfare systems in the world. In Sweden, the Social Security Rate is a tax related with labor income charged to both companies and employees.

    • Employee Social Security

Employees must make a 7% contribution towards the public social security system.

    • Employer Social Security

The social security system in Sweden is comprised of several elements:

    • Health insurance
    • Benefits for work-related accidents and occupational diseases
    • Benefits for invalidity
    • Pensions for the elderly and survivors
    • Unemployment insurance
    • Parental and family benefits

Employers are required to make a contribution of 31.42% percent in addition to an employee’s base salary. Employers deduct social insurance contributions from employee wages monthly and remit them to the Swedish Tax Agency using the PAYE system. 

State/Jurisdiction taxes

Municipal income taxes are assessed by each municipality of Sweden. A municipality’s total income tax rate consists of two components:

    • primary municipal tax
    • county council tax

Compensation and Benefits

Minimum Wage

Sweden has no statutory minimum wage, but minimum wage standards frequently are set by collective bargaining agreements.

Overtime

Overtime is permitted to a maximum of 48 hours during a 4-week period or 50 hours per calendar month but cannot total more than 200 hours per 12-month period.

Hours of Work

An 8-hour day is the norm, 40 hours per week. Saturday and Sunday as rest days.

Holidays

Sweden has 10 national holidays, including some falling on a weekend. Up to 4 extra depending on the sector you work in, your employer and collective bargaining agreement (if a union member).

Leave

Employees are entitled to 25 working days, equivalent to five weeks of annual vacation. In Sweden, vacation pay is 12% of the employee's gross salary.

    • Sickness Leave: Employers are responsible for paying sick leave to employees for two weeks. Employees are not eligible for any compensation for the first day of sickness. Thereafter, employers must compensate them for 13 days at 80% of their salaries.
    • Parental Leave: Parents are jointly guaranteed 480 days of paid parental leave per year, at a rate consistent with most of their normal salaries, with at least 60 days reserved for each parent. Fathers or mothers also are entitled to 10 extra paid days off when the child is born or 20 days off if multiple children are born. Parental leave is taxed as regular income.
Wage payment

Monthly compensation is commonplace.

Bonuses and special benefits

Sweden does not mandate employers to provide bonus payments to employees.

Termination pay

Termination of indefinite employment can follow a period of notice given either by the employer or by the employee, by summary dismissal by the employer, and by an employee’s immediate resignation. The statutory termination notice given by employee is one month. When the employer gives notice of termination, the required notice period varies according to the employee’s continuous length of employment.

Workers’ compensation

Employers injured in the workplace are compensated through their workers’ compensation insurance fund.

Foreign workers in Sweden

The Swedish Migration Board is the central authority for foreigners migrating to Sweden. Foreign workers in Sweden are divided into two key groups regarding visa and travel criteria:

    • non-EU residents– generally requires a Schengen Visa and, if working, a work permit
    • EU residents –valid passport and/or identification cards indicating EU citizenship

Workers in Sweden for less than six months are required to pay a flat-rate tax on income accrued in Sweden, unless noted otherwise by a tax treaty. Workers in Sweden for more than six months are counted as tax residents and are taxed on Swedish-based income at progressive rates like normal residents.  

Visas: Foreign workers are divided into two key groups:

    • citizens not from the European Union – should acquire a visa prior to entry
    • citizens from the European Union– do not require a visa

For stays of longer than 90 days, foreign workers, whether non-EU or EU, are required to attain a government-issued residence permit card. Workers from Switzerland are treated as though they are EU/EEA residents. 

Taxes: While individual residents in Sweden are subject to tax on worldwide income (with some exceptions as regards income from employment abroad), non-residents are liable to income tax on Swedish-sourced income. A non-resident is subject to a final withholding tax of 25% on employment income. Investment income is subject to tax at a flat rate of 30%.

Tax relief for key foreign personnel:  Employees with specialized skills difficult to find in Sweden can receive a 25% reduction of taxable income, including any benefits and employer contributions to housing and living costs. The tax relief means that 25% of the compensation will be exempt from Swedish tax and social security charges during a 5 year period.

Treaty agreements

Sweden has entered into income tax treaties with 92 countries, including an income tax treaty with the United States. Sweden also has a totalization agreement with the United States regarding social security program coverage and contributions.

 

For more information about how our Global Payroll Control Platform integrates with local payroll providers in Sweden, contact us today.

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