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     Kommentar till en text av ED CONNELL
Ärende: Tsunami Disaster Reli
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BF>.PID: FDAPX/w+ 1.12a DE00154

BF> BrF>> The feedom we have here in Sweden is AT LEAST as good as
BF>yours.

BF> EC> How much of the money that you work for do you have to turn over
BF> EC> to the government?



Taxes in Sweden
In Sweden the public sector, i.e. national government and the local 
authorities, has assumed responsibility for a great many services. These 
include education, labor market and industrial policies, care of the 
sick and elderly, pensions and other social security, environmental 
protection, and so on. To discharge its responsibilities, the public 
sector must lay claim to a fair share of aggregate resources by means of 
taxation. Swedish taxes are therefore relatively high, but much of the 
revenue they yield goes back to taxpayers in the form of transfer 
payments and public services. The Swedish tax system includes many 
direct and indirect taxes and contributions. The most important direct 
taxes are the national and local income taxes and the national tax on 
capital. Aside from taxes, there is an extensive system of employer 
contributions which cover pensions, health benefits and other social 
insurance. Revenues from indirect taxes, virtually all of which go to 
the state, stem from two main sources: value-added tax and excises on 
duties. All tax legislation must be passed by Parliament. However, the 
local authorities are free to set the income tax rates in their 
respective municipalities and county council districts.
Sweden has concluded conventions for the avoidance of double taxation on 
income and capital with some 60 countries.
Direct taxation

Income tax
In Sweden taxable income belongs to one of three categories: earned 
income from employment, income from capital or income from business. 
Different tax regulations and rates apply to these three sources of 
income.

Income from employment

The following taxes are levied on earned income:

    * local tax at a rate of 26-35 percent (depending on the 
municipality),
    * national income tax of 20 percent on annual taxable earnings of 
between SEK 252,000 and 390,400 and 25 percent for income above SEK 
390,400 (year 2001).

Typical sources of income in this category are salaries and pensions as 
well as all forms of fringe benefits such as meals, travel and use of a 
company car plus reimbursement for expenses, per diem allowances and 
travel, etc.

There are relatively few deductions permitted for this income category. 
In principle, the deduction of costs necessary for the earning of income 
is allowed. However, the link between the expense and the income must be 
extremely strong. Deductions are granted primarily for:

    * travel to and from work
    * on-the-job (business) travel with a private vehicle
    * higher living expenses in conjunction with business trips.

Income from capital

Generally speaking all income in this category is taxed at a rate of 30 
percent regardless of the amount. Examples of income from capital are 
dividends, interest, capital gains arising from the sale of stocks, 
bonds, real estate, personal property and other similar assets plus 
income from the rental of flats or houses unless this is undertaken as a 
business activity.

Half of the sum of a capital gain resulting from the sale of a private 
residence is taxable. It is also possible to defer payment of the tax if 
the seller in turn purchases an equivalent property or tenant-owner flat 
not later than the year following the year of sale. If the sale concerns 
a property owned for business activity then 90 percent of the capital 
gain is liable to taxation. Income from the sale of other private assets 
is taxable if the profit exceeds SEK 50,000.

If a capital deficit results a tax reduction is granted. The tax 
reduction is 30 percent for that portion of the loss that is below SEK 
100,000 and 21 percent for the balance.

Income from business

The regulations governing taxation of business activity are largely the 
same for limited companies and businesses operated by individuals. As a 
general rule, all income from business activities is liable to taxation. 
Income from capital is considered as part of the business activity if it 
is generated by capital invested in the business.

The tax rates for individuals engaged in business activities are the 
same as those for income from employment. On the other hand, limited 
companies pay only 28 percent of their taxable income in tax.

Taxable income is calculated on the basis of generally accepted 
accounting principles and is therefore closely linked to the company's 
accounts. The calculation of taxable income is based on principles used 
in business economics with minor adjustments on fiscal grounds.

All costs necessary to maintain and develop the business operation are 
deductible expenses.

Annual depreciation is permitted for assets invested in the business 
operation. One method applied to equipment allows depreciation at 30 
percent per annum on the book value of remaining equipment. 
Alternatively, depreciation can be calculated at a rate of 20 percent 
annually based on the acquisition value of the remaining equipment. The 
cost of equipment with a shorter economic life, i.e. less than three 
years, as well as equipment of a lesser value can be deducted in its 
entirety. Lesser value in this context normally means below SEK 2,000 
while for larger companies the limit is SEK 10,000. In the case of 
buildings, scheduled depreciation is allowed at a rate of 2-5 percent of 
the acquisition cost depending on how the building is used.

Employer contributions are deductible in the calculation of the taxable 
income from business operations.

Profit equalisation is possible for most business operations, via so-
called accrual accounts, where a private business can deposit a maximum 
of 25 percent of profits and a limited company 20 percent. The amount 
deposited must be reversed and subjected to taxation not later than five 
years from the year of deposit. Losses can be carried from year to year 
without any time limitation.

A group of companies does not constitute a single taxable subject in 
Sweden. All companies in the group are regarded as individual taxable 
subjects. To avoid consideration of tax regulations in the selection of 
organisational form, e.g. a single company or a corporate group, there 
are regulations that permit the transfer of funds from one Swedish 
company to another, for example via group contributions. Such 
contributions are regarded as a deductible expense for the contributor 
and taxable revenue for the recipient.

Basic deduction and tax reduction

Individuals are entitled to deduct a basic deduction and pension 
contributions from their taxable earnings. The size of the basic 
deduction is linked to the price-indexed base amount* as regulated by 
the National Insurance Act and must be at least 0.27 percent of the base 
amount. In 2001 the base amount is SEK 36,900, which gives a lowest 
basic deduction of SEK 10,000. For annual earnings of between SEK 68,700 
and 206,900 the basic deduction is higher and reaches a maximum, SEK 
19,500, on incomes between SEK 106,400 and 112,800.

Pensioners are granted a special basic deduction of up to SEK 57,600 for 
singles and SEK 51,000 for married pensioners (2001).

A special tax reduction of SEK 1,320 is granted to those with earned 
incomes of up to SEK 135,000. If income exceeds that amount the tax 
reduction is gradually reduced up to a maximum income of SEK 245,000.

Other direct taxes
Real estate tax and real estate taxation

A national real estate or property tax is levied on private houses, 
residential buildings on farms and rented residential and business 
premises. The real-estate tax is calculated on the basis of the assessed 
taxable value. The residential parts of a building dating from 1991 and 
later are not taxed for the first five years, while the tax rate is 
reduced by 50 percent during the subsequent five-year period. Houses and 
residential apartments in blocks of flats are taxed at a rate of 1.2 
percent of the taxable value, whereas floor space used for other 
purposes is charged at a rate of 1.0 percent. The real estate tax on 
industrial premises is 0.5 percent. The assessed real estate value is 
expected to equal approximately 75 percent of the market value of the 
property. The taxable value is used in the calculation of real estate 
tax as well as inheritance, gift and wealth taxes.

Inheritance tax

The inheritance tax (succession duty) is a tax on the additional capital 
received by an heir on the occasion of a person´s death. The tax is 
based on the amount received.

The inheritance tax is progressive. The rate thus rises as the amount 
inherited becomes larger. In addition, different tax tables are used 
depending, among other things, on the relationship between the heir and 
the deceased. There are lower tax rates on inheritances received by the 
closest relatives, who are also favored by the fact that the tax-free 
base amount that may be subtracted from their inheritance is higher in 
their case.

Gift tax

Gift tax is a supplement to inheritance tax and is calculated, in 
principle, according to the same rules. Special relief is granted in 
calculating inheritance tax on assets in unlisted companies. Certain non-
profit organizations are exempt from inheritance and gift tax.

Indirect taxes

Value-added tax
Value-added tax (VAT, moms) is a state sales tax that is levied on all 
increases in value throughout the production and distribution chain and 
reported to the tax authorities.

The obligation to pay VAT arises when a taxable transfer of goods or 
services is carried out in Sweden in a professional context.

VAT is also to be paid on the value of acquisitions from other 
businesses within the European Union (EU) and for the import of goods 
and services from countries outside the EU. No VAT is paid on exports to 
non-EU nations.

The Swedish tax authorities and the Customs Department (Tullverket) are 
responsible for VAT taxation. Since Sweden's entry into the European 
Union in 1995 the border control of trade with other Member states has 
ceased. Taxation on the acquisition of goods within the EU is instead 
carried out in accordance with the domestic regulations that apply in 
each Member state.

The tax authorities are responsible for levying taxes on domestic trade 
and EU acquisitions while the Customs Department
supervises imports from countries outside the EU.

The general VAT rate is 25 percent and this is applied to the turnover 
of all goods and services excepting foodstuffs, hotel accommodation, 
campsites and passenger transport (12 percent), as well as books, 
newspapers and certain goods and services in the cultural sphere (6 
percent).

VAT is reported by the person liable to pay the tax, either by 
submitting the information in their tax return or in a special VAT 
return. Individuals and companies who are liable to pay tax declare 
their VAT in the annual tax return if their tax base is not higher than 
SEK 1 million. The VAT is then included in their final tax assessment.

If the tax base exceeds SEK 1 million the company has to account for the 
VAT in a special return that is submitted and paid monthly.

Excise duties
Special consumption taxes or excise duties are levied on some goods and 
services. The majority of these purchase taxes have been introduced for 
reasons other than the generation of revenue for the state. These duties 
are also a means of steering the consumption of such commodities as 
energy, alcohol and tobacco.

The 16 excise duties which exist at present include taxes on fuel (e.g. 
petrol, oil, coal and liquefied petroleum gas), electrical power, 
alcohol, tobacco, gaming, motor vehicles and roads.

Social security contributions

For citizens of the EU/EEA, the right to social security benefits and 
the obligation to make contributions are determined by EU regulations 
and the EEA Agreement. In other words, citizens of other countries can 
be covered by a social insurance agreement.

Social security is financed via general pension charges, social 
insurance contributions, a state old-age pension fee and general tax 
revenue. The general pension contribution is levied to finance income-
based pensions and supplementary pensions. The contribution is paid 
individually and is calculated on the basis of income from employment 
and other earned income. It is applied to the portion of the aggregate 
income that does not exceed the equivalent of a normal income.

Social security contributions are levied to finance the national social 
insurance system, old-age pensions and certain other social services. 
The contributions take the form of payroll taxes and a tax on the 
earnings of the self-employed. Payroll taxes are paid by the employer 
and are calculated on the basis of salary plus any other taxable 
benefits provided to the employee. The payroll-tax rate is 32.82 percent 
and the rate for the self-employed is 31.01 percent (2001).

Tax payment

Tax accounts
As of 1998 the tax authorities administer a tax account for everyone 
obliged to pay taxes or other charges. All accounting, payments and 
credits are reported in that account. Generally, the account handles the 
payment of preliminary tax (pay-as-you earn, PAYE), payroll taxes and 
VAT. All information that the tax subject is required to submit is to be 
presented in a single document, a tax return.

The tax return is to be submitted monthly by employers and those self-
employed who are registered for VAT purposes.

Tax withholding
The tax collection system is arranged in such a way that estimated taxes 
are withheld and paid at intervals during the income year (PAYE). In 
principle, these preliminary tax payments should in the end add up to 
the amount calculated according to a person´s final tax assessement. In 
the case of employees, the employer is in charge of the withholding and 
payment process. Self-employed people make their own estimated tax 
prepayments. Banks and other financial institutions withhold preliminary 
tax on interest and dividends.

After the final tax assessment is determined with the help of a person´s 
tax return, its amount is compared with the sum of the preliminary tax 
payments made over the year. If the prepayments were too small, the 
taxpayer is billed for the difference plus interest. If they were too 
large, the excess is refunded and the taxpayer is paid interest.

Assessment and appeals

Income tax returns
Individuals and legal entities are required to file an income tax return 
every year. Spouses are assessed individually for all taxable income and 
therefore both spouses must declare their income. Joint taxation is only 
applicable to wealth tax. For individuals with relatively 
straightforward financial circumstances there is a simplified, pre-
printed tax return that can be supplemented, signed and returned to the 
local tax authority. The simplified income tax return is to be submitted 
not later than 2 May following the income year (the so-called assessment 
year).

Simplified income tax returns are assessed on the basis of the 
information about individuals' salaries, other forms of remuneration, 
assets and savings which employers, banks and other credit institutions 
are obliged to supply to the tax authorities.

Other individuals and legal entities file a more detailed type of tax 
return which should be submitted by 31 March of the following year. The 
new option of supplying this information electronically is a distinct 
advantage for this category of taxpayer.

Appeals
Tax returns are assessed by the local tax offices. A person who wishes 
to challenge a decision can ask the office to reconsider its decision at 
any time during the five years following the income year in question, or 
otherwise appeal the decision to the county administrative court 
(länsrätt). Appeals are submitted to the local tax office, which 
reconsiders the decision before any documents are turned over to the 
county administrative court. In some cases, as a result of this 
reconsideration, the tax office approves the taxpayer´s request and the 
appeal is dropped, thus never reaching the court. The court´s decisions 
may, in turn, be referred to one of Sweden´s four administrative courts 
of appeal (kammarrätt). Under certain conditions the verdicts of the 
latter courts may be appealed to the Supreme Administrative Court 
(Regeringsrätten).

Advance rulings
There is a special judicial board (Skatterättsnämnden) that issues 
advance rulings on particular tax assessement issues upon a taxpayer's 
request. The National Tax Board (Riksskatteverket) is Sweden´s central 
administrative agency in charge of promoting correct and uniform 
enforcement of the tax laws, and plays an adversarial role vis-à-vis the 
taxpayer in these cases. Advance rulings are issued if it is especially 
important to a taxpayer to know the tax consequenses of a particular 
action or if it is of importance for uniform interpretation or 
enforcement of the law. Decisions of the judicial tax board may be 
appealed to the Supreme Administrative Court.

Legal sanctions
A person who submits incorrect or insufficent information in a tax 
return is charged a penalty. This is an administrative, economic 
sanction detemined by the tax authorities. The rule of thumb is that 
this penalty amounts to 40 percent of the tax that should have been 
paid. This penalty does not prevent a person from also being prosecuted 
for tax evasion. Cases of alleged tax evasion are handled by the regular 
court system. The maximum punishment for tax evasion is normally two 
years' imprisonment.
Copyright: This text is published by the Swedish Institute on 
www.sweden.se. It may not be reused without prior consent. To obtain 
permission to use the text, please contact: webmaster@sweden.se. Photos 
or illustrations may not be used in other contexts. For more information 
on the copyright and permission.
Publisher:
Swedish Institute
                
Published:
1 Nov 2001
                
Classification:
FS 35 y Qaf
Internet address:
http://www.sweden.se/templates/cs/BasicFactsheet____3927.aspx

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